Winter Academy 2018 Trading, Sales and Financing in the European Energy Market and Industry Functioning of the European Power Exchange

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1 Winter Academy 2018 Trading, Sales and Financing in the European Energy Market and Industry Functioning of the European Power Exchange Patrick Adigbli, Head of Public & Regulatory Affairs, EPEX SPOT 1

2 Agenda EPEX SPOT Basic principles Day-Ahead Market Intraday Market Outlook on the future market design Winter Academy 2018 in Brussels 2

3 EPEX SPOT EEX Group HGRT 51% 49% 100% 100% Clearing activities Part of EEX Group Winter Academy 2018 in Brussels 3

4 The markets of EPEX SPOT Markets and services of the European Power Exchange EPEX SPOT Current EPEX markets Market Expansion Market operation services and 25% shares Market operation services Market coupling services 21 borders Area of 1600 TWh consumption Over 285 Exchange Members 535 TWh of traded volume in 2017 Winter Academy 2018 in Brussels 4

5 Market volumes DE/AT/LU: 280 TWh Thereof intraday: 47 TWh Share in consumption: 50% Delivery zones: 50Hertz, Amprion, APG, TenneT, TransnetBW NL: 35 TWh Thereof intraday: 1.5 TWh Share in consumption: 31% Delivery zone: TenneT FR: 110 TWh Thereof intraday: 4 TWh Share in consumption: 23% Delivery zone: RTE UK: 66 TWh Thereof intraday: 15 TWh Share in consumption: 22% Delivery zone: National Grid BE: 19 TWh Thereof intraday: 1 TWh Share in consumption: 22% Delivery zone: Elia CH: 25 TWh Thereof intraday: 2 TWh Share in consumption: 42% Delivery zone: Swissgrid Winter Academy 2018 in Brussels 5

6 Agenda EPEX SPOT Basic principles Day-Ahead Market Intraday Market Outlook on the future market design Winter Academy 2018 in Brussels 6

7 Market liberalisation BEFORE LIBERALISATION PRODUCTION > TRANSMISSION > DISTRIBUTION AFTER LIBERALISATION PRODUCTION > TRADING > DISTRIBUTION TRANSMISSION Winter Academy 2018 in Brussels 7

the Clearing House - Calculation and publication of

8 The organised market - Access to an anonymous market - Level playing field between members - Financial guarantees through the Clearing House - Calculation and publication of transparent and fair price references Winter Academy 2018 in Brussels 8

9 Ways of commercialising power Power commercialisation Wholesale Market System Services Organised Market: Exchange Over-The-Counter (OTC) Derivatives Market - Futures/Options - Mainly financial fulfilment Spot Market - Physical fulfilment Derivatives Market - Forwards/Options/ Structured Products - Financial and physical fulfilment Balancing Day-Ahead market - Auction Intraday Market Continuous trading Spot Market Other system services (e.g. losses) Winter Academy 2018 in Brussels 9

10 Timeline of the markets Derivatives > DAY-AHEAD MARKET > INTRADAY > MARKET Balancing Long and middle-term (Years/months/weeks) Anticipated covering of need of supply, optimisation of production means Short-term (One day before delivery) Balance of production and consumption Very short-term (several hours before delivery) Balance of production and consumption Real-time (minutes) System security DAY-AHEAD AUCTION - Optimisation of liquidity via an auction - Market areas: Germany/Austria/Luxembourg, France, Great Britain, the Netherlands, Switzerland and Belgium CONTINUOUS INTRADAY - Flexibility through continuous trading - Market areas: Germany/Luxemburg, France, Great Britain, the Netherlands, Switzerland, Belgium and Austria Winter Academy 2018 in Brussels 10

11 Trading on the exchange Sending of trades Settlement Trading EXCHANGE MEMBERS Settlement CLEARING MEMBER (BANK WITH AGREEMENT AT ECC) Scheduling TRANSMISSION SYSTEM OPERATORS Balance Responsible Agreement Source: EPEX SPOT Winter Academy 2018 in Brussels 11

12 Merit order & price formation DEMAND PRICE Winter Academy 2018 in Brussels 12

13 Market participants Winter Academy 2018 in Brussels 13

14 Agenda EPEX SPOT Basic principles Day-Ahead Market Intraday Market Outlook on the future market design Winter Academy 2018 in Brussels 14

Day-Ahead Market Coupling DAY-AHEAD MARKET COUPLING IS SUCCESSFULLY IMPLEMENTED 1. Optimal use of interconnectors facilitates congestion management & increases social welfare (2.5-4bn /year) 2.

