The role of the spot market in successful demand side management. James Matthys-Donnadieu Brussels,

Transcription

1 The role of the spot market in successful demand side management James Matthys-Donnadieu Brussels,

2 APX Group today 3 power spot markets operated in the Netherlands, UK and Belgium 86 TWh traded and cleared in 2012 Over 150 memberships across the markets from 13 countries APX Power UK Clearing APX Power NL Belpex 4 Locations: BE: Brussels NL: Amsterdam UK: London, Nottingham Belpex is a 100% affiliate of APX, licensed to operate the Belgian spot electricity market 2.

3 Markets 3

4 Wholesale trading routes e.g. Belpex e.g. ICE ENDEX Seller 1 Seller 2 Seller 3 Seller 1 Seller 2 Seller 3 Exchange Buyer 1 Buyer 2 Buyer 3 Buyer 1 Buyer 2 Buyer 3 Bilateral Not anonymous Standard & Customized Products Multilateral Anonymous Standard products Clearing and Settlement Taking over counterparty risk 4

5 General principles balance management Electricity consumption = generation on interconnected network Balance between electricity consumption and generation: coordination between TSO s TSO ensures balance in its control area Every BRP is responsible for maintaining ¼ h balance between total injections and total off-takes in his portfolio 5

6 Day Ahead & Intraday market rationale 12:00 DAM Auction Years, quarters, months ahead Forward/futures markets Wholesale Market Places: ICE Endex Continuous forward markets Contract 3 Months ahead Period Covered From 00:00 am on the first day of the Month until 24:00 pm on the last day of the Month Day Ahead? Quid portfolion position? -Generation? -Load forecast? -LT contracts Spot markets Belpex Belpex Day-ahead market auction Hourly products Multi-hourly products 14:00 Balanced DA portfolio towards Elia OTC Trading Delivery Day Continuous portfolio follow up and rebalancing (ID market) Real Time Balancing markets Elia Real-time system balancing Regulated market 15 Minutes trading periods 4 Quarters ahead 3 Years (Calendars) ahead From 00:00 am on the first day of the Quarter until 24:00 pm on the last day of the Quarter From 00:00 am on the first day of the Calendar until 24:00 pm on the last day of the Calendar Belpex Continuous Intraday market Hourly products Multi-hourly products 6

7 Auction versus continuous trading Auction Trading Mechanism Sellers introduce bids: ; Buyers introduce offers 90MW@60, 100MW@55 Aggregation of bids; aggregation of offers => Supply and Demand curve Fixing: Intersection of Supply and Demand Curve => determination of MCP, MCV and individual contracts Features: One price for one product Closed order book Marginal Pricing Offer P Demand P Q price quantity Q 7

8 Auction versus continuous trading Continous Trading Mechanism Bids and Offers are matched immediately according to price/time priority Features: No single price Open order book Market pricing 8

9 Day-ahead Market Coupling Market coupling optimizes use of cross border transmission capacity Flow in the right direction Price differences occur only if interconnector capacity is congested Nordic Market splitting CWE/BritNed Price coupling Interim Tight Volume Coupling: ITVC Volume coupling CWE-Nordic ITVC will be replaced by NWE Price Coupling in

10 Main benefits of Market Coupling Facilitates development of liquid commodity markets and fosters competition Removal risk of trading transmission and energy separately and reduction risk of market abuse since transmission capacity cannot be hoarded Market prices convergence, ultimately towards a single market price if sufficient capacity is available Optimum use of cross-border capacity and optimization of the use of the generation global portfolio. The more differences in local production mixes, the larger the social welfare increase resulting from such optimization SPREAD STORE Mitigation of price volatility by absorbing local variations in production thanks to the activation of flexible means in other areas, which contributes to SoS and will be of increasing importance with the development of intermittent RES Consistency of energy policies is important 41.

11 Intraday Market Coupling Cross border intraday trading = Implicit allocation of transmission capacity If capacity is available, orders from foreign ID markets visible in BE, and vice versa Mar 2008: Launch of Belpex CIM Feb 2011: coupling BE-NL Mar 2012: coupling BE-NL- Nordic region (through NorNed) Integrated NWE intraday market (target end 2013) 11

12 Some figures 12

13 Belpex: a large participant base 39 Market Participants, covering a broad range in terms of Profile: suppliers, traders, producers, utilities, industrial end users Nationality: 11 different countries (BE, DE, NL, CH, UK, FR, ) Size: small niche players as well as large utilities Shell Delta Energy J.P. Morgan Securities Electrabel Barclays Capital Electrawinds Distributie NV Morgan Stanley Vattenfall Energy Trading GmbH INEOS ChlorVinyls Belgium NV EDF Trading Ezpada s.r.o Mercuria Energy Trading SA Axpo Trading AG Deutsche Bank AG Trianel GmbH EDF Luminus NV Lampiris NV Anode Energie Vattenfall Energy Trading Netherlands Centrica Energy Limited Gazprom Marketing & Trading Ltd RWE Supply & Trading Netherlands Danske Commodities ENI SpA RWE Supply & Trading GmbH Total Gas and Power Limited Vitol SA Eneco GDF Suez Trading Energy Cluster NV EON Energy Trading Enel Trade Energi Danmark Statkraft Markets Iberdrola Generación Enovos Luxembourg Merrill Lynch Commodities (Europe) Scholt Energy Control N.V. Solvay Energy Services 13

