Market AnalisisMarket Analisis - aeeolica.org fileMarket AnalisisMarket Analisis....

Elektrizitäts-Gesellschaft Laufenburg AGMember of group

25 de enero de 2006

Market AnalisisMarket Analisis

slide no 2Elektrizitäts-Gesellschaft Laufenburg AG

1. EGL Presentation

2. Market Data

3. Price comparison

4. Pool Price Forecast

5. Risk Management

6. Regulatory Changes


1. EGL Presentation

2. Market Data

3. Price comparison


5. Risk Management



1.1 EGL Presentation


1.2 EGL Activities in Iberia

• Retailing

• Power Trading/Hedging

• Interconnector (Import/export)

• Energy Management/Selling Agent

• Assets Projects (CCGT, Renewable Energy)


1. EGL Presentation

2. Market Data

3. Price comparison


5. Risk Management



2.1 Market Data

- EGL Spain manages 1.600 MW: 92 % wind, 5% hydro and 3% cogen.

- Portfolio effect enables deviation savings.

- Delegate management of all market aspects: -> Selling in daily and intradaily markets-> Follow-up of settlement and guarantees toward OMEL.-> Checking of production meaterings with Red Eléctrica.-> Dispatching (Despacho delegado): ramp down instructions, participation

in ancillary services.


2.2 Portfolio Effect

• The portfolio effect is the ratio of the sum of net individual deviations of all fisical units tothe sum of their absolut indivual deviations. Deviation = Production - Program

∑=

++=n

ini DDD

11 ......

Sum of net deviations

∑=

++=n

ini DDD

11 ......

Sum of absolut deviations

1

1

1 ≤=

∑

∑

=

=n

ii

n

ii

D

DF

F measures the portfolio effect. A small “F”means a big portfolio compensation.

With Di the individual deviation of producer i and n the number of plants in portfolio


2.3 Example of savings due to portfolio effect

PRODUCER 1PRODUCER 1 PRODUCER 2PRODUCER 2 PRODUCER 3PRODUCER 3

PORTFOLIOPORTFOLIO

DEVIATION (MWh)

DEVIATION SETTLED BY OMEL (MWh)

TOTAL COST FOR PRODUCER (Euros)Hipothesis: Deviation cost of 15 €/MWh

+5 -3 +15 3 1

75 45 15

IF PRODUCER IS NOT PART OF PORTFOLIO

PRODUCER 1PRODUCER 1 PRODUCER 2PRODUCER 2 PRODUCER 3PRODUCER 3

DEVIATION (MW)

DEVIATION SETTLED BY OMEL (MW)

TOTAL COST FOR PRODUCER (Euros)Hipothesis: Deviation cost of 15 €/MWh

SAVINGS (MWH OF DEVIATION)

SAVINGS (%)

+5 -3 +15/9 x 3 = 1,7

3,3 2 0,7

+33/9 x 3 = 1 1/9 x 3 = 0,3

25,5 15 4,5

66 % 66 % 66 %

NETIF PRODUCER IS PART OF PORTFOLIO NET ABSOLUTABSOLUT

+9


2.4 F Factor

• The larger and more diversified the portfolio, the smaller its F factor.

-> More than 1.000MW guaranty an

important reduction

-> Geografical diversification is another

key point

-> EGL has an F factor of 0.4

-> Estimate savings with 40%

individual deviation is 3.5 Euros/MWh

of production (market price of 55

Euro/MWh; cost of 27% of daily

market price)

TYPICAL EVOLUTION OF F FACTOR

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

25 200

375

550

725

900

1075

1250

1425

1600

1775

1950

2125

2300

2475

2650

2825

3000

3175

MW IN PORTFOLIOF


1. EGL Presentation

2. Market Data

3. Price comparison


5. Risk Management



3.1 Price comparison

63,459,8

Hipothesis: - Deviation 30% settled by OMEL - Reactive 436 -> 3% * TMR

2818 -> 4% * (pool + premium)

Average Final Price

6792,9 71,4

- Baseload production

2005Fixed

price 436Market

price 436Transitory

2818

Euro/MWh

Wind farm (≤ 5MW; ≤ 15 years)Wind farm (> 5MW; ≤ 5 years)

Wind farm (> 5MW; 5 < Age ≤ 15)Wind farm ( > 15 years)


3.2 Price comparison

1. Pool price considerably increased from 01/01/2005. Market price under RD 436 and 2818 are the winners.

2. 436 market price outperformed 436 fixed price, up almost 30 Euros/MWh in average.

