the german power market – recent developments
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The German Power Market – Recent Developments. Lorena Vinueza Stefan Trück. Department of Statistics and Econometrics University of Karlsruhe, Germany [email protected] [email protected]. Contents. Historical overview Ownership and Market structure - PowerPoint PPT PresentationTRANSCRIPT
The German Power Market – Recent Developments
Lorena VinuezaStefan Trück
Department of Statistics and EconometricsUniversity of Karlsruhe, Germany
[email protected]@lsoe.uni-karlsruhe.de
Contents
Historical overview Ownership and Market structure Power Trading in Germany The Leipzig Power Exchange – a
case study Outlook
Dereglation Process in Germany – Historical
Overview
Historical Overview (I)
1935 “Energiewirtschaftgesetz” State monopoly
1996 The EU-directive guidelines Liberalization of the power markets in Europe
1998 The German Energy Sector law:
opened the German power market to competition
Historical overview (II)
1998 Verbändevereinbarung I (VV1)
Agreement regarding access to and use of the power network
1999 Verbändevereinbarung II (VV2)New competitorsCEPI Index
Historical Overview
2000 Gridcode2000DistributionCode 2000
LPX Leipzig, 06/200 EEX Frankfurt, 08/2000
2001 Guidelines for information exchange regarding trading of physical power in Germany
Lack of competition – Open Access for everyone?
Theory: since 1998 open access for all network users in former Western Germany
Practice: many obstacles remain for many network users on low network levels like: few players with a lot of market
power,rather high prices for consumers remain, lack of real competition,open access
Electric power prices
0
2
4
6
8
10
12
14
16
18
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Industry (Cent/kWh)
Houshold (Cent/kWh)
Source: Bundesministerium für Wirtschaft und Technologie
Compared power prices in EU
Power prices in EU
0
5
10
15
20
25
30
Fin
land
US
A
Sw
eden
Norw
egen
Irla
nd
Gre
ece
UK
Neth
erlands
Fra
nce
Luxenburg
Austr
ia
Denm
ark
Belg
ium
Germ
any
Spain
Port
ugal
Italy
Cent/kWh
Market Structure in Germany
Market Structure and Market Shares
Six “super-regional” companies
large power plants and regional high voltage grid
~ 50 regional distributors
regional distribution grids and smaller power plants
~ 600 municipal utilities
regional distribution grids and smaller power plants
End user sales
~30% ~30% ~40%
Markets – Ownership Structure
Internationalisation of market
Mergers and Acquisitions – some of them PE + Bayernwerk E.ON RWE + VEW RWE VEAG HEW Vattenfall Local/regional units “super-regional”/global
units
Production Volume - Ownership
0 5 10 15 20 25 30
Share of total production [%](Total Production 520 TWh)
RWE
E.ON Energie
EnBW
VEAG
HEW
Bewag
Production Shares (2000)
Power market statistics(year 2001)
variationNumber of utility companies 126.500 -2,1Sales (billions EUR) 51,6 0,5
Number of clients (Thd.) 43.720 0,2Net electricity consumption (bill.kWh) 502,4 0,5Consumption of alternative energies (%) 7Net electricity production of utilities (bill.kWh) 477,5 1,8
Foreign trade Exports 43,9 -2,4 Imports 44 5,2
Source: VDEW
International Markets – Trade in the EU and with East European Countries
Energy Foreign Trade
02468
101214161820
Bill
ion
KW
h
Import
Export
Total Import: 44,9 Billion KWh
Total Export:42,7 Billion KWh
Balance:-2,2 Billion KWh
Source: VDEW
Sources of power production
(year 2000)
61%
31%
5% 3%
Coal, gas, oil
Nuclear
Hydropower
Other alternativeenergies
Source: VDEW
Consumption of alternative energies
(year 2001)
55%32%
8%5%0%
Hydropow er
Wind
Waste
Biomas
Solar
Source: VDEW
Consumption according to group of consumer
46%
28%
22%2% 2%
Industry
Household
Services
Transport
Agriculture
Source: VDEW
CO2 Emissions
Ton.
1991 2842001 274
Source: VDEW
Costs of power generation in cent per kWh
Coal 2 to 5Nuclear 2,5 to 3,5Wind 6 to 9Hydropower 4 to 12Solar 50 to 75
Energy Trading Institutions
in Germany
Energy Trading Institutions in Germany
• OTC – Market
• Internet Market Places
• Power Exchanges (EEX and LPX)
Energy Trading – OTC Markets (I)
More than 300 parties registered in German market, about 20-30 active traders Turnover estimated 50-70 TWh/month Mainly Bilateral Trades Also cross-border auctions and active trading with e.g. Denmark, Netherlands, Czech Rep etc.