14 Continuous volume growth DAM 14

15 Continuous volume growth CIM 15

16 Belpex DAM prices 13 May 16

17 CWE MC baseload prices

18 CWE DAM prices (Year Average) Average price BE in 2012: 46,97 /MWh Price differences on average in 2012: with FR: +0,04 /MWh with NL: -1,03 /MWh with DE: +4,38 /MWh 18

19 Recent (new) trend: decreasing convergence 19

20 Energy procurement 20

21 Full-service contract: Main volume and swing delivery by one supplier Full service contract vs portfoliodriven approach Portfolio contracts system: Main volume covered by standardized contracts, bilateral or exchange-traded Swing delivery on spot market ( index) Real-time balancing ( insurance vs. pass-through) Know your profile in advance! And try to stick to it volume volume Spot contracts Real-time: intraday+ balancing Monthly & quarterly contracts (Multi)year contracts time time 21

22 Contracting Power in Belgium 1 power contract 5 components 3 (risk) negotiations: 1. Gray value 2. Balancing 3. Green value 4. Transmission and distribution tariffs (no negotiation) 5. Taxes (no negotiation) 22

23 Products to cope with increased demand for flexibility 23

24 «Last resort» to balance portfolio Demand for flexibility Rationale Day Ahead Auction Taking into account generation / load forecast / LT contracts Using (price sensitive) hourly orders & block orders Demand for flexibility resulting from: Generators / Utilities: - Make-or-buy: Generate using own plants or Buy on market if cheaper than own generation Suppliers: - Cover clients consumption (flexible / non flexible) End users - Cover own consumption (flexible / non flexible) 24

25 Products currently available on the DAM Hourly limit orders Belpex DAM Order Types - Acceptance is conditional to clearing price (Profile) block orders - Acceptance conditional to average clearing price over all hours in block order - Subject to all-or-nothing condition Q Hour Q Hour 25

26 DAM New order types end 2013 Products that will be implemented on the DAM in 2013 Linked block orders - The execution of (a set of) profile block(s) is subject to the execution of another block Q Hour Block Order Block Order 2 Block Order 3 Q Hour Block Order Block Order 2 Block Order 3 Exclusive block orders - Within a set of (profile) blocks, at most one block can be accepted Low price order Medium price order High price order

27 Optimise thermal power plants DAM Linked blocks use cases Offer plant using multiple orders, allowing it to run at different outputs, each reflected by their own cost level Run one/several hour(s) earlier or later if power prices remain interesting outside of the peak period Optimise consumption processes Only execute part B of consumption process if part A of process was started earlier Or only start A+B when combination does not exceed certain costs Optimise storage capacity Sell only during peak period if off-peak purchase order has been accepted and buy/sell combination is in the money 27

28 Optimise thermal power plants DAM Exclusive blocks use cases Similar to using Linked Block Orders Optimise combined heat & power installations Heat demand with flexible timing, or some heat buffer Flexibility might allow to produce heat & power when power prices are highest, using several exclusive production profiles Optimise demand side management Case: End user can stop consumption, but only if DAM prices > 500 /MWh and for max 2 hours/day Program load shedding on the DAM on the most expensive hours (and only of threshold is reached), using a combination of exclusive blocks of 2 hours - Block 1: hours 1 & 2 - Block 2: hours 2 & 3-28

29 Continuous Intraday Market Products available on the CIM Hourly limit orders - Can be partially matched Block orders - Subject to all-or-nothing condition Tradable until 5 minutes before delivery 29

30 Ways to access the spot market 30

31 Use Belix indices Baseload Hourly Access to spot market Submit orders to supplier Supplier will process & submit to Belpex Financial process/payment through supplier Indirect Participation Service provider will submit to Belpex Indirect Participant can view Belpex account Indirect Participant is responsible for clearing (no financial exposure to service provider) ARP can be outsourced Direct Participation Submit own orders to Belpex Responsible for clearing ARP can be outsourced 31

32 Access to spot market Access to spot market Trading (Bidding, results) Clearing (Risk, financial aspects) Delivery (ARP, nominations) Belix indices (Baseload Hourly) Supplier Belpex Supplier Supplier Orders to supplier End User Supplier Belpex Supplier Supplier Indirect Participation to Belpex End User Supplier Belpex End user End user or 3 rd party (e.g. supplier) Direct Participation to Belpex End User Belpex End user End user or 3 rd party 32

33 Conclusions Different markets have complementary functions: hedging, optimisation, adjustments, balancing DA market is key to optimise production thanks to a regional auction (MC) prior to nomination deadline. DA price volatility provides signals (& products) necessary to trigger demand response and attract production from neighbouring countries ID market becomes crucial with intermittent production from RES and offers additional price signals for demand response 33

34 Thank you for your attention All rights reserved. Only correct quotation with attribution is permitted. This slideshow provides general information. The graphs in this slideshow are for illustration purposes only. For more information on this presentation, please contact Belpex. 34