Design and governance of regional energy markets. Walter Boltz 4th EU/US energy regulators` roundtable Lisbon, May

Transcription

1 Design and governance of regional energy markets Walter Boltz 4th EU/US energy regulators` roundtable Lisbon, May

2 Agenda Central European market overview Regulatory framework One network - many markets Wholesale market structures Price developments European market: quo vadis? 2

3 Agenda Central European market overview Regulatory framework One network - many markets Wholesale market structures Price developments European market: quo vadis? 3

4 UCTE AREA 4

5 5

6 Net electricity production 2001 TWh/y Total 630 TWh Germany Switzerland Austria Hydro Thermal Nuclear Thermal Conventional 6

7 Structure of electricity production 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Germany Switzerland Austria Hydro Thermal Nuclear Thermal Conventional 7

8 Electricity consumption and eligibility Austria 75 % 25 % Opened industrial & comercial market Non eligible industrial & comercial market Opened residential market Switzerland 70 % 30 % Non eligible residential market Germany 73 % 27 % TWh 8

9 Structure of electricity consumption 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Germany Switzerland Austria Industry Services, Transport, Agriculture, etc. Residential 9

10 Generation capacity vs. load MW 120% D - guaranteed capacity D - load 100% CH - guaranteed capacity % CH - load % A - guaranteed capacity A - load Jän 2003 Jul 2003 Jän 2004 Jul 2004 Jän 2005 Jul % 20% 0% D - remaining capacity/load (right scale) CH - remaining capacity/load (right scale) A - remaining capacity/load (right scale) 10

11 Supply market dymamic vs. opening Austria Germany UK Finland Sweden market opening in % Belgium 30 Portugal Switzerland 297 France 59 Denmark Netherlands industrial customers having changed suppliers since market opening in % Italy size of industrial & commercial market (TWh/y) Country 11

12 Large retail price variation across Europe cent/kwh SF S DK F NL A E UK D B I CH residential customers (3,500 kwh/y) industrial customers (35 GWh/y) 12

13 Agenda Central European overview Regulatory framework One network - many markets Wholesale market structures Price developments European market: quo vadis? 13

14 Regulatory framework a brief overview Germany Switzerland Austria member of the EU yes no yes independent national regulator soon no yes market opening 100 %, since 1998 no market opening 100%, since 2001 synchronized electricity network yes, UCTE yes, UCTE yes, UCTE dominant generation type ownership structure of the large generators conventional calor ic hydro hydro mainly privately owned mainly publicly owned mainly publicly owned number of distributors Some 1,000 Some 1, organised electricity exchange yes no yes type of network access negotiated TPA no access for final consumers regulated TPA member of the ETSO CBT scheme yes yes yes regulation on physical wholesale trading no specific no specific no specific regulation on financial trading yes, if on behalf of third parties yes no 14

15 EU & wholesale market design EU has no plans to set a Europe-wide framework for wholesale market design (unlike SMD in the US) No preference for e.g. OTC vs. exchanges Mandatory pool vs. voluntary trading Let different market concepts compete with each other Coexistence of different concepts can contribute to better understanding Wait and see which one proves to be the best 15

16 EU & wholesale trading regulation Currently no EU-level regulation National regulations very different approaches Most European countries tend not to regulate physical trading Financial trading is often subject to national financial reglation EU s proposed revision of the Investment Services Directive (ISD) and the new Market Abuse Directive (MAD) will effect energy traders 16

17 What could ISD bring for traders Investment Service Directive regulates investment firms Requires sufficient capital Formulates contents of traders licences Calls for certain informations to be disclosed Extension of the EU-passport to power derivatives traders Physical trading is outside of the directive s scope Only financialy settled deals should be included Only third party operations are covered 17

18 Pros & Cons of the proposed EU-wide regulation Pros Sufficient reassurance for market participants about the reliability of their counterparts is definitely needed Extension of the European Passport (possibility of Europe-wide business with national financial licence) would enhance power derivatives trading and add legal certainty 18

19 Pros & Cons of the proposed EU-wide regulation Cons Fully applied bank-style regulation could hurt traders business and market liquidity 19

20 Agenda Central European overview Regulatory framework One network - many markets Wholesale market structures Price developments European market: quo vadis? 20

21 UCTE synchronous interconnection 21

22 Balance of physical exchanges (UCTE 2001) 80 TWh Exporters Importers -60 F CH CZ PL SK SLO D P A HR GR HR E L B NL I 22

