10 italian market
TRANSCRIPT
-
8/13/2019 10 Italian Market
1/46
Autorit per lenergia elettrica e il gas 1
THE ITALIAN ELECTRICITY MARKETTHE ITALIAN ELECTRICITY MARKET
The Regulatory Authority for Electricity and Gas
Francesco Cariello
MARKET DEPARTMENT
6 October 2008
-
8/13/2019 10 Italian Market
2/46
Autorit per lenergia elettrica e il gas 2
SummarySummary
From monopoly to liberalizationLegislative framework The Italian Regulatory Authority for electricity andgas(AEEG)Key figures of the electricity market The Italian Power ExchangeElectricity system operators
-
8/13/2019 10 Italian Market
3/46
Autorit per lenergia elettrica e il gas 3
TheThe eletricityeletricity marketmarket beforebefore liberalizationliberalization(1962(1962 1999)1999)
Since the end of 1962 the whole electricity market wasunder the monopoly of a single vertically integrated andstate-owned company: Enel
The transmission and distribution networks werecontrolled by Enel, with the exception of few cities wherethere were local municipal electricity undertakings
-
8/13/2019 10 Italian Market
4/46
Autorit per lenergia elettrica e il gas 4
From monopoly to liberalizationFrom monopoly to liberalization
The liberalization process brought about the replacement of oldadministrative procedures with market mechanisms more suitedto the new framework for power trade
Trade-off between necessity of a coordination of physical flowsand development of decentralized commercial transactionsamong many operators
According to Italian Legislation, implementing the EuropeanElectricity Directive 96/92/EC (common rules for the internalelectricity market), operators can trade electricity through twodifferent types of contracts:
By means of bids/offers within the power exchangeBy means of bilateral contracts (OTC)
-
8/13/2019 10 Italian Market
5/46
Autorit per lenergia elettrica e il gas 5
TheThe liberalizationliberalization processprocess
July 1992 Enel becomes a limited company
November1995
An independent energy regulator isestablished (AEEG)
1999
Legislative decree n. 79 March1999
Enel privatization starts (stock exchange listing)
1999-2007Supply liberalization
Demand liberalization
-
8/13/2019 10 Italian Market
6/46
Autorit per lenergia elettrica e il gas 6
The Liberalization: Legislative framework The Liberalization: Legislative framework
European Union:
Directive 96/92/CE (common rules for the internal electricitymarket)
Directive 2003/54/CE which replaces the former
Italy:
1995: The law n. 481 sets up Regulatory Authorities for thepublic sector, among which the Authority for electricity and gas
Legislative Decree n. 79 (Bersani decree) which transposes theEU Directive 96/92 to Italy
The law n. 239/04The law n. 125/07 which partly transposes the EU Directive
2003/54 to Italy
-
8/13/2019 10 Italian Market
7/46
Autorit per lenergia elettrica e il gas 7
Authority for electricity and gas (AEEG) Authority for electricity and gas (AEEG)
Legislative references:Law n. 481/1995
Features of mandate:IndependenceAutonomy
Activities:Promotes the development of competion in the power marketGuarantees adequate standards of quality and efficiency ofserviceDetermines tariffs (for natural monopolies i.e. Transmission,
Distribution)Promotes consumers protectionRegulates the access to electricity and gas national gridsMonitors compliance with legislationAdopts resolutions
-
8/13/2019 10 Italian Market
8/46
Autorit per lenergia elettrica e il gas 8
The new structure of electricity systemThe new structure of electricity system
implemented by the Bersani decreeimplemented by the Bersani decreeActivities subject to licence:
Distribution
Activities in natural monopolyTransmission Transmission System Operator (TERNA)Dispatching Electricity Market Operator (GME), that
organizes the Market for dispatching services
Liberalized activities:GenerationImportExportSupply(Metering)
The new Energy law proposal changes thelaw n.481 enlarging Authority tasks
The function of costumer protection andof promoting competition in the marketare extended to all liberalized activities
-
8/13/2019 10 Italian Market
9/46
Autorit per lenergia elettrica e il gas 9
The Bersani decree: demand liberalizationThe Bersani decree: demand liberalization
