THE NORDIC/`Baltic POWER MARKET...The power exchange All participants in Elspot needs to be...

THE NORDIC/`BALTIC POWER MARKET

Oslo, June 11th 2013

NORD POOL SPOT

Ellen Charlotte Stavseth Trading Adviser

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Agenda Nord Pool Spot

Terminology

Roles in the power market

Basic principles

The Elspot market and bids

Price calculation and area prices

BREAK

Example of an Elspot participant

Balancing markets

Overview of todays market situation

Settlement and collateral

European integration

Nord Pool Spot - June 11th 2013 2

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Terminology


Basic principles



BREAK


Balancing markets





/ Nord Pool Spot - June 11th 2013

Nord Pool Spot – a market place The largest market place for trading power in Europe

– The first one!

Close to 370 companies from 18 countries trade on the power exchange

Physical power is bought and sold – Total turnover 2012: 180 billion NOK – Volume turnover 2012: 334 TWh

The Nord Pool Spot Group operates day-ahead markets and intraday markets in: – Nordic/Baltics – UK

4

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The market place


UPDATE WITH LATVIA

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Nord Pool Spot’s history 1991 The Norwegian Electricity market is deregulated

1993 Statnett Marked is established

1996 A joint Norwegian-Swedish power exchange is established and named Nord Pool

1998 Finland joins the exchange

2000 The Nordic market becomes fully integrated as Denmark joins

2002 Nord Pool Spot is established as a seperate company

2009 Market coupling with Germany through EMCC (European Market Coupling

Company)

2010 The UK power market N2EX is launced by NPS and Nasdaq OMX Commodities. Estonia is opened as a bidding area. 2012 Lithuania is opened as a bidding area. 2013 Latvia is opened as a bidding area.



Organisation

The Nordic market The UK market offering N2EX

UK London

Estonia Tallinn

Denmark Copenhagen

Sweden Stockholm Norway Oslo

Finland Helsinki

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In total 80 employees located in 7 different

countries

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Owners

Nord Pool Spot AS

Statnett (Norway)

28.2%

Fingrid (Finland)

18.8%

Energinet.dk (Denmark)

18.8%

Svenska Kraftnät (Sweden)

28.2%

Elering (Estonia) 2%

Litgrid (Lithuania) 2%

AST (Latvia) 2%

Nord Pool Spot is owned by the Nordic and Baltic transmission system operators


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Historical turnover at NPS

9

All time high 307 TWh

Nord Pool Spot - June 11th 2013

-

50

100

150

200

250

300

350

TWh

9

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Nordic consumption & Elspot volumes


0

2 000

4 000

6 000

8 000

10 000

12 000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51

Elspot 2012 Elspot 2013 Nordic consumption 2012 Nordic consumption 2013GWh

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Nordic consumption & Elspot volumes


0

2 000

4 000

6 000

8 000

10 000

12 000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53

Elspot 2009 Elspot 2010 Elspot 2011Nordic Consumption 2009 Nordic Consumption 2010 Nordic consumption 2011

GWh

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Day Ahead Auction Volumes


0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

EPEX FRA EPEX GER-AUT Nord Pool Spot APX NL N2EXGWh

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Nord Pool Spot provides A liquid electricity exchange

– Daily turnover ~1 TWh

Equal conditions and opportunities for all participants

Timely and accurate information to the whole market – Through Urgent Market Messages

(UMM) – Publication of fundamental data

Counterparty in all trades – Safe market place with guarantee for

settlement


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Nord Pool Spot’s markets

Elspot – Day-ahead auction for the Nordic

market – Turnover 2012: 334 TWh (+13 %)

N2EX – UK Day-ahead auction

– 94.9 TWh (+407 %)

Elbas – Intraday trade

– 3.2 TWh (+19%)


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Terminology


Basic principles



BREAK


Balancing markets





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What is a kilowatt? Watt [W]: name for power