Energy Trading – OTC Markets (II)
Intermediate Brokers often act between Market Participants (~ 10-15 brokers active) Different sorts of contracts are traded - spot and future products Transparency is not guaranteed No real „Trading“ of Energy
Energy Trading – Internet Platforms
Alternative Platform to common OTC- Telephone trades Several Market Places (e.g. EnronOnline, netstrom.de, HEW click&trade) Only very small proportion is traded via Internet Market Places so far Poor Liquidity of Internet Markets
Energy Trading – Power Exchanges
Offering Standardised Products (Spot and Future Market) more Transparency in markets than in OTC many Market Participants More „real“ Trading (Especially Futures) Market is rapidly growing
Power Exchanges in Germany I
Leipzig Power Exchange (LPX) in Eastern Germany
- first German Exchange for Energy Main partner: Nord Pool ASA
Spot market
Started 16th of June 2000
60 parties have signed trading agreement
Future market
Started in July 2001
Power Exchanges in Germany II
European Energy Exchange (EEX) in Frankfurt Main partner: German Stock Exchange
Spot market
Started 8th of August 2000
30 parties have signed trading agreement
Concentration on Future market
Started 1st of March 2001
24 parties have signed trading agreement
Turnover in May-01: 0.6 TWh
Power Exchanges – Spot Market Products
Base Load 24 h
Peak Load 8-20 h
Base Load – for 24 hours
Peak Load – from 8 am – 8 pm
Single hour loads
Use of Spot Market
Portfolio optimization short term trades for peaks buy extra capacities speculative traders etc.
Main Products
Power Exchanges – Future Market Products
Futures
Options (planned)
Swaps (planned)
Etc.
Traded are mainly long-term futures like monthly,
quarterly and yearly products
Power Exchanges – Turnover
Total Consumption in Germany 2001: ~500 TWh
Turnover LPX, 01–06/2001: 5 TWh
Turnover EEX, 01–06/2001: 4,36 TWh
Full Demand and Turnover at German Power Exchanges 01-06/2001
96,2%
2,0%
1,7%
Other
LPX
EEX
only small fraction of Energy is traded at Exchanges
Trading / Strategies of Market Participants
Combination of long-term OTC contracts with fixed prices and short-term trades at Power Exchanges as popular strategy
Rapidly Growing Futures Market due to more transparency for complex products at exchanges compared to OTC trades
Prices per MWh – 1999-2001
10
12
14
16
18
20
22
24
26
Jan 99 Apr 99 Jul 99 Okt 99 Jan 00 Apr 00 Jul 00 Okt 00 Jan 01 Apr 01
EU
R/M
Wh
CEPI LPX EEX
As the prices for the consumers became cheaper, power is not traded at significantly cheaper prices at the Exchanges
Power Exchanges - Developments
Merge of LPX and EEX in 2002 – EEX in Leipzig
Spot market
Turnover in July 02: 2,5 TWh
Future market
Trading Volume: 30,1 TWh in July 2002
(Yearly Contracts: 21,5 TWh
Quarter Contracts: 3,1 TWh
Monthly Contracts: 5,5 TWh)
Especially Futures Market is growing rapidly
Case Study: The Leipzig Power Exchange (LPX)
The Leipzig Power Exchange – Organisation of the Exchange
Public law structure
Exchange as an institution under public law LPX acts through organs under public law
Supporter
LPX Leipzig Power Exchange GmbH Private law institutions Shareholders
The Leipzig Power Exchange – Market Participants (excerpt)
- Aare Tessin AG- Bewag Aktiengesellschaft- DISAM A/S- EDF Trading Limited - Electrabel- Elektrizitäts-Gesellschaft-Laufenburg
AG- EnBW Gesellschaft für Stromhandel- enercity trade- Energieunion AG- EWMR- Entega Trade GmbH- E.O.N. Energie AG- Fortum Energie GmbH- GEW Köln AG- HEW AG- Kom-Strom AG
- Kraftübertragungswerke Rheinfelden AG- MVV Energie AG- Norsk Hydro Energy Deutschland GmbH - NWS Energiehandel GmbH- Österreichische Elektrizitätswirtschafts AG- RWE Energie AG- Southern Energy Europe bv - Stadtwerke Düsseldorf AG- Stadtwerke Leipzig,- Statkraft Energy Deutschland GmbH- Südwestdeutsche Stromhandelsgesellschaft mbH- Syneco GmhH & Co.KG - Tiroler Wasserkraftwerke AG- TXU Europe Energy Trading BV- VASA Energy GmbH & Co. KG- VEAG Vereinigte Energiewerke AG- VEW Energie AG
The Leipzig Power Exchange – Trading and Entrance Fees
Overview Trading fees
(mutual, i.e. to be paid by both the purchaser and the seller)
0.04 Euro/MWh
Annual fee
12500 Euro
Entrance fee (one-off)
7000 Euro
The Leipzig Power Exchange –Auction Bidding
LPX supposes „Auction Bidding“ as best solution
Bundling up of demand and supply
Minimizes Strategic Influences and Market Power
Economical and Simple Solution
The Leipzig Power Exchange – Block Bids Periods
Limits for block bids from start
Maximum size for an individual block bid is 50 MWh
A maximum of 3 block bids per block period and participant can be sent in addition to the hourly bid
These limits can change later on and if so LPX will inform its participants no later than on Thursday the week before implementation of new limits.