Two parallel markets:Eligible consumers they can choose their supplierNoneligible consumers captive market
Demand liberalization has been introduced gradually:1999: 30 GWh/year2000: 20 GWh/year2002: 9 GWh/year
2003: 100 MWh/year2004-2007: All non residential costumers are eligible11 JulyJuly 2007: All consumers are2007: All consumers are eligibleeligible
-
8/13/2019 10 Italian Market
10/46
Autorit per lenergia elettrica e il gas 10
The Bersani decree: supply liberalizationThe Bersani decree: supply liberalization
Asymmetric regulation of incumbentThe Bersani decree stated that:
ENEL had to retain a maximum market share of 50% after2003ENEL had to sell 15.000 MW of capacity by that timeAs a consequence, three generation companies (orGencos) were established and sold on the market (thesales of Elettrogen, Eurogen and Interpower werecompleted by the end of 2003)
Objective: to introduce competition in generation
Vertical separation of the activities in the supply chain
Objective: to guarantee efficient and non discriminatoryaccess to transmission and distribution networks; to avoid anti-competitive behaviours and dominant position abuses byoperators in downstream market
-
8/13/2019 10 Italian Market
11/46
Autorit per lenergia elettrica e il gas 11
OperatorsOperators // institutionsinstitutions in thein the electricityelectricitymarketmarket
Terna: Transmission System OperatorGSE: Electricity Services OperatorGME: Market OperatorSingle Buyer
AEEG: Italian electricity and natural gassectors regulatorAGCM: Italian antitrust authority
-
8/13/2019 10 Italian Market
12/46
Autorit per lenergia elettrica e il gas 12
TSOTSO -- TERNA (I)TERNA (I)
Terna was created in 1999 as a separate company (100 %owned by Enel S.p.A, Italys incumbent) to own, develop andmaintain more than 90% of the National Electricity TransmissionNetwork. Meanwhile management of the grid was entrusted to apublic operator controlled by the Ministry of Finance and calledGRTN - ( Independent System Operator model)
Following legislation envisaged that:Ownership and management of the network should berebundledAny company (generation, import, distribution) doesnt ownmore than 5% of the TERNA stockholders equity
Enel reduces its equity interest in TERNA (now around 5%)
-
8/13/2019 10 Italian Market
13/46
Autorit per lenergia elettrica e il gas 13
TSOTSO -- TERNA (II)TERNA (II)
ACTIVITIES (FORMERLY THEY WERE CARRIEDOUT BY GRTN):
Transmission serviceDispatching serviceBalancing serviceCongestions managementReserve serviceUpgrading transmission network
-
8/13/2019 10 Italian Market
14/46
Autorit per lenergia elettrica e il gas 14
ELECTRICITY SERVICES OPERATOR (GSE)ELECTRICITY SERVICES OPERATOR (GSE)State-controlled company (fully owned by Ministry of Finance),stemming from former GRTN after transferring dispatching,transmission and upgrading network activities to Terna.It is responsible for promoting and developing renewables
resources.
Activities:Owns GME (Electricity Market Operator) and AU (Single Buyer)Buys electricity generated by renewable and assimilatedsources and sells it in the marketIssues Green Certificates and monitors producers and importers compliance with renewables obligationCertifies plants using renewables sources
Issues the Guarantee of Origin (GO) of electricity generatedby renewablesManages the scheme that incentivates electricity generationby photovoltaic plantsCertifies co-generation plants
-
8/13/2019 10 Italian Market
15/46
Autorit per lenergia elettrica e il gas 15
MOMO MARKET OPERATOR (GME)MARKET OPERATOR (GME)
Activities:
Organizes and manages electricity power exchange undercriteria of neutrality, transparency and objectivity, with a
view to promoting competition between producers andensuring an adequate availability of reserve capacity
It is responsible for the organization and management of
transactions within Green Markets:Green Certificates (since March 2003)Energy Efficiency Certificates -White Certificates(since March 2006)
Greenhouse Emission Units (since April 2007)
This company was set up by GRTN (now TERNA) in June 2000and it became operative on 1 April 2004 (start-up oforganised wholesale electricity market). Now its fully ownedby GSE (Electric Services Operator).
