regional market integration in the cee region

1 XI Autumn Conference of the Energy Managers Association, Prague, 10. Sept. 2008

Regional Market Integration in the CEE Region

Tahir KapetanovicDirector Electricity, E-Control


Highlights

Priorities for the integration of the CEE electricity market(s): Why.What.When

Congestion management

Market entry barriers and remedies

Regulatory gap and how to bridge it

Future prospects and expectations from the "3rd Package"


Highlights


Cogestion management





ERGEG Electricity Regional Initiative and CEE

An intermediate step towards really integrated, common European market

CEE Region: the „electrical heart of Europe“

Diversity of the CEE markets‘ characteristics: Maturity Size Liquidity History, etc.


CEE Facts & Figures

GermanyGermanyPolandPoland

CzechCzechRepublicRepublic

AustriaAustria

SlovakiaSlovakia

HungaryHungary

SloveniaSlovenia


Generation shares

(EC SI 2006)

CEE Facts & Figures


CEE Facts & Figures (cont‘d)



AustriaAustria

SlovakiaSlovakia

HungaryHungary

SloveniaSlovenia

AT DE CZ HU PL SK SI

0

100

200

300

400

500

600

[TW

h]

CEE Production 2005 (Sum = 930 TWh)

Large hydro Nuclear Conventional thermal Renewables except large hydro

AT DE CZ HU PL SI SK

0

20

40

60

80

100

120[G

W]

CEE Generation Capacity (Sum = 204 GW)

Large hydro NuclearConventional Thermal Renewable except large hydroOthers





AustriaAustria

SlovakiaSlovakia

HungaryHungary

SloveniaSlovenia





AustriaAustria

SlovakiaSlovakia

HungaryHungary

SloveniaSlovenia

0

20

40

60

80

100

120

140

160

1.1.

2005

18.1

.200

5

4.2.

2005

20.2

.200

5

8.3.

2005

24.3

.200

5

9.4.

2005

25.4

.200

5

11.5

.200

5

27.5

.200

5

12.6

.200

5

28.6

.200

5

14.7

.200

5

30.7

.200

5

15.8

.200

5

31.8

.200

5

16.9

.200

5

2.10

.200

5

18.1

0.20

05

3.11

.200

5

19.1

1.20

05

5.12

.200

5

21.1

2.20

05

Price CZ

Price EEX

Price EXAA

Correlation EEX/EXAA: 0,94 EEX/CZ: 0,544 EXAA/CZ: 0,545


ERGEG ERI CEE PrioritiesWhy.

Interconnections and efficient congestion management are a key precondition for any cross-border market „to happen“

Transparency helps to: lower market entry barriers, reduce the risk for non-incumbents, lower prices for customers in a sustainable manner

Coherent regulatory competences and framework

Remove barriers for new entry (and foster competition …)

Balancing is the key - although not the biggest - segment of electricity market to be integrated across the borders

For market integration, market design(s) must be coherent too


ERGEG ERI CEE PrioritiesWhy.What

CongestionCongestionManagementManagement

Market entry Market entry barriersbarriers

Balancing marketsBalancing marketsintegrationintegration

Market designMarket designissuesissues

Regulatorycompetences

TransparencyTransparency

short-term short-term 2008/20092008/2009

long-termlong-term2010 and 2010 and

beyondbeyond

.When

CongestionCongestionmanagementmanagement

Market entry Market entry barriersbarriers

Regulatorycompetences

TransparencyTransparency


Highlights







EU Priority Interconnection Plan of 10. January 2007, http://ec.europa.eu/energy/energy_policy/doc/11_priority_interconnection_plan_en.pdf


Interconnections in the CEE Region

Out of the 32 electricity grid Out of the 32 electricity grid

priority projects in the EUpriority projects in the EU

15 projects15 projects

are in Central Europe !!!are in Central Europe !!!


Congestion Management

Objective (CM Guidelines): flow-based capacity calculation as the basis for the common and coordinated capacity allocation

„Best effort“ approach: start with explicit allocation, move towards implicit ASAP (depends on „availability“ of price)

Auction Office is an important organisational & functional step


Working groups by the TSOs Flow based capacity calculation

Coordinated Auction

Operation of the system commited for January 2009

Challenge: incentives to effectively support market integration

Cooperation & coordination is crucial

Congestion Management (cont‘d)


Congestion Management (cont‘d)

(actual project plan, see also CM IG reports at www.ergeg.org)


First EU-wide AO established in CEE in July 2008 (Freising, Germany)

Facts and figures Each TSO has equal shares in the new company AO has full legal rights (not subsidiary of a TSO) General Manager assigned (must not come from the country where AO is located)

Notification to the competition authorities in Germany & Poland

Framework review by regulators after the CM IG on 09. May 2008 (auction rules, governance issues, contracts & agreements, etc.)

Congestion Management – Auction Office


Finalization and implementation of the capacity calculation solution (grid model, border-areas, timeframes, information exchange, etc.)

Maximum wellfare criteria „maximum flows“

Comparison of flow-based vs. NTC a tricky and somewhat awkward task Consentec: Implementation Group on 16. September 2008

Test calculations to follow, involving also market participants

IT tender for software

Congestion Management – Work in Progress


Highlights







CEE Market Entry Barriers*

Most significant wholesale market obstacles Bureaucratic licensing procedures Lack of appropriate market places and/or their ineffective operation Insufficient coordination (of TSOs, regulators, etc.)