Time 00:00 24:0006:00 14:0010:00 18:00
Block 1 Block 5Block 2 Block 3 Block 4
The Leipzig Power Exchange - Trading Volume and Prices I
LPX Spot Market - Weekly volumes and average prices (MCP)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
60000
65000
70000
75000
80000
85000
90000
95000
100000
24-00 25-00 26-00 27-00 28-00 29-00 30-00 31-00 32-00 33-00 34-00 35-00 36-00 37-00 38-00 39-00 40-00 41-00 42-00
MWh/week
0,00
1,50
3,00
4,50
6,00
7,50
9,00
10,50
12,00
13,50
15,00
16,50
18,00
19,50
21,00
22,50
24,00
25,50
27,00
28,50
30,00
€/MWh
Week volume Weekly average price
Only Fri-Sun
The Leipzig Power Exchange - Trading Volume and Prices II
Prices and Volumes in LPX Spot Market
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
11000
12000
13000
14000
15000
16000
17000
18000
16
.06
.00
20
.06
.00
24
.06
.00
28
.06
.00
02
.07
.00
06
.07
.00
10
.07
.00
14
.07
.00
18
.07
.00
22
.07
.00
26
.07
.00
30
.07
.00
03
.08
.00
07
.08
.00
11
.08
.00
15
.08
.00
19
.08
.00
23
.08
.00
27
.08
.00
31
.08
.00
04
.09
.00
08
.09
.00
12
.09
.00
16
.09
.00
20
.09
.00
24
.09
.00
28
.09
.00
02
.10
.00
06
.10
.00
10
.10
.00
14
.10
.00
18
.10
.00
22
.10
.00
MWh/day
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
16,00
18,00
20,00
22,00
24,00
26,00
28,00
30,00
32,00
34,00
36,00
EURO/MWh
Daily turnover Daily average
The Leipzig Power Exchange – Trade Data (I)
FACTS ABOUT TRADE JUNE 16 - OCTOBER 23
Total volume: 1070892 MWh
Average volume/day: 8238 MWh
Highest daily volume (Thu Sep 21): 16954 MWh
Lowest daily volume (Mon June 19): 1448 MWh
Average daily price (MCP): 16,88 EURO
Highest daily average (MCP) (Thu Sep 14): 30,32 EURO
Lowest daily average (MCP) (Sun Oct 15): 7,74 EURO
Highest hourly price (MCP) (Hour 12 on Thu, Sep 21): 100,19 EURO
Lowest hourly price (MCP) (Hour 6 on Sun, Oct 15): 0,86 EURO
The Leipzig Power Exchange – Trade Data (II) – Anomalies
in December 2001 the „market-clearing-price“ reached a peak with 1000 Euro/MWh
the average weekly price moved to 50 Euro/MWh
‚prices are economically not logical nor explainable‘ (MVV)
problem: data about production, network problems not available to all traders
Conclusions considering Prices (I)
• Volatility seen in Power Prices is exremely high and unprecedented in other Commodity Markets • Prices vary substantially by time of day, week or year• Positive and Negative price „spikes“ can be observed• Frequency, Magnitude and complexity of Fluctuations also unique in commodity markets
Behaviour of prices suggests challenges associated with modelling these prices, e.g.
Conclusions considering Prices (II)
• Prices follow similar daily, weekly and annual patterns• Even the price volatility follows certain patterns, price volatility is strongly correlated with price levels • Basic relationships between power prices at different geographic locations show e.g. similar volatility
However.....
.....the challenge is to build models that capture this complex behaviour of prices
Links in the Internet
• www.strom.de • www.eex.de• www.lpx.de• www.bmwi.de• www.finance.wiwi.uni-karlsruhe.de• www.energy-more.de• www.bundeskartellamt.de• www.eu-kommission.de