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A Review of existing models for Electricity Markets in EU countries

A Review of existing models for Electricity Markets in EU countries. INOGATE Local Information Event 18 th of May 2014 – Astana, Kazakhstan. Contents of the Presentation. Electricity Markets Where ? Why ? How ?. Taxonomy of the electricity market models Historical Evolution

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A Review of existing models for Electricity Markets in EU countries

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  1. A Review of existing models for Electricity Markets in EU countries INOGATE Local Information Event 18th of May 2014 – Astana, Kazakhstan

  2. Contents of the Presentation • Electricity Markets • Where ? • Why ? • How ? • Taxonomy of the electricity market models • Historical Evolution • Cash flows • Energy flows • Market Design Criteria • Reliability & Timelines • Day Ahead Scheduling and Real time Balancing • Capacity Remuneration Mechanisms

  3. Contents of the Presentation • Electricity Markets • Where ? • Why ? • How ? • Taxonomy of the electricity market models • Historical Evolution • Cash flows • Energy flows • Market Design Criteria • Reliability & Timelines • Day Ahead Scheduling and Real time Balancing • Capacity Remuneration Mechanisms

  4. Electricity Sector Restructuring The seed … General movement in favor of electricity industry restructuring Introduction of competition Imposition of prices reflecting real costs according to use 1978: Fred Schweppe’s Seminal Article “Power Systems 2000”

  5. Electricity Sector Restructuring … and the harvest Nordpool (1996) Norway (1990) Netherlands (1999) Germany (2000) England-Wales (1990) Alberta (2001) Ontario (1998) Poland (2000) South Korea (2001) EPA (1992) Ireland (1999) Romania (2004) California (1998) Japan (1995) Greece (1999) Spain (1998) PJM (1998) Cyprus (2003) France (2001) Philippines (2006) Italy (2004) Texas (2002) India (2008) New Zealand (1996) Singapore (2003) Brazil (1998) Chile (1982) Australia (1997) Argentina (1992) Source: KEMA Presentation “A webinar for the European Copper Institute Webinar 2: Market Design” Dr. Konstantin Petrov / Dr. Daniel Grote 2.11.2009

  6. Electricity Market Reforms – the motivation !

  7. Electricity Market Reforms – How ? Source: Lessons from liberalised electricity markets, IEA, 2005

  8. Electricity Market Reforms – The overall structure Subject of “unbundling”

  9. The concept of unbundling

  10. UnbundlingOptionsunderthe3rd EU EnergyPackage

  11. TheUnbundlingprocesstowards the 3rd EU EnergyPackage Dir2003/55/EC Reg1228/2003 • Key Conceptsintroduced: • Legal and FunctionalUnbundling • RegulatedThirdParty Access • introduction of rules onnationalregulators • Key Conceptsintroduced: • firstcommon rules forgeneration, supply, transmission • Unbundling of accounts • NegotiatedThirdParty Access

  12. Where does the 3rd EU Energy Package aim to ?

  13. …and where are we now ? 15 Countries DA Coupled as of May 2014

  14. Contents of the Presentation • Electricity Markets • Where ? • Why ? • How ? • Taxonomy of the electricity market models • Historical Evolution • Cash flows • Energy flows • Market Design Criteria • Reliability & Timelines • Day Ahead Scheduling and Real time Balancing • Capacity Remuneration Mechanisms

  15. The organization of the electricity sector 4 models (evolution over time):

  16. S U P P L Y GENERATION High Voltage customers TRANSMISSION MV & LV customers DISTRIBUTION Pre-liberalization Model:Monopoly Vertically integrated (usually state-owned) company Imports, Exports Electricity flows Contracts

  17. . . . Full competition model (1) (wholesale, retail cash flows) Contracts - centralized market Imports Generator1 Generatorn Centralized market Supplier n supplier1 Supplier 2 Exports consumers consumers Wholesale Retail

  18. . . . Full competition Model (2) (wholesale, retail cash flows) Bilateral Contracts Imports Generator 1 Generatorn Supplier n supplier1 Supplier 2 Exports consumers consumers Wholesale - bilateral Retail

  19. . . . Full Competition Model Electricity flows Imports Generatorn Generator 1 Transmission System (MONOPOLY) Supplier Consumers HV Distribution Company 1 Distribution Companyn Consumers (LV, MV) Consumers (LV,MV) exports

  20. Full Competition Model The actors (by order of competitive behavior) More Competition Less/No Competition

  21. Contents of the Presentation • Electricity Markets • Where ? • Why ? • How ? • Taxonomy of the electricity market models • Historical Evolution • Cash flows • Energy flows • Market Design Criteria • Reliability & Timelines • Day Ahead Scheduling and Real time Balancing • Capacity Remuneration Mechanisms

  22. Are “Competition” and “Reliability” real competitors ? Source: Lessons from liberalised electricity markets, IEA, 2005

  23. Fortunately, some things don’t change ! Market Planning Operation Source: Lessons from liberalised electricity markets, IEA, 2005 & own classification

  24. Electricity Markets – Focus on Market Timelines Time-line Long-term/ Mid-term (years to days ahead) Real Time Days D-1 / D Day D-1 Real-Time Market Intra-Day Market DA Market Forward Market Uncoordinated Trading Supply / Demand Balance Hedge against price volatility Schedule gen. units start-up Adjust (‘optimise’) buy/sell positions

  25. The time dimension of the EU Target Model

  26. Power Exchangesauction trading(simple bids and offers) Everythingissoldatthemarketclearingprice Priceissetbythe “last” unitsold Marginalproducer: Sellsthislastunit Getsexactlyitsbid Infra-marginalproducers: Getpaidmorethantheirbid Collecteconomicprofit Extra-marginalproducers: Sellnothing Price supply Extra marginal demand Quantity Marginal producer

  27. TSO Role in Balancing (1) • Two different models: Model 1: Sequential market/TSO responsibility Model 2: Parallel market/TSO responsibility

  28. TSO Role in Balancing (2)

  29. Capacity Remuneration Mechanisms

  30. Capacity Remuneration Mechanisms in Europe

  31. Thank You !Nikos TourlisINOGATE Senior Energy Markets Convergence Experte-mail: ntourlis@ldk.gr

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