Regional Integra-on of Electricity Markets

Transcription

1 Regional Integra-on of Electricity Markets Manuel Baritaud Senior Energy Analyst Gas, Coal & Power Markets Division European Gas and Power Trading Conference London, June 2013

2 Outline Day- ahead and real- Jme market integrajon Future and forward market integrajon Capacity market integrajon

3 Outline Day- ahead and real- Jme market integrajon Future and forward market integrajon Capacity market integrajon

4 Renewable energy variability Wind and Solar Power Genera-on in Germany, September Wind Solar GW /09 11/09 12/09 13/09 14/09 15/09 16/09 Quick deployment of wind and solar power raises new challenges

5 Market integra-on needed to accommodate variable renewables ProducJon French- German border net power exchange compared with wind and solar power genera-on in Germany, Sept (MW) Exchanges MW Imports from France MW Exports to France Net exchanges Wind producjon in Germany Wind and solar producjon in Germany Source: RTE Wind and solar power variability spreads all over Europe

6 Controlling power flows Phase- shiring transformers installed in the EU EEA at a selec-on of borders Na<onal TSOs install equipment to control flows at borders

7 Australia: consolida-on of system opera-ons triggered price convergence Average Wholesale Electricity Prices, AUS/MWh Merger of system operators and electricity markets over wider geographic areas increases overall efficiency

8 USA: PJM expansion PJM Footprint PJM s expansion history PJM designated an RTO by the FERC - Allegheny Power - Commonwealth Edison - American Electric Power (AEP) - Dayton Power and Light (DLP) - Duquesne Light Co. (DLCO) - Dominion Virginia Power - First Energy - Duke Energy Ohio and Kentuky PJM interconnec<on expanded its footprint gradually to become now the largest in the world in terms of peak demand

9 Coordina-on of real -me markets is challenging Inefficiency of inter- Market Scheduling from New England to New- York, 2011 Inefficient Direc-on Efficient Direc-on Efficient Direc-on Inefficient Direc-on Inefficiencies are ohen observed at the boundaries of system operators

10 Market Integra-on: consolida-on vs. coordina-on Consolida-on Coordina-on IniJal situajon: Fragmented local system operators Integrated operajons over wide areas: - Standard Market Design - RTO s expansion (e.g. PJM, MISO) Coordinated regional markets - OpJmisaJon of electricity seams between SOs - Network codes

11 Outline Day- ahead and real- Jme market integrajon Future and forward market integrajon Capacity market integrajon

12 Electricity price vola-lity: France - UK Daily average prices, France and UK, May '12 - May '13 Price differen-al between France and UK, May '12 - May '13

13 Electricity price vola-lity: France - Germany Daily average prices, France and Germany, May '12 - May '13 Price differen-al between France and Germany, May '12 - May '13

14 Electricity price vola-lity: France - Spain Daily Average prices, France and Spain, May 12 May 13 Price differen-al between France and Spain, May 12 May 13

15 Cross- border hedging products Physical products Physical transmission rights Loop flows induced by variable renewables reduce the transfer capacity available for long- term hedging Financial products Contract for difference (CfD): Nordpool Financial transmission rights: US RTOs Ne;ng would increase opportuni<es to trade electricity across border

16 Liquidity Traded volumes at power exchanges as a percentage of na-onal demand 2011 (%) 15% 13% 67% 40% 58% 85% Liquidity of wholesale markets is important to have strong price forma<on on each side of the border and hence credible market price difference 67% Source: ACER CEER (2012), Annual Report of the results of monitoring the Internal Electricity and Natural gas markets in 2011

17 Outline Day- ahead and real- Jme market integrajon Future and forward market integrajon Capacity market integrajon

18 Capacity remunera-on mechanism across Europe Source: Eurelectric Inexistent coordina<on of capacity mechanisms

19 Capaci-es located beyond borders contribute to ensure genera-on adequacy France demand and imports on 8 February 2012 at 19:00 How to take into account the role of external capacity? StaJsJcal contribujon Peak demand: MW Cross- border trade of capacity

20 Genera-on adequacy forecast Remaining capacity by 2020 in the best es-mate scenario (ENTSO- E Scenario B) Remaining capacity by 2020 ENTSO- E average: 11% Source: ENTSO- E (2013) Scenario Outlook and Adequacy Forecast By 2020, some countries will have excess capacity and others a capacity shortage

21 Cross border trade of capacity: MISO and PJM PJM and MIDWEST ISO Capacity prices Example of gains from cross- border capacity trades PJM Base Residual Auc-on MIDWEST ISO Voluntary Capacity Auc-on Price differenjal: USD 30/kW- y Capacity transfer capability: c MW Actual capacity sales: 400 MW net (900 MW gross) PotenJal gain for PJM: USD 1.5 billion per year* * Source: The Brahle Group (2011) MISO- PJM Capacity Market Seam, Efficient cross- border trading of capacity can deliver huge economic benefits

22 Arbitraging between control areas Power Market Control Area B Strategic reserve Capacity cerjficate Peak prices Control Area A Control Area C Generator Control Area D Capacity payment Uncoordinated capacity mechanisms can lead to double coun<ng and gaming by market par<cipants

23 Reliability regula-on PJM and MISO: States covered and NERC Regions Key dimensions Federal ISO/RTO MISO Federal Energy Regulatory Commission PJM GeneraJon adequacy forecasts at different geographic scales State Missousri Wisconsin Iowa Minesota Nebraska North Dakota Michigan Indiana Ohio Kentucky Illinois Virginia Tenessee Maryland Delaware Pennsylvania New Jesey Different reliability metrics Region MRO RFC SERC/RFC Na-onal Electric Reliability Council RFC Network capability for capacity transfer Ensuring genera<on adequacy with adjacent capacity markets requires developing regula<ons at the relevant area

24 Conclusion: benefits of market integra-on Real- -me markets: efficient use of capacity IntegraJon of wind and solar power creates new challenges, but coordinajon between system operators remains difficult ConsolidaJon of system operajons over wide geographic areas increases overall performance Future markets: compe--ve electricity market Financial hedging products for cross border trade of energy offer more opportunity to trade and increase compejjon Capacity markets: a more reliable power system Capacity markets must properly take into account capacity beyond borders RegulaJon of reliability across border will be key for efficient inter- regional market integrajon

25 Thank you