– 1 kilowatt (1 kW) = 1.000 watt

Kilowatt hour (kWh): name for energy – Effect x Time – 1 kWh = 1.000 watt hours – 1 Megawatt hour (MWh) = 1.000 kWh – 1 Gigawatt hour (GWh) = 1.000 MWh = 1.000.000 kWh – 1 Terawatt hour (TWh) = 1.000 GWh = 109 kWh

A light bulb 40 W – To consume 1 kWh it has to light 1000 Wh/40W = 25 hours – Cost app. 10 Euro-cent

MWh is the product traded at NPS


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Useful terms in the power market

Capacity – Measure of output performance

– The hydro power plant capacity can be 500 MW Power

Generation – Production of electricity

– Norway produces 120 TWh/year Energy

Efficiency – Conversion of fuel energy to electric power

– The efficiency of a hydro power plant is app. 90 %


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Facts about energy An average Norwegian household consumes app.

20.000 kilowatt hours (= 20 MWh) in one year

The Nordic power market consumes app. 400 TWh per year

Daily production of a nuclear power plant app. 25 GWh

Windmills – installed effect of app. 4 MW – Efficiency app. 50 % – Daily production per windmill app. 2 MW x 24 hours = 0.048 GWh – 25 GWh per nuclear power reactor/0.048 GWh per windmill = 520

windmills need to produce the same amount of energy as a nuclear power plant


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Terminology


Basic principles



BREAK


Balancing markets





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Participants in the market


PRODUCERS Generators

Energy companies

CONSUMERS Power intensive industry

Large consumers Distributors

Energy companies TSO’s

BROKERS Trade power on physical and

financial market E.g. retailers

TSO’S Owners of the infrastructure –

the grid

NORD POOL SPOT The power exchange

All participants in Elspot needs to be physically connected and have a balance agreement in the bidding area trading in.

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The triangle of roles in the power market


Nord Pool Spot AS

ELSPOT AND ELBAS

Transmission System Operators

REAL TIME OPERATORS

FREQUENCY BALANCING MARKET

Participants

GENERATORS DISTRIBUTORS GRID OWNERS

BROKERS INDUSTRY

Bidding in Elspot

Trade Results

Transmission capacity

Trade Results

Generation schedules

Forecasted consumption

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Terminology


Basic principles



BREAK


Balancing markets





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Distribution of power

Power is distributed through transmission lines – The infrastructure in the power market

The dimensions of the lines determines its transmission capacity – Terminology: A transmission line has a transmission capacity of

e.g. 500 MW

Transmission lines within countries – Transport internal power surplus to regions with deficit


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Exchange of power

Transmission lines between countries lead to exchange of power – Depending on area surplus/deficit – Import and export

Now: focus on building new transmission lines to the Continent – Several plans


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Demand-bid


Price [EUR/MWh]

Volume [MWh]

The consumers willingness to buy

power

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Supply-bid


Price [EUR/MWh]

Volume [MWh]

The producers willingness to sell

power

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The supply curve in the Nordic Marginal Cost

Gas turbines

100 200 400 TWh 300 Nord Pool Spot - June 11th 2013

Nuclear CHP

Coal

Oil

Hydro

Increasing marginal cost

27

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Price calculation


Price [EUR/MWh]

Volume [MWh]

■ Daily auction – 365 days

■ Gate closure 12:00 CET – Prices calculated day-ahead

■ Bids submitted by electronic communication

■ Trading currencies – EUR, NOK, SEK, DKK

■ Several supply and demands bids aggregated into two curve

– Balance price and turnover Turnover

Balancing price

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Terminology


Basic principles



BREAK


Balancing markets





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Elspot

ELectrical SPOT market

The physical market of power trading with delivery the next day – Cornerstone in the Nordic power market

Auction-based market for trading – One daily auction at 12:00 CET

Covers Norway, Sweden, Finland, Denmark, Estonia, Latvia and Lithuania


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Elspot overview I


Price [EUR/MWh]

Volume [MWh]

