role of power exchanges in the south – east europe countries, opcom

8/10/2019 Role of Power Exchanges in the South East Europe Countries, OPCOM

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ROLE OF THE POWER EXCHANGES

in the South East Europe Countries

earning every Day Ahead your trust

OPCOM, the Romanian Pow er Market Operator

15th ELECTRICITY FORUM OF THE

ENERGY COMMUNITY

ATHENS, 25-26 November 2009


2/16

AGENDA

About PX

the mission main pillars

role of markets prices for decision on investment

People: you have to hear them

About OPCOM

electrici ty markets pricing mechanisms

transparency & liquidi ty

About Market Integration

hindrances of the current markets integration process the coupling saga

Take wise decisions for a long way; the Poyry-NPC report

Conclusions

earning every Day Aheadyour trust


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The market is vital for competition, security of supply and

sustainable development.

The services which only PXs can provide: Reliable price reference Trading facilitation on different term horizons in liquid PX products

Efficient portfolio adjustment

Counterparty risk

Correct XB capacity allocating through adequate flows providing

meanwhile maximizing the capacity utilization

The challenges: Liquidity (bringing price consistency) Efficiency (appropriated products)

Shortest way electricity becomes money (well tailored counterpart

role).

Conclusion: The PXs support the players to discover the price and

investors to foresee it.


PX: its mission main pillars


4/16

Recent Accenture study is listing the ranking of technologies as contribution to additional/replacement capacity according

the selected big players (63% market share) investment plans: Natural gas, significant being RWE: 31.3 %;

Nuclear, mainly due to the EdF contribution: 25.8 %;

Coal, including lignite (mainly: E.ON, Vattenfall, Electrabel, Enel): 20.9 %;

Renewable: 17 % ;

Traditional hydro: 4.4 %;

Immediate results:

despite the winter crisis, the gas remains the most important option

role of renewable will triple as big players focus

nuclear will (however) decrease due to decommissioning (mainly in Germany)

According to th is ranking, the main problems to be solved (including cost) are:

Gas pipe projects, including financing and pipes feeding;

Practicability of the abatement technologies including CCS;

Management of the radioactive waste and related storage;

Connection of renewable based generation to the network and the systems stability.

Prices interdependencies:

Gas market vs. carbon market;

Carbon market vs. CCS technologies implementation, with NAP in background;

Electricity price will include other prices; green certificates separate from wholesale but included in retail prices.

Conclusions: Markets decide not only on investors choosing to (or not to) invest, but also upon the chosen alternatives,

according to the additional costs / supporting investment;

Decision is at the cross-road of the electricity, fuels, CO2 allowances, green certificates prices and CCS cost;

Conclusion after conclusions: Time of the cheap electricity passed.

ranking of technologies as

additional/replacement capacity

Source: Accenture

earning every Day Aheadyour trustThe markets decide on investment.

A larger angle: Not only electricity markets matter !


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WE ASSESS THE FEASIBILITY OF A NATIONAL POWER EXCHANGE !

SYSTEM OPERATORS. The countr ies decision is sovereign.

PEOPLE: YOU HAVE TO HEAR THEMearning every Day Aheadyour trust

DONORS: Need for investment.

YOU ARE NOT POOR! THIS REGION IS RICH. (intervention in the Forum 11th)

Exploit regional benefits/the economics of scale in energy investment and operations,

including emergencies (security of supply) and environment

Present investors and energy suppliers (incl. traders) a more attractive market a

bigger regional market, with EU-compatible rules and institutions

(Presentation in the Investment Seminar, April 2007)

Kary

Nyman

Worl

dBank

Claus

Urban

ke

Statkra

ft

Vladim

irJan

kov

ic

EMS

TRADERS: Conditions for investors & traders. Investors & traders condition.

As traders we do not suffer under the wrong price.

Intransparency, illiquidity and regulatory risk lead to high risk premiums high

trading profits for only a few.

As traders we do not suffer from outages due to suboptimal system utilisation.

But as investors we do suffer and as prudent energy specialists we do care!

Statkraft trusts that the conditions will improve and we are commited to do business

in the region!

(Seminar of Romanian Traders Association, November 2009)


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OPCOM. Electricity Pricing basic mechanismsearning every Day Aheadyour trust

Continuous

trading

Public auction

OPCOM currently of fers two forward alternatives & one market for short term

Trading platform ready for market coupling, trading platform ready for intra-day continuous trading

67 participants100 participants

Continuous intra-day segment of

day ahead in p reparation

Standard contract finalised by produc t

group waits for regulator aproval.