-
8/13/2019 10 Italian Market
16/46
Autorit per lenergia elettrica e il gas 16
SINGLE BUYERSINGLE BUYER -- AU AUActivities:
Through July 1, 2007 it has had the task of procuring electricityfor captive customers under criteria of continuity, security andefficiency of supply
Since July 1, 2007 it has the task of procuring electricity forvulnerable consumers (households and small businesses)Purchases electricity in the market on the best possible terms andresells it to distributors
Ways of supplying:Concludes contracts, including multi-year contracts, for anamount of energy not exceeding one fourth of the overall demandof the vulnerable clients marketPartecipates in procedures for the allocation of transmissionimport capacity and incentivated energyEnters into the multi year electricity import contracts forvulnerable clientsProcures electricity in the power exchange
-
8/13/2019 10 Italian Market
17/46
Autorit per lenergia elettrica e il gas 17
ITALY ITALY REGULATORREGULATOR -- AEEG AEEG
Activities referring to the wholesale ectricity market:
Regulation of transmission and dispatching servicesGuidelines to TSO TERNA to adopt a Grid CodeDefinition of transmission and dispatching activities as aconsequence of rebundling of network ownership andmanagementDefinition of merit order criteria for renewables and CHPplantsRegulation of import conditionsPromoting and monitoring competition in wholesalemarketsIn particular: together with the AGCM, the antitrustauthority , monitors the functioning of the electricitymarket to detect possible anti-competitive behaviours ofoperators
-
8/13/2019 10 Italian Market
18/46
Autorit per lenergia elettrica e il gas 18
MINISTRY FOR INDUSTRY
REGULATOR AEEG
Grid code guidelines
Transmission anddispatching regulation
Merit order criteria forrenewables and CHPplants
MO GME
Market Operating Discipline
TSO TERNA
Grid code
Scheme for dispatching rules
Guarantees merit order
PRIMARY LEGISLATION
approves
formulatesobservations
verifies
verifies
directives
COORDINATION AMONG MAIN INSTITUTIONSCOORDINATION AMONG MAIN INSTITUTIONS
-
8/13/2019 10 Italian Market
19/46
Autorit per lenergia elettrica e il gas 19
The structure of theThe structure of the electricityelectricity marketmarket
NATIONAL AND FOREIGN GENERATORS
Bilateral Contracts
Energy
Power Exchange
Contracts of supply
TRADERS SINGLE BUYER AU
PROTECTED CUSTOMERS(LV)
EnergyMGP - MA
Resources fordispatching
MSD
TERNA
ELIGIBLE CONSUMERS
GME
(Sellers / Distributors)
-
8/13/2019 10 Italian Market
20/46
Autorit per lenergia elettrica e il gas 20
EvolutionEvolution ofof electricity consumptionelectricity consumption
In the last ten years demand increased in average by 2,5%In 2007 demand was 339,9 TWh, of which 293,6 TWh covered byinternal production and 46,3 TWh by import (15,7%)
TWhSource: TERNA
233 239 244254 256 260 270
280 281 293
39 4142
44 4851
51 4649
45
0
50
100
150
200
250
300
350
1 9 9 7
1 9 9 8
1 9 9 9
2 0 0 0
2 0 0 1
2 0 0 2
2 0 0 3
2 0 0 4
2 0 0 5
2 0 0 6
Net import
Nationalproduction
2 0 0 7
293
46
l f k l d ( )
-
8/13/2019 10 Italian Market
21/46
Autorit per lenergia elettrica e il gas 21
Maximum summer peak: 55.619 MW 2006 (1st peak duringsummer)
Maximum winter peak: 56.810 MW 2007
DevelopmentDevelopment of peak load (MW)of peak load (MW)
Source: TERNA
-
8/13/2019 10 Italian Market
22/46
Autorit per lenergia elettrica e il gas 22
The majorThe major playersplayers in the marketin the marketMarket shares in national gross production in 2007
Source: AEEG
-
8/13/2019 10 Italian Market
23/46
Autorit per lenergia elettrica e il gas 23
TheThe compositioncomposition ofof nationalnational productionproduction
