IEM: Electricity Market Filip Černoch cernoch@mail.muni.cz From liberalization to harmonization of the regulation and integration of the markets • Hamonisation of the rules on wholesale markets (detecting of market abuse, prohibiting of using of insider information or the spreading of incorrect information). • Regulation of who can use cross-border infrastructure and under what conditions. • Access to infrastructure (exemptions from TPA to implement risky investments which cannot be made otherwise). • Rules on government intervention (state aid for RES, backup capacity…). • Consumer rights and protection. Market unification • Target model – agreed blueprint for the architecture of both electricity and gas market. To harmonize cross-border trading arrangements and link national markets through efficient use of infrastructure carrying electricity. • Network Codes (Capacity Allocation and Congestion Management and others) and Framework Guidelines. Independent regulators • Independent both from industry and govt´s interests. Own legal entities, have their own budget. • Can issue binding decisions to companies and impose penalties on those that do not comply with their legal obligation. • Generators, network operators and suppliers have to provide them with acurate data. • Are required to cooperate with each other (ACER, ENTSO-E, ENTSO-G). ACER • Drafting guidelines for the operation of cross-border gas pipelines and electricity networks. • Reviewing the implementation of EU-wide network development plans. • Deciding on cross-border issues if NRAs cannot agree or if they ask it to intervene. • Monitoring the functioning of the IEM including retail prices, network access for electricity produced from RES, and consumers rights. ENTSO-E + ENTSO-G • Developing of standards and draft network codes to help harmonise the flow of electricity and gas across different transmission systems. • Coordinating of the planning of new network investments and monitor the development of new transmission capabilities. Europe-wide 10 year investment plan to help identify gas every two years. Key data (2012) •Installed capacity – 952 GW. •Total electricity generation 3264 TWh (+5% since 2002). •Electricity generation mix: coal 28,4%, nuclear 27%, natural gas 17,8%, hydro 10,3%, wind 6,3%, biofuels and waste 5,2%, oil 2,2%, solar 2,2%, peat 0,2%, geothermal 0,2%. •Electricity consumption by sector: industry 36%, commercial 32,1%, residental 29,6%, transport 2,3%. Wholesale electricity market •Cross-border trade has been growing, in 2011 around 10% of gross production. •Germany surplus of 22,8 TWh, France exported 44 TWh (both in 2012), increasing trade activity in Norway, Sweden, Austria, Switzerland (hydroelectric capacities). Wholesale electricity market 11 Wholesale electricity market • Day-ahead market coupling through the coupling of crossborder electricity exchanges. Coupling of regional electricity markets – Nordic market, Central West, North West Europe… • (Day-ahead) market coupling optimises interconnection capacity utilisation (calculation and allocation) and facilitates linking of buyers and sellers on either side of a border. • Cross-border capacity allocation is carried out together with the financial energy settlement in one single operation at the exchange (no need for prior reservation of capacity) = implicit auctioning. 13 • Wholesale market – price coupling of CE to NWE, Nordpool and SE Europe = day-ahead market. • New regulatory Framework by the end of 2014 • Connect all ´energy island´ by 2015 (Iberian Penisula, Baltic States) • EU generation market still concentraced. In 8 MS more than 70 % of power generation controled by historic incumbent. • Europe is set to retire a substantial share of its power generaticon capacity (coal, nuclear) in coming decade. Third liberalization package 14 Intra-day markets • Intra-day and balancing markets largely national or bilateral. • Dutch-German border. • Dutch-Belgium border. • Nordpool Elbas platform. • Dutch-Norwegian NorNed interconnector. • Great Britain on BritNed. Retail market • Still fragmented, regulated, with low level of switching. • Still high generation concentration. In 8 MS more than 70% of generation controlled by historic incumbent. Prices • Gap between household (EU-28 average of €140/MWh) and industry (€90/MWh) – different levels of taxation and RES surchages. • Since 2008 the wholesale prices have been falling by 1/3, retail prices have increased by 4%/y. • Due to the persistence of regulated prices and market concentration, the higher level of levies, taxes and network cost and low responsiveness of consumers to switch suppliers to better offer. Prices for household consumers, second half 2014 (eur/kWh) Prices for industrial consumers, second half 2014 (eur/kWh) Impact of IEM on security of supply = power system´s capability to meet changes in requirements through investment, operational and end-use responses. • EU market integration and electricity trade increases interdependency among jurisdiction. But lack of integrated policies regarding a fuel mix. • + diversification (more flexibility, lower the risk of shortages). • -/+ exposure to market, price and generation development in neighbouring countries. • EU legislation, network codes (network security and reliability code, code for operational procedures in an emergency…). • Cooperation of TSOs (Ten year network development plan, regional investment plans…). Sources • IEA (2014): Energy Policies of IEA Countries – The European Union.