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Northern Europe Electricity Regional Initiative 5th Stakeholder Group Meeting Status of EMCC and CWE-Nordic Market Coupling Enno Böttcher Copenhagen 26 May 2010. Agenda. About EMCC and the current market coupling business. Development of interregional volume coupling Nordic - CWE.

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Northern Europe Electricity Regional Initiative 5th Stakeholder Group MeetingStatus of EMCC and CWE-Nordic Market CouplingEnno BöttcherCopenhagen26 May 2010


Agenda

About EMCC and the current market coupling business

Development of interregional volume coupling Nordic - CWE

Conclusions and discussion


Nordic-German tight volume coupling

  • General principles:

  • In a volume market coupling, the optimal net positions and thus the energy transfers between the considered market areas are determined by a system-wide maximisation of social economic welfare, i.e. the participants’ economic gains

  • The calculated optimal energy transfers are transformed into price-independent bids and offers respectively

  • The actual clearing of the market areas, i.e. determination of market clearing prices and decision on acceptance or rejection of orders, remains with the involved power exchanges

  • EMCC is assigned to conduct interregional volume market coupling between the Nordic region and Central West Europe


  • EMCC organisation

    Shareholders

    Tasks and setup

    Managing Director

    • The present allocation of shares is in principle based on the size of the end-user consumption in the relevant market:

      • Scandinavia: 40 %

      • Germany: 60 %

    front office

    back office

    Market Coupling Office

    IT

    Communications

    Scheduling

    Settlement

    Market Development

    Accounting

    Legal

    EMCC was established in Hamburg in August 2008


    EMCC`s current focus

    DK1: Interconnector between DK West - Germany (950/1,500 MW)Capacity holder: transpower stromübertragungs gmbh, Energinet.dk

    DK2: KONTEK between DK East - Germany (550 MW)Capacity holder: Energinet.dk, Vattenfall AB, 50Hertz Transmission

    Baltic Cable between Sweden - Germany (600 MW)Capacity holder: E.ON Sverige, Statkraft

    NorNed between Norway - Netherlands (700 MW)Capacity holder: Statnett, TenneT

    1

    2

    3

    4

    1

    EMCC, its internal set-up and its IT system are designed to allow for the extension of its services to other interconnections and markets.

    2

    3

    4

    volume market coupling planned


    gate closure

    ATCs from TSOs per cable

    anonymous

    OBK from PXs

    Daily business process Nordic-German market coupling

    PXs

    Capacityholders

    ATC

    order books

    schedules

    bids

    congestion rent

    calculation

    service fee

    financial settlement

    Info

    Traders

    PXs trade confirmation

    placing additional

    bids at the PXs

    publish ATC

    NPS price publication

    start marketcoupling calculation

    CBF publication,scheduling

    EPEX price publication

    10:00

    afterwards

    09:30

    12:00

    by 12:10

    before 14:00

    by 12:30

    by12:45

    by 13:25


    Nordic-German volume market coupling results

    Cross-border flow

    Flows and turnover

    MWh

    GE  DK

    DK  GE

    DK  GE

    €/MWh

    GE  DK

    CBF: cross-border flow due to welfare criterion

    Turnover: calculated congestion revenue

    AF: adverse flow; * Euro/MWh

    Results for 170 delivery days (9th Nov. 09 - 30th Apr. 2010; 4,080 hours traded)


    Likelihood of adverse flows for interregional tight volume coupling

    DK1

    DK2

    average

    The smaller the price difference the bigger the likelihood of adverse flows.