NATIONAL NET PRODUCTION BY SOURCE IN 2007
More than 80% of total generation is from thermal power plantsNatural gas has a central role in energy production, coveringmore than 50% of total production
Source: TERNA
Others25 TWh
10%
Oil20.9 TWh8.2%
Coal40.2 TWh
15.8%Wind andphotovoltaic
4.1 TWh1.4%
Natural gas167.9 TWh
66%
Hydro37.9 TWh
12.6%
Thermal254,0 TWh
84.3%
Geothermal5.2 TWh
1.7%
-
8/13/2019 10 Italian Market
24/46
Autorit per lenergia elettrica e il gas 24
Power Import in 2007Power Import in 2007
In 2007 total netimport (48.9TWh)Great part of netimport is fromFrance andSwitzerland(90%)
SLOVENIA3.237 GWh
FRANCE15.259,2 GWh
SWITZERLAND28.864,5 GWh
AUSTRIA
1.396,4 GWh
GREECE173 GWh
-
8/13/2019 10 Italian Market
25/46
Autorit per lenergia elettrica e il gas 25
New interconnectorsNew interconnectors may be realised bymay be realised by ::
Project approval by the relevant Ministry in theframework of the annual grid development plan
Capital investment considered by the Regulatordesigning the transmission tariff (possible incentive rateof return applied)
The new line is subject to third party access (TPA)regulation (market measures to allocate the capacity)
In general: by the transmission system operator(TSO):
As an exception : by a private investor not operatingtransmission or distribution grids that may build theinterconnector being granted an exemption from TPA for adetermined period Reg. UE 1228/2003, DM 21/10/2005
-
8/13/2019 10 Italian Market
26/46
Autorit per lenergia elettrica e il gas 26
New interconnectorsNew interconnectors byby privateprivate investorsinvestors ::merchant linesmerchant lines
Exemption granted by the Ministry for economic development,with the consultation of the Authority and the TSO. Forinterconnectors connecting Member States the Commission
agreement is mandatory.
Exemption grantable to direct current DC(or equivalenttechnology) interconnectors; AC interconnectors may be granted
the exempiton only in case of exceptionally risky and costlyinvestments.
The period of granted exemption should be proportional to thelevel of risk of the investment
The owner of the interconnector may use the line its tradingactivity (import/export) or may apply a network tariff to thirdparties willing to have access to it
-
8/13/2019 10 Italian Market
27/46
Autorit per lenergia elettrica e il gas 27
Merchant linesMerchant lines projectproject approvedapproved(( DecreeDecree 21/10/05 and EU21/10/05 and EU RegReg 1228/2003)1228/2003)
Exemption granted to 2 merchant lines between Italyand Switzerland
1. Interconnector: Tirano (IT) Campocologno (CH)
Investors: Edison, Raetia Energie, Comune di Tirano AC line, 150 kV
Exemption granted: 150 MW for 10 years
2. Interconnector: Mendrisio (CH) Cagno (IT)
Investors: Ferrovie Nord Milano, Azienda Elettrica Ticinese AC line, 380 kV
Exemption granted: 150-200 MW for 13 years
-
8/13/2019 10 Italian Market
28/46
Autorit per lenergia elettrica e il gas 28
PowerPower plantsplants and peak loadand peak load coveringcovering
Source: TERNA
21117
69021
670 27880
20000
40000
60000
80000
Hydro Thermal Geothermal Eolic andphotovoltaic
16.2 21.5
73.6 66.1
8.7 11.4
0%
20%
40%
60%
80%
100%
Winter peak Summer peak
Import
Eolic andphotovoltaicGeothermal
Thermal
Hydro
NET POWER CAPACITY IN ITALY IN2007 (MW)
SHARE OF PEAK LOAD COVERINGBY POWER CAPACITY (%)
Total net capacity in 2007 was 93.598 MW, mostly thermal(74%) and hydro (22%)Import contributes substantially to the covering of peak load,especially during summer
-
8/13/2019 10 Italian Market
29/46
Autorit per lenergia elettrica e il gas 29