15 Day-Ahead Market Coupling DAY-AHEAD MARKET COUPLING IS SUCCESSFULLY IMPLEMENTED 1. Optimal use of interconnectors facilitates congestion management & increases social welfare (2.5-4bn /year) 2. Price convergence of market areas in case of sufficient border capacity Multi-Re 4M Mark Both drive Price Cou (PCR) solu 3. Smoothing effect on negative or positive price spikes Attenuation of extreme weather conditions (i.e. cold wave, storm front) on other market areas 5. Higher security of supply through market integration and no longer depending on the individual country 2014 Multi-Regional Coupling 4M Market Coupling Both driven by the Price Coupling of Regions (PCR) solution Winter Academy 2018 in Brussels

Market A Network topology OPTIMIZER Market A Prices Accepted block orders Net positions/ Flows OUTPUT

16 Market Coupling in a nutshell Market A Aggregated hourly orders Anonymous list of block orders INPUT ATC A B ATC B A Market B Aggregated hourly orders Anonymous list of block orders Data Market B Data Market A Network topology OPTIMIZER Market A Prices Accepted block orders Net positions/ Flows OUTPUT Flow A B Market B Prices Accepted block orders Net positions/ Flows Winter Academy 2018 in Brussels 16

17 From CWE To MRC NO5 NO4 SE1 FRE ERI 53 bidding areas 67 lines NL DE NO1A NO3 SE2 FI EE BE NO2 NO1 SE3 DK1A LRI LV LRE Functionalities hourly step and interpolated orders FR DK1 DK2 SE4 LT regular block orders 4 bidding areas 4 lines GB2 GB1 NL BE FR FB DE FRAN PL SVIZ LBE AUST LBI BSP SLOV Profile block orders Linked block orders Exclusive block orders Flexible block orders Functionalities hourly step and interpolated orders regular block orders PT ES MO COAC CORS SARD MALT NORD CNOR CSUD SUD MFTV FOGN BRNN Curtailable block orders MIC orders Load gradients Scheduled stops PRGP SICI ROSN GREC PUN orders Merit orders Flow based Winter Academy 2018 in Brussels 17

18 Price evolution 120 DE/AT/LU FR UK NL CH BE Cold spell all over Europe Source: EPEX SPOT 100 Subprime crisis Increase of Brent CWE Market Coupling Banking crisis Integrationof Renewables under EEG Overcapacities in BE & FR Market DE/AT/LU (Phelix) FR CH (Swissix) NL BE UK (in ) Winter Academy 2018 in Brussels 18

19 Agenda EPEX SPOT Basic principles Day-Ahead Market Intraday Market Outlook on the future market design Winter Academy 2018 in Brussels 19

20 Renewables challenge the market RENEWABLE Generation GROWTH Ramps Generation Forecast Deviations FORECAST DEVIATIONS 15mn products profile Day-ahead forecast Intraday forecast Real Feed-in Hourly products profile Adjust purchase and sale based on the results of the dayahead auction Run and plan power generation closer to delivery Manage unforeseen events such as power plant outage or renewable forecast errors GENERATION RAMPS Generation Ramps Hourly products profile Generation Enable arbitrage Offer flexibility to 15mn products profile between neighboring manage ramping countries, provide opportunities for cross-border trading constraints or intrahour variation, adjust from hourly positions to 15-min Sources: EPEX SPOT, REN21, IEA, BMWi, BDEW Winter Academy 2018 in Brussels 20

21 EPEX SPOT re-invents Intraday trading / Cross-border continuous DE-FR Cross-border continuous DE-FR- AT-CH API 30min auction UK 30min lead time in DE, FR, AT 5min lead time in BE, NL ID3 Index DE Automated trading via API 5min lead time (within DE contral areas) 30min products on continuous FR-DE-CH (foreseen) 45min lead time in DE, FR, AT 15min products on continuous DE 15min intraday auction DE 15min products im Fließhandel DE-AT-CH Cross-border continuous DE-FR-AT- CH-BE-NL 15min products on continuous NL 5min lead time (AT, FR) XBID Go-Live Winter Academy 2018 in Brussels 21

22 Intraday becomes European Winter Academy 2018 in Brussels 22

Technical solution is based on a common IT system: shared order book, capacity management module and shipping module 10 7 6 4 3 2 13 3.