3. This price difference explains why more than 90% of wind farms chose 436 market option.


1. EGL Presentation

2. Market Data

3. Price comparison


5. Risk Management



4.1 Pool price forecast

- Oil and gas price upward movement seems more permanent. - Spanish producers already include EUA allowances cost in pool price. EUA trades at more than 26 Euro/ton.

- Dry year. Low hydro reserves.

- Tariff deficit entirely paid by government. Tariff update in July 2006.

- Forward price market also reflect a high expectation of OMEL pool price

-> Pool price should remain high in 2006

Combined cycle 0,368 Ton CO2/MWhCoal 0,85 Ton CO2/MWhFuel-oil 0,557 Ton CO2/MWh

CO2 Emissions


1. EGL Presentation

2. Market Data

3. Price comparison


5. Risk Management



5.1 Risk Management

• Market option of Royal Decree 436/2004 has the drawback of volatile revenues.

-> Solution: Hedging -> EGL assumes the pool price risk.

• Hedging possibilities:• Financial swap/physical bilateral• Baseload• Profile/Production


5.2 Hedging examples

• Fixed monthly volumes

0

5

10

15

20

25

Jun04

Jul04

Aug04

Sep04

Okt04

Nov04

Dez04

Jan05

Feb05

Mrz05

Apr05

Mai05

• Production

0,0

5,0

10,0

15,0

20,0

25,0

1 31 61 91 121 151 181 211 241 271 301 331 361 391 421 451 481 511 541 571 601 631 661 691


5.3 Forward prices

• Forward prices on January 24, 2006: Q2 2006 : 54 Euro/MWhB-o-Y 2006: 56 Euro/MWh

• Example: A wind producer can sell 10 MW baseload B-o-Y 2006 at 56 Euro/MWhagainst OMEL pool price thereby hedging market price risk.

-> Monthly settlement-> if OMEL clears lower than 56, EGL pays to the producer.-> if OMEL clears higher than 56, the producer pays to EGL.

• We recommend to hedge only 2006. Next year could see the comeback of a fixedtariff for wind producers. Exposure to market prices would no longer exist.


1. EGL Presentation

2. Market Data

3. Price comparison


5. Risk Management



6.1 Power Guarantee and Deviation

- Red Eléctrica will be in charge of the settlement of power guarantee andimbalance costs, now managed by OMEL. Deadline: May 2006.

- Settlement is going to be trickier.

- Creation of a balancing perimeter (perímetro de equilibrio)

- Deviation costs will be market-based and will be known in D+1.- If the balancing perimeter helps the system, he gets/pays OMEL price- If the balancing perimeter is opposed to the system, he gets max OMEL

price or pays min OMEL price.

- Portfolio effect (deviation netting) will remain as important as before.


6.2 Dispatching Centers (Despacho Delegado)

- Set-up of dispatching centers that will serve as intermediary toward Red Eléctrica for real time actions.

- Obligation for all 10MW+ wind farms to associate to dispatching centers beforeend of 2006.

- Every wind farm must be connected to REE dispatching (CECRE) through twodedicated redundant lines (líneas redundantes).

- Dispatching centers must be connected to CECRE to get real-time adjustmentinstructions. Good opportunity to participate in ancillary services (tertiaryregulation) to reduce deviations/optimize revenues.


Contact details

Frédéric Jousten

[email protected]

T: +34 91 594 71 76

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