P305 POST IMPLEMENTATION REVIEW

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1 Public P35 POST IMPLEMENTATION REVIEW Webinar 16 March 217 Emma Tribe

2 Who we are Presenter Emma Tribe Market Analyst Answering questions Roger Harris David Thomas

3 What I m going to cover Analysis and information on System Prices What the review covers Pricing changes as a result of BSC Modification P35 Some of our analysis from the report Answer questions at end, or get back to you over and Q&A document 3

4 Previous reviews and analysis Continuous analysis in System Price Analysis Report (link at end of presentation) A six month post implementation review was conducted, Webinar with introduction to P35 and key analysis from the six month review 4

5 What the review covers We don t conclude whether P35 has been a success or not Present analysis on Balancing and Settlement data up to 3 November 216 Sections: Background including Market Context Data Balancing Behaviour System Prices Trading Charges Parameter Analysis 5

6 Background to BSC Modification P35 BSC Modification P35 was raised to progress the conclusions to Ofgem s Electricity Balancing Significant Code Review (EBSCR), and implemented on 5 November 215. Reform to improve efficiency in balancing and security of supply EBSCR Final Policy Decision: a) Make cash-out price marginal b) Include a cost for disconnections c) Improve the way reserve costs are priced d) Move to a single cash-out price 6

7 Two step changes in BSC Modification P35 Changes introduced make cash-out prices more marginal : 1. A reduction in the Price Average Reference (PAR) value to 5MWh and the Replacement PAR (RPAR) value to 1MWh upon implementation Further changes from 1 November 218: 1. A further reduction to the PAR value to 1MWh on 1 November Increase the VoLL to 6,/MWh 3. A dynamic LoLP function 2. A price for Short Term Operating Reserve (STOR) actions using a Reserve Scarcity Price (RSP) determined by a static Loss of Load Probability (LoLP) function 3. A price for Demand Control actions at Value of Lost Load (currently 3,/MWh) 4. A single imbalance price for each half-hour 7

8 Terminology and acronyms System Price, Imbalance Price and Cash-out Price are the same thing Long and short, when talking abut the market and a Party De-Rated Margin a measure of available excess capacity. RSP Reserve Scarcity Price STOR Short Term Operating Reserve BMU Balancing Mechanism Unit LoLP Loss of Load Probability VoLL Value of Lost Load 8

9 Key analysis from the review

10 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Average System Price ( /MWh) Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 MIP ( /MWh) Offer Price ( /MWh) Trends in market prices Market Index Price (proxy for wholesale prices) Average Offer Price Daily Average Market Index Price Monthly Average Market Index Price Gas Coal Hydro Pumpedstorage System Prices Market, Offer and System Prices increased in Autumn Spread of prices in Long vs Short System post P35 Short System Long System Average System Lower average System Price 1

11 Frequency Frequency Frequency System prices System Prices - 214/15 vs 215/ System Prices P217 vs Live System Prices ( /MWh) 14/15 15/16 System Price ( /MWh) P217 Live 14/MWh difference in 214/15 and 215/16 distributions Small differences between P217 and Live price Differences over 2/MWh when market short 8, 7, 6, 5, 4, 3, 2, 1, Differences between P217 price and live price System Price Changes Long Short 11

12 Energy Imbalance Volume (MWh) Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Percentage of Long Periods Absolute EnergyImbalance Volume (TWh) Balancing behaviour Market Length 9% Absolute sum of Parties' Energy Imbalance Volumes 8% 7% % 5% %.6 3% 2% /13 13/14 14/15 15/16 More long Settlement Periods in 215/16 Greater Energy Imbalance Volumes for Parties Average of Parties' Energy Imbalance Volumes by Settlement Period /13 13/14 14/15 15/16 14/15 - Long Volume 14/15 - Short Volume 15/16 - Long Volume 15/16 - Short Volume 12

13 Production and Consumption Accounts Energy Imbalance Volumes Net Energy Imbalance Volumes for a Party No need to balance Production and Consumption Accounts separately 5 MWh Production Account 2 MWh Party s net position Still need to balance the net position 3 MWh Netted off Volume -3 MWh Consumption Account 13

14 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Net Trading Charge ( Milliion) Total Imbalance Volume (TWh) Trading charges Net Energy Imbalance Charge and total absolute Account Energy Imbalance Volume by month Absolute Imbalance Volume Monthly Net Imbalance Charges Net credit Energy Imbalance Charges to Parties in 215/16; Highest Account Energy Imbalance Volumes in 215/16 14

15 7-Mar 22-Mar 6-Apr 21-Apr 6-May 21-May 5-Jun 2-Jun 5-Jul 2-Jul 4-Aug 19-Aug 3-Sep 18-Sep 3-Oct 18-Oct 2-Nov 17-Nov De-rated Margin (MW) Reserve Scarcity Price (RSP) repriced STOR actions 13 STOR actions repriced in September and October 12 Daily minimum De-Rated Margin Min of De-Rated Margin Two Settlement Periods where RSP repriced actions set the System Price; under November 218 scenario this would increase to four Parties can change behaviour in anticipation of a high RSP 15

16 System Price ( /MWh) Looking forward to November Settlement Period Short P217 Price Short P35 Price Short Nov 18 Price Long P217 Price Long P35 Price Long Nov 18 Price Largest difference between live and November 218 Price during morning and evening peaks when market short 5MWh to 5MWh has greater impact on average than 5MWh to 1MWh Cannot predict how market conditions will change PAR 1 Prices available on Portal: 16

17 Summary P35 raised to process EBSCR conclusions Market prices have changed since the implementation of P35 Between December 215 and November 216: System Prices were on average lower More long Settlement Periods Greater Energy Imbalances for Parties Implications of a Single Imbalance Price on dual accounts Energy Imbalance Charge - net Credit RSP only used in September and October Recalculated prices with the November 218 scenario 17

18 Any questions? Questions or comments? Technical queries? Imbalance Pricing Guidance for full detail about the System Price calculation: System Price Analysis Report at: 18

19

20 Repriced STOR actions under November 218 calculation RSP 12/MWh in live scenario, System Price 143/MWh RSP 24/MWh in November 218 scenario, System Price 27/MWh

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