    Agenda coupling

    About EMCC and the current market coupling business

    Development of interregional volume coupling Nordic - CWE

    Conclusions and discussion


    Long-term plan for the couplingIntegrated European Market (IEM)

    Glidepath analogy

    of DA roadmap

    Integrated European Market


    A first step: couplingTight Volume Coupling for the CWE-Nordic region (TVC)

    • Interim Tight Volume Coupling (TVC), based on EMCC‘s Nordic-German coupling, will provide tight volume coupling between the future CWE market coupling and NPS market splitting

    • TVC will consider two regions with

      • many market areas

      • many interconnectors

      • different market coupling schemes

    • The CWE-Nordic TSOs and PXs asked EMCC to develop the interim solution to couple the two regions

    • The project was launched in January

      • Costs are shared by all TSOs in both regions


    The current solutions will be replaced by an interim solution

    • Current day-ahead market

    • Interim day-ahead market

    Current solutions

    Market splitting Nordic and Estonia (one PX)

    Price coupling in the Netherlands, Belgium and France (TLC – 3 PXs)

    Tight volume coupling between Denmark, Sweden and Germany through EMCC

    Explicit auctions on other borders

    Intermediate solution

    Market splitting in the Nordic (NPS)

    Price coupling in CWE

    Tight volume coupling on all connections between the CWE and Nordic regions

    TLC

    CWE


    The interim solution concept was developed by all parties solution

    1

    2

    3

    Definition & Initiation

    Solution Development

    Operation

    Setting of functional requirements

    for the interim solution

    (TSOs and PXs)

    • EMCC develops solution

    • TSOs prepare for providing ATCs

    • PXs prepare for providing order books

    • Establishment of governance arrangements (TSOs and PXs)

    • EMCC operates tight volume market coupling

    • PXs operate second step calculations

    • Continuous work on making solution as tight as possible

    EMCC was asked to establish

    tight volume coupling

    The interim solution establishes tight volume coupling on all interconnectors between the CWE and Nordic regions


    Established project organisation – interim tight volume coupling

    Joint PX-TSO

    Steering Committee

    Working group

    Working group

    Governance

    E-Bridge Consulting

    Technical & Business

    Process

    • Convenor:

    • Enno Böttcher

    • Deliverables:

    • Technical solution, business processes and timing

    • Coordinate fallback solutions

    • Coordinate IT-enhancements to existing architecture

    • Coordinate implementation, testing and migration of solution

    • Convenor:

    • Christian Dobelke

    • Deliverables:

    • Interim Solution Committee (ISC)

    • Interim Solution Agreement (ISA)

    • Share option agreement

    • External project management

    • Tasks:

    • Assist steering committee and working groups

    • Evaluate and integrate results of working groups

    • Provide basics for decision-making to the steering committee


    Working group governance - interim governance solution coupling

    • How to grant sufficient influence for a large group of heterogeneous stakeholders ?

    partly directly affected (capacity holders, e.g. Energinet), partly rather remotely affected (e.g. Fingrid)

    partly long-time customers (e.g. transpower), partly new customers of EMCC (e.g. Statnett)

    partly EMCC shareholders, mostly not

    Interim solution committee (ISC)

    Interim solution agreement (ISA)

    Effective control on actions of EMCC in the framework of interim coupling of CWE/Nordic

    Overseeing the efficiency of service provided

    Acceptance of design, development, operation

    Exchange of information between involved parties and decide on joint communication to the market and to the regulators

    Contractual basis for ISC

    Between all CWE/Nordic TSOs and PXs

    Defining rights and obligations

    Defining composition, decision making procedures and cost sharing in the ISC

    Defining termination clauses (“EMCC interim coupling is not a vehicle towards price coupling with EMCC responsible for setting prices”)

    Completed by sunset clause and share option in case of delayed enduring solution


    Contractual framework of the two workgroups coupling

    ()

    • Interim solution agreement

      • Common agreement between all CWE/ Nordic TSOs and PXs and EMCC (overall contractual basis for ITVC solution between CWE and Nordic)

    • Share option agreement

      • Common agreement between EMCC shareholders and new shareholders

    • CWE/Nordic interim solution confidentiality agreement

      • Common agreement between all CWE/ Nordic TSOs and PXs and EMCC (rgds. the use of confidential information)

    • Confidentiality agreement - use of market data

      • Common agreement between all CWE/ Nordic PXs and EMCC (regarding the use of confidential market data)

    • Cost share agreement

      • Common agreement between all CWE/ Nordic TSOs and EMCC (principles of sharing costs among the TSOs)

