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The steps toward an IEM- CM and the role of AHAG

The steps toward an IEM- CM and the role of AHAG. NE ERI SG Meeting 26 May 2010 Copenhagen Ms Asta Sihvonen-Punkka Chair of ERGEG EWG and AHAG. Structure of the presentation. The objective and background of the work Previous work PCG target model ERGEG work and AHAG.

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The steps toward an IEM- CM and the role of AHAG

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  1. The steps toward an IEM- CM and the role of AHAG NE ERI SG Meeting 26 May 2010 Copenhagen Ms Asta Sihvonen-Punkka Chair of ERGEG EWG and AHAG

  2. Structure of the presentation • The objective and background of the work • Previous work • PCG target model • ERGEG work and AHAG

  3. Vision for the cross-border electricity market The truly integrated internal electricity market will benefit consumers by providing competitive prices and sustainable as well as secure supply through efficient utilisation of the power system

  4. Key success factors • Optimal use of the transmission network • Increased access and economically efficient utilisation • Secure network operation • Robust wholesale energy markets • Effective trading products and platforms • Strong wholesale market liquidity and price formation • Support to emerging energy markets • Effective competition • Legal, regulatory and governance frameworks facilitating trust and market confidence • Facilitating supply and demand side competition • Transparency

  5. Steps of work on capacity allocation and congestion management • Florence Forum process (since 3rd meeting 1999) • Regulation and CM Guidelines (2003 ), amended CM Guidelines (2006) • ERGEG Electricity Regional Initiative (2006 ) • Reports on CM • ETSO-EuroPEX joint work (2007-2008) • PCG (Dec. 2008 – Dec. 2009) • 3rd Legislative Package, work during interim period by ERGEG, ENTSO-E

  6. Legal background • Regulation (EC) No 1228/2003 and the amended Congestion Management Guidelines, to be replaced by the new adopted Regulation (EC) No 714/2009 and the Annexed Guidelines • CM methods should be market-based (explicit or implicit allocation) • Coordinated CM methods to be applied • Forward market (yearly, monthly) • Day-ahead market • Intraday market

  7. What is a Target Model? • A medium term view – for progressive implementation at the latest by 2015 • To give direction to the regional and interregional integration initiatives establishing the essential harmonisation requirements while allowing justified regional flexibility • Key attributes: feasible, reasonable, practical • Addresses all of the key timeframes for Congestion Management (forward, day-ahead, intraday, balancing) as well as capacity calculation and governance issues • A consensus view to facilitate a significant step forward

  8. PCG Target Model 8 Coordination of ATCs (Flow Based and/or NTC) Flow Based where more efficient Flow Based where more efficient Harmonised GCT Intraday Allocation Implicit Continuos Trading and/or Implicit Auction Day-Ahead Implicit Allocation Price Coupling Day Ahead capacity Explicit Auctions Physical and/or Financial Transmission Rights Monthly Balancing, Real Time Y+1 Futures on Y+1 „Forward“ market „Physical“ market

  9. ERGEG and AHAG • Established at the December 2009 Electricity Regulatory Forum • AHAG = Ad Hoc Advisory Group of Stakeholders • Members include Florence Forum stakeholder organisations (ENTSO-E, EuroPEX, EFET, Eurelectric, IFIEC, CEFIC, EWEA) and EC, chaired by ERGEG • Purpose is to give advice to ERGEG (framework guideline on capacity allocation and congestion management) and to give guidance to projects

  10. Structure of current work on CACM ERGEG Framework Guideline on Capacity allocation and CM AHAG Advice to ERGEG, give guidance to projects Capacity calculation project (ENTSO-E Clotilde Levillain) Intraday project ENTSO-E Frank Vanderberghe) DA & Governance EC Matti Supponen

  11. Capacity calculation • Design of a Common Grid Model (CGM) • set of coordinated processes characterized by tight cooperation and coordination of the TSOs • will deliver a European view of the power system • harmonised coordinated capacity appraisal methodologies including security assessment amongst European TSOs • harmonised standards regarding necessary information and information exchange • The method to be applied • Flow-based capacity calculation for meshed networks • ATC • Delimitation of zones

  12. Forward market • TSOs shall sell transmission capacity forward in line with forward energy market horizons • TSOs shall sell transmission as Physical Transmission Rights (PTRs) with Use-it-or-Sell It (UIOSI) provisions or as Financial Transmission Rights (FTRs) • PTR with a UIOSI mechanism in the short-term starting with a regional implementation approach • Introduction of FTRs • Important issues: a well functioning secondary market, firmness (financial firmness)

  13. Day-ahead market • The target model for the day-ahead capacity allocation and congestion management is single price coupling • The requirements for single price coupling include • Use of a single pricing algorithm • Harmonized gate closure times • Sharing of all bid data between PEXs • Compatible bids/products • The day-ahead market establishes a reference price for transmission rights with financial settlement and

  14. Market Coupling/Capacity Allocation post-processing Cross-Border Shipping Coordinated Matching matching 1) matching results 1) results local order net positions, prices book Cross-Border information Exchange Programs Congestion Cross-Border Local Market Cross-Border Local Market Cross-Border Revenues Exchange Local Market Operation Local Market Exchange Operation Exchange Management Operation Operation Management Management available Cross-Border Exchange capacities Programming Authorizations Capacity provision includes Bilateral Exchange Calculation Capacity Provision Capacity Provision and Congestion Revenue Capacity Provision Capacity Provision Capacity Provision Distribution for Coordinated Capacities TSO responsibility PX responsibility non-TSO responsibility (e.g. merchant lines) 1) Matching results include calculated prices and net positions Functions of single price coupling

  15. Intraday market • Three alternative solutions • Implicit continuous allocation (ELBAS model) • Implicit auction • Hybrid (combination of the two) • Flexibility, speed of implementation, welfare maximisation, market-based • PCG Target model for Inter-Regional Cross-Border capacity allocation implicit continuous allocation (continuous trading)

  16. The way forward • ERGEG to publicly consult draft Framework Guideline and Initial Impact Assessment on capacity allocation and congestion management • ACER to utilise ERGEG work and to proceed with official process • The role and tasks of AHAG to be assessed when the Agency becomes operational • The projects to deliver concrete results • ENTSO-E network codes • Finally legally binding rules through comitology

  17. Thank you for your attention For more information on ERGEG and AHAG work www. http://www.energy-regulators.eu http://www.energy-regulators.eu/portal/page/portal/EER_HOME/EER_FWG/Electricity/Congestion%20Management/AHAG%20-%20expert%20group

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