■ Daily auction – 365 days

■ Gate closure 12:00 CET – Prices calculated day-ahead – Physical delivery: D+1 00:00-

00:00

■ Bids submitted electronically

■ Trading currencies – EUR, NOK, SEK, DKK

■ Several demand and supply curves aggregated into two curves

– Market cross point Turnover

Market price

Demand

Supply

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Elspot overview II

Buyers/Sellers can place: – Single Hourly bids – Block bids – Flexible Hourly bids

Market cross point calculated per: – Hour – Area – Index price (System price)



Bid types in Elspot

1. Single hourly bid −Price and volume given separately for each hour

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Single Hourly bids The basic type of Elspot market order

Used for both purchase and sales orders

Each participant chose the range of price steps

The bid may contain up to 64 price steps (Incl. max and min)


Price: Fr hour: To hour: -200 100 101 150 151 200 201 300 301 2000

1 2 2 3

9 10 300 300 150 150 0 0 -100 -100 -300 -300

23 24 Total, 24 hours:

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Bid types in Elspot


2. Block bid −Set the all-or-nothing condition in bid for several

consecutive hours.

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/ Elbas 36

Block bids Block bid must consist of at least three consecutive hours

Participant decides start and stop hour

Minimum volume 1 MW

Useful in cases where the cost of starting and stopping power production is high – Denmark

Inflexible production, consumption and contracts can be handled efficiently with block bids

Hour 07:00 – 10:00 Volume -50 MW Bid price = 75 EUR/MWh Average price (07-10) = 74 Rejected

Hour 07:00 – 10:00 Volume -50 MW Bid price = 75 EUR/MWh Average price (07-10) = 80 Accepted

36 Nord Pool Spot - June 11th 2013

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Block bids – acceptance Acceptance of sales bid when the average area price across the

block period is higher that the bid price

Acceptance of purchase bid when the average area price across the block period is lower than the bid price.

Additional condition: The bid has to be included in the price giving curves when accepted. – PRB=Paradoxically Rejected Block bids


Hour 07:00 – 10:00 Volume -50 MW Bid price = 75 EUR/MWh Average price (07-10) = 76.65 Possibly rejected

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Linking of block bids Possible to link block bids together

– To avoid partial blocks being accepted

Example

Copenhagen Power in DK2 owns a coal power plant – Maximum production capacity 300 MW – Time until full production: 3 hours

‒ Mother: 07:00-20:00, Volume -300 MW @ 70 €/MWh,

– Daughter: 04:00–07:00, Volume -100 MW @ 0 €/MWh,

– Grand-child: 20:00-23:00, Volume -100 MW @ 0 €/MWh,



Bid types in Elspot


2. Block bid −Set the all or nothing condition in bid for several

consecutive hours.

3. Flexible one hour bid −Sales bid which may be accepted in an hour which

fulfills the bids price condition. (Mostly used at very high price)

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Flexible one hour bid Sales bid only

Only price and volume is given in the bid

The bid may be accepted in the hour which gives the best optimal solution – given that the price condition in the bid is fulfilled.

Priority order is price – then time.

Useful to introduce flexibility in curves – "demand side bidding” – Aluminum plant can be stopped in 1 hour



Price [EUR/MWh]

Volume [MWh]

Flexible one hour bid - example

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Terminology


Basic principles



BREAK


Balancing markets





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The Nordic exchange area

NO1

DK1

NO5

NO4

NO3

SE

FI

EE NO2

DK2


NO4

NO3

NO5 NO1

NO2

FI

DK1

DK2

SE1

SE2

SE3

SE4 LT

Bidding areas – Participants submit bids within bidding

areas – Both buy and sell orders

Location – Can buy in all areas – Only possible to sell in areas with own

production capacity

Various amount of bidding areas in each country – TSO’s decide

Balance responsible – Each participants is responsible to bid in

balance

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EE

LV

/ Nord Pool Spot - June 11th 2013 44

Business procedures in Elspot 10:00 Transmission capacities published on NPS web

12:00 Gate closure

12:02 Market coupling Nordic – Germany. – Calculation of flow on Baltic cable, Kontek cable, Jutland-Germany

and NorNed cable

~12:20 NPS price and flow calculation Nordic market

13:00 Publication of prices in Nordic – Normal time for publication is around 12:30 – 13:00