GenerationGeneration plants distributionplants distribution inin ItalyItaly
Source: TERNA
North47.923 MW
Calabria4.410 MW
Sardinia4.121 MW
Sicily7.110 MW
South Centre11.816 MW
South16.161 MW
North Centre7.009 MW
-
8/13/2019 10 Italian Market
30/46
Autorit per lenergia elettrica e il gas 30
NewNew thermalthermal powerpower plantsplants 20082008 --2011 (MW)2011 (MW)
Source: TERNA
-
8/13/2019 10 Italian Market
31/46
Autorit per lenergia elettrica e il gas 31
Mixed model: Bilateral contracts and non mandatory bidding system,based on exchange of physical power contracts
Two energy markets:
Transactions take place the day ahead of the day in which electricity isphysically produced and consumed
Day-ahead market (MGP)
Adjustment market (MA)
A market for dispatching services (MSD):The System Operator procures resources to solve grid congestions, to
purchase operational reserve and to balance the power system in realtime
IPEX (Italian Power Exchange): marketIPEX (Italian Power Exchange): market
structurestructure
-
8/13/2019 10 Italian Market
32/46
Autorit per lenergia elettrica e il gas 32
IPEX : market structureIPEX : market structure
Procurement ofdispatchingresources
System MarginalPrice
System MarginalPrice Pay as Bid
OBJECTIVE
PRICE
Injection/withdrawalprogramsdefinitionfor next day
Modifying thecommitmentsresulting from theDay-Ahead mkt
Market Operator(GME)
Market Operator(GME)
TransmissionSystem Operator
(TERNA)
COUNTERPARTY
Day-Aheadmarket
Adjustmentmarket
Dispatchingservicesmarket
OPERATORSGenerators,eligible clients,Single Buyer, TSO
GeneratorsQualified powerunits only
-
8/13/2019 10 Italian Market
33/46
Autorit per lenergia elettrica e il gas 33
3 Phases for IPEX 3 Phases for IPEX
PHASE 1 (Ended on 30 March 2004)Technical trials with operators
PHASE 2 (1 April - 31 December 2004)Partial functioning: only supply side
PHASE 3
Complete functioning: demand and supply sides1 July - 31 December 2004: technical trialsSince 1 January 2005: actual starting
NEXT PHASE (IDEX):Introduction of a financial derivatives market onelectricity prices
-
8/13/2019 10 Italian Market
34/46
Autorit per lenergia elettrica e il gas 34
IPEX : selling and purchase priceIPEX : selling and purchase price in thein the
dayday -- aheadahead marketmarketSelling price: segmentation of the market in different zonesIts the price that remunerates operators that provide energy
Purchase price ( National unique price PUN): calculated asweighted average of zonal prices on clients consumptionIts the price paid by demand side operators
IPEX : selling prices based on aIPEX : selling prices based on a systemsystem
-
8/13/2019 10 Italian Market
35/46
Autorit per lenergia elettrica e il gas 35
PricesRendita inframarginale
Inframarginalrent
P r ic e s
IPEX : selling prices based on aIPEX : selling prices based on a systemsystemmarginal pricemarginal price approachapproach
/ MWh /MWh
MW MW
Offerings notaccepted
Acceptedofferings
System marginal price Pay as bid
Offerings notaccepted
Acceptedofferings
In the Day-ahead Market and the Adjustment Market, prices arefixed using a system marginal price approach, while the Marketfor dispatching services is based on a pay-as-bid approach
IPEX:IPEX: offersoffers andand bidsbids
-
8/13/2019 10 Italian Market
36/46
Autorit per lenergia elettrica e il gas 36
IPEX:IPEX: offersoffers andand bidsbids
simple offer/bid, consisting of one quantity-unit price (MWh, /MWh)
pair;multiple offers/bids, consisting of a maximum of four quantity-unit pricepairs;
pre-defined offers/bids, i.e. simple or multiple offers that each MarketParticipant may submit on a one-time basis.
