I-SEM a new wholesale electricity market for Northern Ireland and Ireland. 4 th February 2015

Transcription

1 I-SEM a new wholesale electricity market for Northern Ireland and Ireland 4 th February 2015

2 Introduction Development of power markets in Ireland and Northern Ireland Development of power markets across Europe Market coupling explained The elements of the I-SEM

3 2007 The implementation of the SEM The market design was a gross mandatory pool model with single marginal pricing The design is based on ex-post pricing and single-sided participation

4 2007 The implementation of the SEM Power providers offer in trades at day-ahead but retail supply companies do not bid to buy The demand curve is based on actual consumption measured ex-post

5 2008 Power market developments in Europe Power markets have been evolving across Europe since the early 1990s Nordpool, initially set up to cover Norway, expanded to cover the greater Scandinavian area as the decade progressed Markets set up in Europe were based on stock exchange models and became known as energy exchanges or power exchanges Unlike the SEM, they operated double-sided auctions and firm day-ahead markets This means that both producers offer to sell and retail suppliers bid to buy

6 2008 Power market developments in Europe This means that both producers offer to sell and retail suppliers bid to buy The market clears where the demand and supply curves meet

7 2008 Power market developments in Europe In central Europe, the Amsterdam Power Exchange began an initiative aimed at improving the efficiency of cross border flows This was focused on the power flows between the Netherlands, Belgium and France Old arrangements resulted in sub-optimal and inconsistent use of interconnectors Large price differences observed while cross border capacity was available Cross border flows from high price areas to low price areas Solution was Tri-Lateral Coupling (TLC)

8 2008 Power market developments in Europe Source APX presentation on Target Model, Dundalk, June 2011

9 2008 Power market developments in Europe Isolated Markets Price Differences P ( /MWh) Market A Export P ( /MWh) Market B Coupled Markets Price convergence Import PA PA PB PB QA QA Q (MWh) QB QB Q (MWh) Source PCR, EUPHEMIA: Description and functioning, April 2013

10 2008 Power market developments in Europe

11 Power market developments in Europe Markets included in PCR TWh Markets associate members of PCR Markets that could join next as part of an agreed European roadmap

12 2009 The EU Target Model

13 2014 The I-SEM Forwards Day-ahead Intraday Balancing Financial trading within the I-SEM Financial transmission rights for cross border Potential for centralised platform Additional liquidity measures to be addressed No physical forward contracting Imbalance settlement

14 2014 The I-SEM Forwards Day-ahead Intraday Balancing Imbalance settlement Day-ahead market is the exclusive route to market for day-ahead physical positions Based on EU market coupling Unit based participation (both generation and demand) Some portfolio participation allowed (including Aggregator of Last Resort) Trialling of day-ahead commercial structures ongoing

15 2014 The I-SEM Forwards Day-ahead Intraday Balancing Imbalance settlement Based on continuous EU solution (XBID) Scope for regional auctions to be included Exclusive route for physical intraday positions Same granularity of participation as day-ahead Envisaged as the market where participants adjust day-ahead positions based on improved forecasts and other technical information

16 2014 The I-SEM Forwards Day-ahead Intraday Balancing Imbalance settlement Day-ahead positions should be the starting point for physical notifications to the TSO Notifications should be technically feasible Commercial offers from participants based on Incremental and Decremental prices (Inc & Dec) EU approach is for Balancing actions to be only in the last hour In the I-SEM, TSOs will be able to take early actions to secure the system Actions classed as energy and non-energy actions

17 2014 The I-SEM Forwards Day-ahead Intraday Balancing Marginal imbalance pricing based on TSO balancing actions Non-energy actions should be pay-as-bid, and excluded from imbalance price calculation Balance responsibility envisaged Imbalance determined based on final metered positions vs. aggregate contracted positions Imbalance settlement

18 2014 The I-SEM: Capacity Remuneration Mechanism 1. Level of capacity payments set by auction where generators compete to meet the required capacity. 2. Generator: sells reliability option through auction and gets flatter capacity payments 3. Supplier: pays regular capacity payments and gets protection against high energy prices. 4. Generator: pays back volatile high prices in exchange for flatter capacity payments. Strong incentive to be ON. 5. More expensive flexible units can compete by including system service revenue. 6. Price signal retained for demand side and interconnector flows.

19 2014 The I-SEM: Capacity Remuneration Mechanism 1. Generator gets option payment so does not need high price spikes to cover missing money. 2. Supplier funding of regular capacity payments hedges against energy price spikes. 3. Generator pays back when spot price exceeds strike price. Strong incentive to be ON.

20 The I-SEM Project teams set up in SEM RAs to develop detailed design of the elements of the I-SEM Teams set up within EirGrid to implement the design for 2017 Workshops and consultations are already happening Aggregator of Last Resort Building Blocks workshops and consultation due Market Design workshops underway Agreed working approach published setting out more detail on the way forward for the I-SEM On target for 2017

21 Questions?