CMBC-CN Procedure will change

accordingly.

Efficient products can help

players to stay comfortably

in business

Existing products, which will befollowed by:

Block bids in DAM

Closed

auction

99 participants2009:12.8

%,

34.5

Euro/MWh

200

9:22.8

%,

45.2

Euro/MWh

35.6% market share of produc ts
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Trading liquidity backed by two successive Ministers Orders: state owned generators, the biggest 5(ord.408/2006), respectively all (ord.445/2009)

obliged to trade further available power in centralised markets.

Transparency boosted by the Electricity Law requirement: Prices cleared on the electricity centralised markets are published on daily basis as related

operator responsibility (Art.40, paragraph 4)

Romania opens a way

Poland embraces the idea

Source: HEREN EDEM 13.05.2009

DOES U.K. FOLLOW THIS WAY?Parliament and regulator evaluate the opportunity to introduce mandatory trading in PX

OPCOM. Transparency & Liquidity (1)earning every Day Aheadyour trust


8/16

earning every Day Aheadyour trustOPCOM. Transparency & Liquidity (2)

Beyond the volumes dif ference, the spot market share in OPCOM is

comparable with those of Powernext or Belpex

DG-T

RENQua

rterly

Report

Q2

,2009

14

TWh/month

5 2.5

Nordic

30

Germany France

The Netherlands

For many years, the power exchanges represented the

magical tool for trading facilitation.

Volumes and market shares increased year on year,

the most in 2008, in the detriment of the OTCs.

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

300,000

600,000

900,000

1,200,000

1,500,000

1,800,000

Jul-05

Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

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Feb-09

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Oct-09

Nov-09

Dec-09

V o lu me - C MB C V ol um e - D AM D AM S ha re C MB C S ha re T ot al m ar ke t s ha re ( DA M+ CM BC )

Continuously improvin g the liquidity of OPCOM products (monthly

cumulated volumes sp ot/forward))

D

G-T

RENQuarterly

Report

Q2

,200

9

0.6 0.2

Romania

Czech Republic

Before the coupling Cz-Sk TWh/month


9/16

earning every Day Aheadyour trustOPCOM. Transparency & Liquidity (2)

For many years, the power exchanges represented the

magical tool for trading facilitation.

Volumes and market shares increased year on year,

the most in 2008, in the detriment of the OTCs.

Source: CEZ

Spectacular evolution of Czech Republic and Slovakia spot markets due to

the market coupling (daily volumes)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0

300,000

600,000

900,000

1,200,000

1,500,000

1,800,000

Jul-05

Aug-05

Sep-05

Oct-05

Nov-05

Dec-05

Jan-06

Feb-06

Mar-06

Apr-06

May-06

Jun-06

Jul-06

Aug-06

Sep-06

Oct-06

Nov-06

Dec-06

Jan-07

Feb-07

Mar-07

Apr-07

May-07

Jun-07

Jul-07

Aug-07

Sep-07

Oct-07

Nov-07

Dec-07

Jan-08

Feb-08

Mar-08

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May-08

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Jul-08

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Sep-08

Oct-08

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

V o lu me - C MB C V ol um e - D AM D AM S ha re C MB C S ha re T ot al m ar ke t s ha re ( DA M+ CM BC )

Continuously improvin g the liquidity of OPCOM products (monthly

cumulated volumes sp ot/forward))

~16,000

MWh/dayRomania

Czech Republic - Slovakia

Platts

EiEE

,Novem

ber

2009

After the coupling Cz-Sk

DG-T

RENQua

rterly

Report

Q2

,2009

14

TWh/month

5 2.5

Nordic

30

Germany France

The Netherlands

~16,000


10/16


down up

keep keep up down

down

up

downup

Childhood period Full convergence Financial crisis miss convergence

effect

New equilibrium

the prices convergence

OPCOM. Transparency & Liquidity (3)

Forward traded volumesCMBC


11/16

Until now at least 7 sins of the cross border trade and

accordingly regarding market integration premises:

Unclear legislation and limited competences before 3rd package

Lack of harmonization, lack of trust, different interests,

different resources

Network model and market coupling methods uncertainties

Adverse initiatives and leaders competition

Divergences related governance matters Top down vs. bottom up initiatives

Different gate closure hours

gielda

Apx UK

Powernext

GME

Hupx

omip

Opcom

EEX

Nord Pool

Apx

EXAA

OTE

Belpex

Borzen

BSP

omelomi


Electricity markets integration


12/16

EPEX

Market Coupling Sagaearning every Day Aheadyour trust

2006 Bott om Up Trilateral: France-Belgium-The Netherlands

2007 Top Down (?) Pentalateral Energy Forum

2008 Bot tom Up EPEX

2009 Bottom Up Czech Republic - Slovakia

2005-2006 Current SEE; 2008 8th region

SOON: enlarged SEE

The challenge ahead: it can be possible to

integrate a two (even multi) speed Europe ?

Note: "Multi-speed" Europe is the term used to describe the idea of a

method of differentiated integration whereby common objectivesare pursued by a group of Member States both able and willing to

advance, it being implied that the others will follow later.

MC: the momentum of our days


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MARKET COUPLING: WE CAN DO !

Momentum is flying. Lets grasp it now !Grasp, I mean: to catch;

to hold;

to understand;

to control.


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JOIN THE POYRY-NPC FINDINGS THUSREWARDING THE DONORS EFFORT !

TAKE WISE DECISIONS FOR A LONG WAY.

REGULATED PRICES. Think carefully on the balance between competitive

segment and regulated segment as proportion of volumes and costs and respond

to ERGEG 2007 position paper by providing the road map for regulated prices

removal.

GENERATION. Keep the assets in one hand or many, either public or private, but

unleash the commodity for the market not wasting it but ensuring that generators

receive real price; it helps generators for investment and avoid further distortion of

market price.

Provide for state owned incumbents public auctions or ask/allow them to sell

in spot market, to protect against too low price (state aid) and impose VPP for

private consolidated companies if big to defend competition (mitigate market

power) and allow new entries.

Question: who plays role of DG COMP within the 8th region?

COUPLING. Choose price market coupling according Florence Forum decision

and stay on ATC at least until CWE will decide. Think twice on the size of the

bidding areas: not mandatory to be national: see Germany-Austria one zone under

EPEX administration.

MARKETS. Set up efficient markets for each contracting term horizon (forward,

DAM, intra-day, balancing, ancillary services) according the current and/or

envisaged best practices.

PX. Bust the myth of difficulty in setting up the PX; there are only two issues which

PX can not outsource: responsibility towards market participants (membership

agreement) and responsibility towards regulator (license conditions).


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An old story is saying that up in the mountains, a goat antelope is trying every day to pass a sharp

crest. He is daring, wise and skilled, but however in the middle of the way he always hesitates. Every

day he is coming back in the bitter sunset, knowing very well that tomorrow he will try again. A

consultant may tell him that from the point of view of the risk management it is equal to go ahead or to

come back and even worst to stay in the middle. But Im afraid that the daring character is scared not

on passing further, but about what he can find where the crest ends.

We also in SEE may be scared about what we will face at the end of the opening: higher prices for

electricity, not competitive prices for commodities, joblessness .. No consultant can foresee it or

the contrary.

CONCLUSIONS


All in al l, accord ing our market experience we encourage national spot markets set-up in SEE

which br ing similar value in these markets, eventually paving the way for markets coupling.

CONCLUSION AFTER CONCLUSIONS

PXs support long term security of supply by delivering the price signal for efficient investment in due time as

well as short term security of supply by efficiently balancing the generation and demand;LONG TERM: PXs help investment by putting price on energy and carbon;

SHORT TERM: Neutral framework to meet offer and demand provided by PXs helps market to

select efficient generation and discourage waste on demand side; also they

guarantee that money come FAST;

Romania through individual evolution and Czech Republic - Slovakia three months after start of MC in

1st September are equally providing liquid electricity spot markets in SEE and CEE showing same

average daily volumes.

OUR DAYS DILEMMA: DIFFICULT TO GO FURTHER, BUT MUCH RISKY TO STAY.


16/16

gielda

Apx UK

Powernext

GME

Hupx

omip

Opcom

EEX

Nord Pool

Apx

EXAAOTE

Belpex

Borzen

BSP

omel

omi

Thank You for attention !

[email protected]

www.opcom.ro

role of power exchanges in the south – east europe countries, opcom

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