Both demand bids and supply offers (purchase and sale offers) may besubmitted into the Day-ahead Market. Three types of offers/bids may besubmitted:
TheThe Adjustment Market (MA)Adjustment Market (MA)
-
8/13/2019 10 Italian Market
37/46
Autorit per lenergia elettrica e il gas 37
TheThe Adjustment Market (MA) Adjustment Market (MA)
The Adjustment Market allows Market Participants to submitappropriate demand or supply offers in order to accommodatetheir own schedules in the Day-ahead MarketUp to now the market is open only supply side
hTh k f d hM k f di hi i
-
8/13/2019 10 Italian Market
38/46
Autorit per lenergia elettrica e il gas 38
TheThe Market for dispatching servicesMarket for dispatching services
This is the market where the TSO procures the resources for itsdispatching service. The process of acceptance of offers/bids takesplace in two stages:
immediately after the close of the sitting, i.e. when theaccepted offers/bids are used to revise the injection andwithdrawal schedules resulting from the Day-Ahead Market andthe Adjustment Market, so as to relieve any residual congestionand to create the reserve margins needed to guarantee thesecurity of the system;
throughout the day of delivery (i.e. in real time), whenoffers/bids are accepted in order to balance the system in realtime.
Both demand bids and supply offers are submitted into the market,
but they can only be specified in the simple offer format.Operators are rewarded using a pay-as-bid approach
The market is very concentrated: the first operator in 2006 sold60% of total energy
IPEX thIPEX: the l lli g ional selling prices i th Din the Da
-
8/13/2019 10 Italian Market
39/46
Autorit per lenergia elettrica e il gas 39
IPEX: theIPEX: the zonal selling priceszonal selling prices in the Dayin the Day --aheadahead marketmarket
In the North zone, during 2007, prices have been morethan 4% lower than in other zones
In the same year prices have been higher in the islands,Sardinia (+5,0%) and Sicily (+11%)
In the North the degree of competition is higher than inother zones especially in the off-peak hours
Sicily and Sardinia are particularly penalized by thepresence of significant congestion limits
The purchase price is calculated as a weightedaverage of zonal prices and is strongly influencedby dynamics at zonal level
IPEX: theIPEX: the onal selling priceszonal selling prices in the Dain the Day
-
8/13/2019 10 Italian Market
40/46
Autorit per lenergia elettrica e il gas 40
IPEX: theIPEX: the zonal selling priceszonal selling prices in the Dayin the Day --aheadahead marketmarket
Source: GME
North68.47 /MWh
Calabria73.22 /MWh
Sardinia75.00 /MWh
Sicily79.51 /MWh
South Centre73.05 /MWh
South73.04
/MWh
North Centre72.80 /MWh
Year 2007
IPEX: theIPEX: the purchasepurchase price in the Dayprice in the Day aheadahead
-
8/13/2019 10 Italian Market
41/46
Autorit per lenergia elettrica e il gas 41
IPEX: theIPEX: the purchasepurchase price in the Dayprice in the Day -- aheadaheadmarketmarket
Source: GME
IPEX,IPEX, PowernextPowernext and EEX, priceand EEX, price indexesindexes
-
8/13/2019 10 Italian Market
42/46
Autorit per lenergia elettrica e il gas 42
,, , p, p20062006 --20072007
IPEX:IPEX: supplysupply side in the Dayside in the Day aheadahead marketmarket
-
8/13/2019 10 Italian Market
43/46
Autorit per lenergia elettrica e il gas 43
IPEX:IPEX: supplysupply -- side in the Dayside in the Day -- aheadahead marketmarket
Source: GME
70%
21%
8% 1%
Private operatorsGSE
ImportBids by TSO
IPEX:IPEX: demanddemand -- side in the Dayside in the Day -- aheadahead marketmarket
-
8/13/2019 10 Italian Market
44/46
Autorit per lenergia elettrica e il gas 44
IPEX:IPEX: demanddemand -- side in the Dayside in the Day -- aheadahead marketmarketin 2007in 2007
Source: GME
49%
45%
3% 1% 2%
Single Buyer OthersPumping
ExportOffers by TSO
The IPEX:The IPEX: fact sheetsfact sheets in 2007in 2007
-
8/13/2019 10 Italian Market
45/46
Autorit per lenergia elettrica e il gas 45
Day-ahead Market:Operators: 89 (71 supply side, 74 demand side)Total demand: 330 TWh (liquidity: 67.1%)
Adjustment Market:Operators: 32 (29 supply side, 32 demand side)Total demand: 13 TWh
Market for dispatching services:Operators: 19Total demand: 47 TWh
-
8/13/2019 10 Italian Market
46/46