Market Coupling: a method with implicit advantages. B. Den Ouden CEO, Amsterdam Power Exchange Spotmarket BV (APX)
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1 Market Coupling: a method with implicit advantages B. Den Ouden CEO, Amsterdam Power Exchange Spotmarket BV (APX)
2 Daily spot market Prijs Vraag Aanbod Conditional bids marktprijs 24x + blocks: Daily program Verhandeld volume Hoeveelheid 2.500, , , ,0 500,0 0,0 MWh Eur ,00 35,00 30,00 25,00 20,00 15,00 10,00 5,00 0,00 Pagina 2
3 Pagina 3 New bid interface
4 Monthly volumes GWh/month electricity Monthly volumes gas volume scaled down by 50% GWh/month Natural gas APX APX UK UK gas Pagina 4
5 Volumes UK gas: EnMO 11,0 10,0 Mln MWh/mnd 9,0 8,0 7,0 6,0 5,0 4,0 3,0 GPF BoW GPF WDNW GPF Weekend GPF Days OCM Physical OCM Locational OCM Title 2,0 1,0 0,0 Oct Jan Apr Jul Oct Jan April July Oct Jan Apr July Oct Jan Apr July Pagina 5
6 No. of market parties directly active 60 APX APX UK EnMO Pagina 6
7 Price (movements) 100,00 Monthly base price average , , Price 50,00 49,99 51,03 25,00 34,62 29,83 25,91 26,24 40,12 32,64 0,00 January Febuary March April May June July August September October November December Av. 2001: 33 /MWh Av. 2002: 30 /MWh Pagina 7
8 Independent APX shareholder: grid company 100% Shareholder grid company: Dutch state Completely independent Firm trading system Back-up systems APX always produces a price Dutch state 100% Grid operator TenneT APX 100% Pagina 8
9 APX group First combined exchange in electricity & natural gas EnMO APXUK APX International Multi-commodity Added value Pagina 9
10 Cross-border allocation methods (New lines) Non-market based: First come first serve Pro rate curtailing Market based: Explicit autioning Implicit auctioning, market splitting/coupling Counterbuying,, compensating re-dispatch Pagina 10
11 Some congested borders in Europe Reasons: Historical policy Fuel decisions Local taxation X - No. Of major generators - Constraints / Auctions - Operating exchanges New lines: Slow Huge investment Political reasons might fade over time Optimize existing capacity! Pagina 11
12 Non-market based methods Stable when no congestion or non-competition Unstable when there is a real value and full competition First come first serve: fax run in the opening seconds Pro rata: gaming for ever-bigger subscription volumes Pagina 12
13 Market based methods Attribute an economical value to the good being limitedly available: transmission capacity Explicit auctioning: Explicit auction transmission capacity Cap. price Maximum im/export Pagina 13
14 Explicit auctioning Creates stability Drawbacks: Risky Suitable for bigger players No contribution to liquidity on either side No netting of im & exports Creates a barrier even at times when there is no congestion! Leads to a fragmented European market Pagina 14
15 From explicit towards implicit transmission auction method Auction revenue Explicit auction transmission capacity Prijs Spot market Area A Maximom export Spot market Area B Cap. price? Maximum im/export Maximum import Quantity Quantity Pagina 15
16 Implicit auction without constraints: one integrated market Explicit auction transmission capacity Prijs Spot market Area A Maximom export Spot market Area B Cap. price? Maximum im/export Maximum import Quantity Quantity Pagina 16
17 Market Coupling, Nordic (1): situation with no transport capacity Spot Market Area A high price Spot Market Area B low price Isolated markets with a price difference Price Price Quantity Quantity Pagina 17
18 Market Coupling (2): situation with sufficient transport capacity Spot Market Area A prices equal Spot Market Area B prices equal Spot Markets and prices unified by transport capacity Price Price imports exports Quantity Quantity Pagina 18
19 Market Coupling (3): situation with limited transport capacity Spot Market Area A higher price Spot Market Area B lower price Spot Markets and prices differ but are connected Price imports Price exports Implicit Capacity auction: revenues to Grid Operators Quantity Quantity Pagina 19
20 Advantages Integration of daily capacity auction + spot market One step instead of two Diminishing trading risk, market power Better suitable for hedging Local traders also acting internationally Netting of im/exports (optizing( use of cap.) Bigger liquidity One market when there is no congestion Pagina 20
21 Example: Brussels Power Exchange BPX Spot market: BPX Brussels Power Exchange: Belgian price Implicit auction of transmission capacity Extra liquidity by VPP measure VPP = Virtual Power Plant Production rights on inc. producer Pagina 21
22 Example: Belgian market and Dutch market, explicit cross-border auctions Market parties would sell preferably in NL Directly crossing the border by buying crossborder capacity Import from the south: transit transit APX No liquidity for the Belgian market Also VPP s No added value for Belgium Pagina 22
23 Implicit auction method System developed for APX / BPX Transmission capacity no longer sold to market parties Im- /export through spot market: BPX BPXexportimport APX All liquidity inside Belgium Including VPP liquidity Added value Pagina 23
24 Re-dispatch: inside price areas Example: Oversupply Overdemand constrained connection In spite of constraints : - Free contracting - Market contracts remain - Whole region 1spot price - Stimulates market liquidity Requirements: - System Operator needed - Costs of counter-buying by SO are charged in grid tariff Between countries / price areas: very expensive! Pagina 24
25 Conclusions Liberalization leads to emerging economical forces, leading to emerging constraints Non-market based methods unstable Explicit auctioning stable but fragmenting Implicit auctioning: future opportunity Pagina 25
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