All stakeholders committed to remove those obstacles

Practical, solution-oriented approach with roadmap since 2007

Retail market barriers to be addressed at a later stage

* See also CEE ERI Stakeholder Group meetings at (www.ergeg.org)


CEE Market Entry Barriers – some Details

Network access administration and bureaucratic formalities(license and subsidiary requirements, language barriers, contract volume charges, bank guarantees, etc)

Market fragmentation and regulatory divergence(different levels of unbundling, different national support schemes for renewables, various national ways of implementing electricity disclosure, different CHP-support schemes, non-harmonized capacity payments, diverging white certificates approach)

Market structure and timetable for the trading day(unsynchronized timelines for day-ahead activities, nominations and biddings, no intraday cross-border market, non-harmonized cross-border capacities allocation)

Divergent IT platforms and data delivery


Key Improvements to be Achieved

Abolish all licence requirements for wholesale trading

Simplify transaction procedures by harmonizing operational platforms and scheduling processes

Standard contracts to facilitate financial trading

Reduce credit risk by encouraging effective clearing solutions

Resolve problems related to scheduling

Further details on CEE countries:Further details on CEE countries:

• EFET presentation at the 2nd CEE Stakeholders Group on 22. June 2006 (http://www.ergeg.org/portal/page/portal/ERGEG_HOME/ERGEG_RI/ERI/Central- East/Meetings/SG%20Meetings/2nd_CEE_SG/CEE%20obstacles%20Vienna%20June%2006.pdf)

• PWC public domain Study (http://www.pwc.com)


Highlights


Congeston management





CEE Regulatory Competences

Legal implementation of the EU Directives, regulatory models and competences differ in the CEE countries

In order to remove undesired impacts on the market functioning and evolution (e.g. in cross-border issues) better coherence and compatibility of regulatory competences is needed

Member States‘ representatives informed at the 2nd CEE Mini Forum / Stakeholders Group 06/2006

Dedicated Implementation Group with CEE Regulators and Member States‘ representatives to address this issue (initially planned for 2008 …)

Detailed benchmark of the CEE regulatory competences in the cross-border issues in 2007


Highlights







Challenges & Opportunities

Complete the Internal Electricity Market meeting the targets of EFFICIENCY, SECURITY, SUSTAINABILIY (INFRASTRUCTURE !)

Bring together diverging national priorities through the stepwise REGIONAL INTEGRATION

CEE is the heart of electrical Europe and will remain at the FOREFRONT OF ELECTRICITY SUPPLY EVOLUTION


„3rd Package“ Expectations

Effective (ownership) unbundling of the grid operators

… for non-discrimination and

… security of supply (no grid ownership for owners of market operations)

Cooperation and coordination of the grid operators

… in operational security aspects

… in definition, implementation and supervision of standards

… in activities supporting the market

Legally binding framework for and implementation of the adequate transparency and information management to

… lower market entry barriers

… reduce the risk for non incumbents

… help lower prices for customers in a sustainable way


„3rd Package“ Expectations (cont‘d)

Legally defined and empowered EU regulators to be charged with:

… the approval of EU security standards

… the approval of EU operating standards

… the approval of investment plans at the EU-level

… the approval of cost allocation methodologies for cross-border investments

… the approval of binding guidelines for areas defined by legislation

… enforcement powers including the power to impose solutions on the EU network organisations

… providing advice to the European Commission on regulatory and market issues


Information: www.ergeg.org ERI CEE


Thank you for your attention !

Tahir KapetanovicDirector Electricity

Energie-Control GmbHAustrian Energy Regulatory AuthorityRudolfsplatz 13a, A-1010 Vienna,

Austria

Tel: [email protected]


About us: Structure of Regulation in Austria

Electricity Market

Federal Ministry of Economics and Labour

Advisory Council for ElectricityEnergie-Control Commission

Energie-Control GmbH (Regulator)Energie-Control GmbH Supervisory Board


About us:Energie-Control Commission

Setup:Setup: An independent body not bound by any order and chaired by a judge of the

supreme court, with 2 further members and 3 deputy members Decisions require unanimity for validity In the own matter the first and last instance, otherwise processing appeals

that may be raised against the decisions of the Energie-Control GmbH The affairs of the Energie-Control Commission are managed by Energie-

Control GmbH

Key functions:Key functions: Approving the grid operators‘ general terms and conditions Determining tariffs for system use and other tariffs pursuant to section 25 of

the Electricity Act Ruling on the justification of refusal of grid access Settling disputes: (i) between market participants, (ii) involving settlement of

unbalances


About us:Energie-Control GmbH

Setup:Setup: A private non-profit company, established with the purpose of performing

regulatory tasks in the electricity and natural gas sector, owned by the Austrian state, with share capital 3,7 Mio. €, located in Vienna

Chairman: Mr. Walter Boltz Departments/Divisions: Administration, Electricity, Gas, International Affairs, IT,

Legal, Regulation & Competition, Renewables, Retail Customers, Tariffs

Key functions:Key functions: Creation of framework conditions Market monitoring and supervision Settlement of disputes, organisational aspects of balance payments between

the system operators Execution of provisions on stranded costs Statistical work Crisis prevention & emergency energy management


About us:find more at www.e-control.at

regional market integration in the cee region

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