    • Cost recovery agreement

      • Common agreement between EMCC and CWE/Nordic PXs

    • PXs service agreement

      • Common agreement between all CWE/ Nordic PXs and EMCC (regarding the services the PXs provide to EMCC)

    ()

    ()

    ()

    ()

    ()

    ()

    in finalization

    finalized


    Working group technical and business processes - issues & solutions

    • Technical and business process deliverables

    • Objectives

    • Develop and implement an Interim Tight Volume Coupling Solution between CWE and Nordic region for the interconnectors Baltic Cable, DK1, DK2 and NorNed in close cooperation with CWE-Nordic TSOs and PXs

    • Management of cross-border flows, shipping and scheduling for the aforementioned interconnectors by EMCC

    • Avoid market irritations which may occur from a “loose” sequential market coupling

    • Tasks

    • Development of technical solution and business process in line with the requirements/constraints of CWE-Nordic TSOs and PXs

    • Development of a fallback solution and investigation of robust processes

    • Improvement and harmonisation of extended day ahead processes to cover exceptional situations

    • Coordinated migration of Interim Tight Volume Coupling Solution and CWE market launch


    Coordinated elaboration of regional market processes solutions

    Start

    • A coordinated process was initiated between all involved PXs, TSOs, EMCC and IT suppliers

    • On 9th February 2010, the 1st meeting of T&BP working group took place

    • The business process for CWE-Nordic coupling including fixed timings is currently in final discussion and will be approved soon

    • 2nd auction and special routines are included in the process

    • It will be flexible in case of technical problems, i.e. the working group will also define fallback solutions

    • Market participants will be informed in time

    Step 1

    Step 2

    Decision

    yes

    no

    Alternative 1

    Alternative 2

    End

    End

    All involved parties are involved in the development of sound processes that comply with national and regional rules and constraints.


    Price areas considered today and for CWE-Nordic solutions

    NO3SESAM

    NO4SESAM

    NO1SESAM

    NO2

    SESAM

    NO5SESAM

    ESTSESAM

    R-imSESAM

    FINSESAM

    SESESAM

    DK1A

    SESAM

    SEASESAM

    700

    L-exSESAM

    L-imSESAM

    DK1

    SESAM

    DK2

    SESAM

    NL

    EL-S*

    Current EMCC market coupling (incl. Baltic Cable):

    EMCC calculates 17 price areas and flows on 22 interconnectors for the interregional tight volume coupling between Denmark, Sweden and Germany

    950/1500

    550

    600

    BE

    EL-S**

    GE

    ETS

    Interim Phase Coupling for EMCC and CWE

    including NorNed

    FR

    ETS

    AUT

    ETS

    established interface

    development started


    Next steps solutions

    • Initial technical deliverables will be provided from June 2010, followed by an intensive testing period.

    • Before the launch of the TVC solution a market validation test will be performed.

    The CWE-Nordic regulators invited the CWE-Nordic PXs, TSOs and EMCC to a meeting in Bonn on 7th May 2010 in order to discuss the status of the TVC solution

    • The CWE-Nordic regulatory authorities are monitoring the interim TVC and CWE MC developments – the ISC reports directly to the regulators.

    • All parties agree to start CWE with a tight volume coupling (TVC) with the Nordic market.

    • All parties put their strongest efforts to ensure a start as close as possible to 7th September 2010.

    If it turns out in July 2010 that a timely start cannot be realised, all parties will decide on mitigating actions.


    Agenda solutions

    About EMCC and the current market coupling business

    Development of interregional volume coupling Nordic - CWE

    Conclusions and discussion


    A significant step towards the Integrated European Market solutions

    • Tight volume coupling across the CWE and Nordic region

    • More efficient use of cross border capacities, promotes cost efficiency, security of supply and inclusion of new renewable generation

    • Enhanced transparency through joint solutions

    • Cooperation and commitment of all involved stakeholders

    • Process is monitored by the regulatory authorities

    CWE-MC


    Contact solutions

    Enno Böttcher

    European Market Coupling Company GmbH

    Hopfenmarkt 31, D-20457 HamburgGermany

    [email protected]


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