23 Physical electricity exchanges 2002 (GWh) 23

24 Regional wholesale markets Marketplaces emerge, wherever trade between market participants can be concluded without major hindrance This is not true for the whole of Europe: Physical flow of power is limited by bottlenecks in transport capacities No unified (more importantly transparent) method of transport capacity allocations Differing rules concerning network access Europe is not jet a single electricity market, but rather divided into regional marketplaces 24

25 Different markets different prices /MWh Sep-02 Okt-02 Nov-02 Dez-02 EEX (D) - Base APX (NL) - Base 25

26 European power market convergence M a r k e t r e g io n in w h ic h p ric e s co rre la te Transm ission constraint FINLAN D IR E L A N D D E N M A R K N o r d ic / B a ltic EST- O N IA R U S S IA LATVIA LITHU- A N IA U K B r ita n n ic a P O L A N D B E L A R U S FRANCE B E L G IU M G E R M A N Y LU X. N o r th w e s t Europe Switz M itte l C Z E C H R E P. A U S T R IA SLOVENIA C R O AT IA H U N G A R Y S L O VA K IA R O M A N IA UKRAINE B O S N IA SPAIN Ib e ria ITA LY S E R B IA M A C E - DONIA B U L G A R IA T U R K E Y M O N T E - N E G R O Source: Cambridge Energy Research Associates

27 Methods of cross border capacity allocations

28 Agenda Central European overview Regulatory framework One network - many markets Wholesale market structures Price developments European market: quo vadis? 28

29 Key requirements for an efficient wholesale market... Sufficient number of sellers and buyers for each electricity product no (obvious) abuse of market power possible No major transmission constraints If any: unified and transparent method of allocation Non-discriminatory access to the grid equal treatment of all market participants independent network operation Market transparency sufficient and accessible information for all market participants 29

30 ... do we have them in Central Europe? (D,CH,A) Market concentration Large number of participants Few big players (E.ON, RWE, EdF) Transmission constraints Non-discriminatory grid access for traders Independent network operation Market transparency Regulation on physical trading sufficient cross-border capacity traders can freely move power within the region no specific regulation 30 Switzerland is somewhat a black box. Nevertheless relative active trade at Hub Laufenburg different levels of independence across the region no publicly accessible load forcast opaque information on running generation

31 Central European wholesale market No transmission constraints between Germany Austria Switzerland Very strong price correlation Identical standard products OTC and exchange trading Relatively high turnover Somewhat limited liquidity Over 100 market participants MTFS ¼ hour delivery of profiles possible 31

32 Correlation - German and Austrian Prices /MWh Jän-03 Feb-03 Mär-03 Apr-03 EEX - Base EXAA - Base 32

33 Even single hours show relatively good correlation /MWh SWEP EEX hour 12 EXAA hour 12 33

34 Central European wholesale market participants Large incumbent generators EdF, E.ON, RWE, ENEL Trading associations of local utilities MVV (D),Trianel (D), e&t (A) Pure Traders TXU, Enron, Aquila, Reliant, Sempra, Entrade Since most of the pure traders are gone, the market is largely dominated by big incumbent players 34

35 European vs. national generation market shares 20% 100% European market share in % 15% 10% 91% 17,0% 9,7% 9,0% 8,0% 66% 6,0% 44% 53% 92% 45% 34% 75% 50% National market share in % 5% 20% 24% 3,2% 2,7% 2,6% 2,6% 15% 2,3% 25% 9% 0,6% 0% EdF RWE E.ON ENEL Vattenfall VerbundElectrabel Endesa British Energy Iberdrola Atel 0% 35

36 Power exchanges in Europe 1 UK Power Exchange 2 European Energy Exchange, EEX * Spot market in co-operation with Nordpool Q Amsterdam Power Exchange, APX, Q1 99 spots- and futures market planned: gas spot market 4, 5, 6 Nordpool - Nord Pool, The Nordic Power Exchange (Lysaker) - Nord Pool, (Swedish Branch) - Nord Pool/EL-EX (Fl) Swiss Power Index (SWEP) 7 Spanish Electricity Pool, OMEL Polish Power Exchange, POLPX, Q Romanian Power Exchange, OPCOM, Q Borzen Slovenian Power Exchange Q Powernext - Q Alpen Adria Power Exchange, EXAA, Q Gestore del Mercato Elettrico (GME) - planned for Q4 03** 14 Budapest Power Exchange planned for Q1 03 * = merger out of European Energy Exchange Frankfurt, EEX, Spotsund Futuresmarket (Q2 00) and LPX ** orig. plan: Q1 01

