gent summer school: electricity markets & trading gregory michiels 27 august 2013
TRANSCRIPT
Gent Summer School: Electricity Markets & Trading
Gregory Michiels
27 August 2013
2
EDF LUMINUS: 1st CHALLENGER IN ELECTRICITY PRODUCTION IN BELGIUM1,950 MW installed capacity (beginning 2013)
10 % of the Belgian electricity production capacity
73 MW hydro-electric energy
3.8 % of our energy mix
117 MW wind energy 6 % of our energy mix
418 MW nuclear participations
21.4 % of our energy mix
1,342 MW gas power plants
68.8 % of our energy mix
3
1st CHALLENGER IN GAS AND ELECTRICITY SUPPLY
1,700,000 access points
30,000,000 MWh sold
Market share of 20%
4
SHAREHOLDERS
June 2009EDF announces its intent to buy Centrica’s 51%
November 2009Approval by the European Commission 12/11 Closing 51% shares 26/11Minority shareholders sale option
8 June 2010Publilum and VEH sell half of their shares, Dexia sells all participation EDF in SPE: 63.5%
22 November 2011The company name is EDF Luminus
5
Optimisation versus Trading
Asset Optimiser• Manages a portfolio of assets
(power plants, contracts, retail portfolio,…)
• Objective is to control physical and financial risks and maximising margins
= hedging
Trader• Creates a position • Objective is to make money
from this position when market conditions change
= speculation
Both actors sell and buy in the wholesale markets to achieve their objectives, thus creating a liquid market
6
Timeline of activities of an asset optimiser
From 3 years to 1 month ahead of implementation date [D]• Forecast of the
medium-term supply/demand balance
• Scheduling of power plant maintenance
• Sale/purchase operations on the forward markets
1 Month ahead of implemenation date [D]• Refine the
supply/demand balance to more accurate weather forecasts and availability of power plants
• Sale/purchase operations on the forward markets
Day Ahead [D-1]• Create operating
schedule for the power plants
• Balancing supply and demand on the Day-Ahead market (DAM)
• Send nominations to TSO
Intraday [D]• Respond to latest
unanticipated changes in the portfolio
• Send re-nominations to TSO
• Sale/purchase operations on the intraday market
7
OTC markets and power exchanges
8
Forward and spot prices
10
20
30
40
50
60
70
80
02/0
1/20
1206
/02/
2012
12/0
3/20
1216
/04/
2012
21/0
5/20
1225
/06/
2012
30/0
7/20
1203
/09/
2012
08/1
0/20
1212
/11/
2012
17/1
2/20
1221
/01/
2013
25/0
2/20
1301
/04/
2013
06/0
5/20
1310
/06/
2013
15/0
7/20
1319
/08/
2013
23/0
9/20
1328
/10/
2013
02/1
2/20
1306
/01/
2014
10/0
2/20
1417
/03/
2014
21/0
4/20
1426
/05/
2014
30/0
6/20
1404
/08/
2014
€/M
Wh
weekly average spot prices
Belpex Apx Epex Spot France Epex Spot Germany
9
Price Drivers
10
DAH price formation: supply/demand balance
Power
Price
Industrialdemand
Residential demand
Exports
Commercial demand
Nuclear
CCGT
Renewables
Coal
Peak u
nit
s
Imports Hydro
rese
rvoir
11
The make or buy decision
Fuel CO2
Power Plant
Heat
Power
12
Interaction hedging - dispatching
DAH dispatch decision is independent from hedging decision in the forward markets
Situation AForward Market• CSS = 5€/MWh• Hedged
Day-Ahead• CSS = 10€/MWh• PP dispatched
Benefit• 5€/MWh
Situation BForward Market• CSS = 5€/MWh• Hedged
Day-Ahead• CSS = 2€/MWh• PP dispatched
Benefit• 5€/MWh
Situation CForward Market• CSS = 5€/MWh• Hedged
Day-Ahead• CSS = -3€/MWh• PP not
dispatched
Benefit• 8€/MWh
Situation DForward Market• -3€/MWh• Hedged
Day-Ahead• CSS = 3€/MWh• PP dispatched
Benefit• 3€/MWh
13
Capacity mix Europe
2. Status of CWE-Nordic interregional coupling;A first step: Interim Tight Volume Coupling (ITVC)
• Interim Tight Volume Coupling (ITVC), based on EMCC‘s Nordic-German coupling, will provide tight volume coupling between the future CWE market coupling and NPS market splitting
• ITVC will consider two regions with
o many market areas
o many interconnectors
o 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
• The project will be launched in two steps;
step 1 without the NorNed, step 2 with the NorNed
• Costs are shared by all TSOs in both regions
14
CWE Market Coupling
• Launched on 9 November 2010
• Cooperation of Transmission System Operators (TSOs) and
power exchanges (PXs) coupling the Belgian, Dutch, French
and German electricity markets
• Provides for the implicit cross-border capacity allocation and
matching of orders of the involved PXs, resulting in the optimal
allocation of available day ahead cross-border capacity and
price convergence between day ahead wholesale electricity
markets across this region
15
CWE market results 3 Aug 2013
16
CWE market result 23 August 2014
17
Convergence of CWE prices: are we on a copper plate?
18
Forward markets: OTC
19
Imbalance markets
20
Levers for the TSO to manage the country balance
primary reserve
secondary reserve
tertiary reserve via generation units
tertiary reserve via sheddable customers
uncontracted reserve ('free bids')
reserve contracts with neighbouring system operators
AU
TO
MA
TIC
MA
NU
AL
30sec
<15min
15min
21
Balancing: how does it work?
•Balancing = difference between production and consumption of the whole portfolio (metering)
1/4h Balancing obligation for each BRP
•Short position of BRP purchased at imbalance price -•Long position of BRP sold at imbalance price +
TSO takes care of the position of the country
•High incentive for BRP to be balanced•Many opportunities for BRP
Imbalance price is equal to marginal price activated by TSO
•Differences (extra incentive) only if big imbalances
Imbalance price + and – are equal most of the
time
22
Imbalance prices
NRV = Net Regulation Volume (=volume activated by Elia to
restore the balance)POS = Positive Imbalance price (what you get paid if you inject
more than you consume)NEG = Negative Imbalance price (what you pay if you consume
more than what you inject)
sunny dayCold evening peak
Delta between DAH prices and imbalance prices
D-1D
24
Demand side management
25
Market Regulation
Prohibition of market manipulation and trading on the basis of ‘insider information’
Market monitoring by ACER
Market manipulation prohibitions
Insider dealing prohibitions
Market Integrity
Applies to underlying physical power, gas and transport contracts and markets
Trade data reporting to
ACER
Transparency
Post trade transparency for energy markets through ACER
Public transparency of
fundamental data / inside
information and their reporting to
ACER
Applies to all gas, power and transportation contracts and markets
THANK YOU !QUESTIONS & ANSWERS