23 Intraday becomes European INTRADAY MARKET COUPLING IS ON THE WAY (Q1 2018) 1. Cross-border Intraday Project (XBID): joint initiative by Exchanges and TSOs from 11 countries to create integrated intraday market 1 2. Technical solution is based on a common IT system: shared order book, capacity management module and shipping module Orders entered by market participants in one country can be matched with orders in any other country, as long as transmission capacity is available Go-live of central XBID Project foreseen for Q Local Implementation Projects (LIPs) communicate individual Go-Live planning N 1ST GO-LIVE WAVE LIP N 2ND GO-LIVE WAVE LIP Winter Academy 2018 in Brussels Sources: PCR, XBID, EPEX SPOT

Intraday becomes flexible EPEX SPOT 15-MIN & 30-MIN PRODUCTS (TWH) EPEX SPOT 15-MIN PRODUCT VS. BALANCING ENERGY (TWH) 12 1 10 2,5 8 1,47 6 4 4,6 0.

24 Intraday becomes flexible EPEX SPOT 15-MIN & 30-MIN PRODUCTS (TWH) EPEX SPOT 15-MIN PRODUCT VS. BALANCING ENERGY (TWH) ,5 8 1, , ,6 5 3,9 3, DE - 15min kontinuierlich DE - 15min Auktion AT - 15min kontinuierlich UK - 30min Auktion CH - 15min kontinuierlich Sources: EPEX SPOT, ÜNB 0 15min continuous 15min auction Energy activated for balancing Winter Academy 2018 in Brussels 24

25 Intraday moves closer to real time TRADING EVOLUTION ON EPEX SPOT DE INTRADAY-MARKET (HOURLY PRODUCTS) Source: EPEX SPOT Winter Academy 2018 in Brussels 25

26 Intraday becomes automated IT S NO SCIENCE FICTION AND IT S NOT THAT SCARY Winter Academy 2018 in Brussels 26

27 Agenda EPEX SPOT Basic principles Day-Ahead Market Intraday Market Outlook on the future market design Winter Academy 2018 in Brussels 27

28 A normal day in 2030? Winter Academy 2018 in Brussels 28

29 MW-15min /MWh A normal day in 2050? SOLAR ECLIPSE, MARCH 2015 PV GENERATION EPEX 15MIN AUCTION PRICES , , ,26-50,12-164,48 0 Q25 Q29 Q33 Q37 Q41 Q45 Q49 Q53 Q57 Q61 Q65 Q69 Q73 Q Q1 Q9 Q17 Q25 Q33 Q41 Q49 Q65 Q57 Q73 Q81 Q89 Winter Academy 2018 in Brussels 29

30 Clean Energy Package + - EPEX SPOT WELCOMES EPEX SPOT RECOMMENDS Reinforcement of competitive, nondiscriminatory and market-based energy markets Further interconnecting wholesale markets & abolishing barriers to cross-border trade Promotion of products with lower granularity Further harmonization & integration of balancing markets Recognition of critical role of Nominated Electricity Market Operators in positive evolution of market coupling in Europe Fostering of demand response and the role of aggregators Importance of unrestricted, market-based price formation & scarcity pricing Avoid regulated prices. Rely on CACM to set harmonized maximum and minimum clearing prices that can be adjusted (technical limits) Foster large & liquid bidding zones, which are the basis for well-functioning competitive power markets Clearly separate intraday & balancing markets. Balancing gate closure time should not be set at expense of intraday markets. There should be no cross-border capacity reservation for balancing purposes Empowerment of ACER and strengthened regulatory oversight of the MCO function raise the question of the Agency s internal governance and in particular of the voting rights within the Board of Regulators Winter Academy 2018 in Brussels 30

31 Connecting the dots Electricity Balancing Guideline CACM Clean Energy Package Winter Academy 2018 in Brussels 31

32 Thank you for your attention! Winter Academy 2018 in Brussels 32

33 Contact: Patrick ADIGBLI Head of Public & Regulatory Affairs EPEX SPOT Winter Academy 2018 in Brussels 33

EPEX SPOT Power for Today. Power for Tomorrow. Dr. Sandrine Wachon Tokyo I 29 January 2018

資料 2-1 EPEX SPOT Power for Today. Power for Tomorrow. Dr. Sandrine Wachon Tokyo I 29 January 2018 EEX Group at a glance EEX Group is a group of specialised companies providing market platforms for energy