37 Central European power exchanges Initialy two competing power exchanges in Germany LPX Leipzig Power Exchange (Leipzig) EEX European Energy Exchange (Frankfurt) In 2002 merger of the two exchanges In 2002 launch of EXAA Energy Exchange Austria EEX EXAA based in Leipzig Graz Starting date June 2000 March 2002 products spot & futures spot spot products single hours & blocks single hours & blocks participants delivery Germany Austria Spot volume (TWh) 33 0,9 Futures volume (TWh)

38 Wholesale market products OTC and exchange traded products are fairly similar Peak 08:00 20:00 Base 00:00 24:00 Spot 24 single hours Block of hours Forward (futures) 6 months 4-6 quarters 3 years 38

39 Market price discovery Exchanges publish prices and volumes regularly Price reports assess the OTC market platts Heren, platts, Argus Widely accepted price benchmark Almost identical German, Austrian and Swiss spot assessments One single forward assessments for Germany representing the whole Central European region Since credibility crisis in the US reassessment of the reporting methodology 39

40 Estimated market liquidity Liquidity is difficult to assess, since most of the trades are done on the OTC market Since Enron is gone, OTC volumes suffer Banks still shy away from Central European trading Exchange trading gaining momentum Clearing services becoming popular physical consumption (TWh) 40 overall trading volumes (TWh) Scandinavia Holland Austria Germany Switzerland overall trading volume as a multiple of physical consumption

41 Exchange traded spot volumes TWh ,9% 30% 25% 80 20% 60 15% 40 10% 20 6,7% 5% 0 13,2% 1,7% Nordpool (2001) EEX (2002) APX (2002) EXAA (2002) 0% spot volume spot volume / consumption 41

42 Exchange traded financial volumes TWh ,9% 23,6% Nordpool (2001) EEX (2002) 250% 200% 150% 100% 50% 0% financial volume financial volume / consumption 42

43 Agenda Central European overview Regulatory framework One network - many markets Wholesale market structures Price developments European market: quo vadis? 43

44 Costs and Prices in Central Europe /MWh 50 wholesale price (Base) Italy 33 supply price Austria - residential customers supply price Austria - large industrial customers EEX Base (wholesale price Central Europe) 17 short-run marginal cost - coal generation 13 short-run marginal cost - nuclear generation Germany short-run marginal cost - nuclear generation France short-run marginal cost - run-off river 44

45 Hourly structure of wholesale prices (EEX) /MWh Period 00/01 Period 01/02 Period 02/03 45

46 Monthly average prices (EEX) /MWh Jän Feb Mär Apr Mai Jun Jul Aug Sep Okt Nov Dez

47 Term structure of the Central European market /MWh quarters years Jän-03 Feb-03 Mär-03 Mai-03 Jun-03 Jul-03 Aug-03 Sep-03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Y 04 Y 05 Y 06 Base Peak 47

48 Forward prices on the rise /MWh 45 /MWh Jul 03 Sep 01Okt 01Dez 01Jän 02Mär 02Apr 02Jun 02Jul 02Aug 02Okt 02Nov 02Jän 03Feb 03Apr 03 year 04 base year 04 peak peak/base spread (right scale) 48

49 Some aspects of increasing prices Forward prices (year 04, year 05, year 06) have been on the rise for some time Uncertainity about the burdens of EU-wide environmental actions (allocation of emission rights, penalties) Ongoing debate on G - vs. L -components of network prices Uncertainty and anticipated cost for generators have been factored in 49

50 Agenda Central European overview One network - many markets Wholesale market structures Price developments European market: quo vadis? 50

51 Conclusions from the market development so far In the absence of transmission constraints trading evolves naturally Trading can work even in very different general regulatory frameworks in the region No mandatory pool needed Trading is fostered by the different generation structures and vast spare capacities 51

52 Conclusions from the market development so far Large number of market participants supported liquidity but mergers are threatening the market Liquidity has been hit by the departure of Enron & Co Financial and derivatives trading come only with time 52

53 What will come next? Number of market participants will be further reduced (spot) liquidity will concentrate on a single marketplace possible merger of exchanges With a reliable spot index financial institutions will increasingly enter the market active derivatives trading 53

54 What will come next? Evolution of regional marketplaces Iberian and BENELUX integration Regional marketplaces will only grow if there is a rtpa including a unified and efficient way of cross border transmissions capacity allocation in place 54

55 Contact Walter Boltz Energy Control Regulatory Authority Rudolfsplatz 13a A-1010 Vienna Austria Tel: Fax: walter.boltz@e-control.at 55

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