14:00 Settlement

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What does Nord Pool Spot calculate? System price

– Assume infinite transmission capacity in the grid – A theoretical common price in the exchange area – Used as a reference price in the financial market

Area price – Based on available transmission capacity – Bottlenecks in the grid gives price differences


Objective of price calculation algorithm: optimize social welfare

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Isolated areas


Pric

e [E

UR

/MW

h]

Volume [MWh]

Pric

e [E

UR

/MW

h]

Volume [MWh]

Norway – surplus area Sweden – deficit area

100 MW 100 MW

150 EUR/MWh

100 EUR/MWh

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Infinite transmission capacity


Pric

e [E

UR

/MW

h]

Volume [MWh] Turnover = 200 MW

Market-price = 125

EUR/MWh

System price Assumes infinite

transmission capacity in the grid (here:

between Sweden and Norway)

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Exchange between countries I


Pric

e [E

UR

/MW

h]

Volume [MWh]

Pric

e [E

UR

/MW

h]

Volume [MWh]

150 EUR/MWh

100 EUR/MWh

Norway has the possibility to export 100 MW to Sweden

100 MW

100 MW

Common price for

Norway and Sweden = 125

EUR/MWh

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Exchange between countries II


Pric

e [E

UR

/MW

h]

Volume [MWh]

Pric

e [E

UR

/MW

h]

Volume [MWh]

140 EUR/MWh 110

EUR/MWh

Only 50 MW available transmission capacity between Norway and Sweden

50 MW

50 MW

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Area prices

Price differences between areas due to: – Large power surpluses – Not sufficient transmission capacity

Power flows from surplus area to deficit area – E.g. Norway exports power to Sweden

Transmission capacity limitations may create large price differences within a country


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Price Areas Bidding Areas


NO1 SE3

NO1 SE3

NO1 SE3

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NO1 SE3

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Price differences within the exchange area


Area Price

Theory: System price < Area prices

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Transmission capacities has great influence


February 1st Hour 11

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Terminology


Basic principles



BREAK


Balancing markets





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An Elspot participant Company Norway Power

– Located in bidding area NO2

Owns hydro power plants – Installed generation capacity 6 MW

Have obligations to provide the local community with power – Varies with the need of the consumers

How to provide the power to the customers in the most cost-efficient way?


/ Elbas 57

Bilateral contract

Norway Power

Own generation Power exchange


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The three alternatives 1. Own generation Known marginal cost for producing

2. Bilateral contract A contract established between two companies Fixed price - agreed upon Fixed volume – hours/days/weeks/months/years

3. Power exchange Possibility to purchase/sell power Price unknown until after auction Submit a bid curve – price/volume dependent


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Consumption prognosis How to know how much the

consumers will consume the next day?

Consumption prognoses are necessary

What information could be used to make prognoses? – Today’s consumption – Weather forecasts – Day of week – weekend/weekday – The consumers – Historical data


MW

0

2

4

6

8

10

12

1 5 9 13 17 21

Hour

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Norway Power’s access to power

Generation – Station inflexible generation 2 MW @ 25 NOK/MWh – Station superflexi 2 MW @ 100 NOK/MWh – Station flexi 2 MW @ 200 NOK/MWh

Bilateral contracts – Contract with generator SWE AB 2 MW

Participant at Nord Pool Spot AS


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MW

Hour

0

2

4

6

8

10

12

1 5 9 13 17 21

Planning of trade for Norway Power

Generation

Bilateral contract

Example hour 9

6 MW need


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Participant X, MW

Norway Power, MW

Participant Z, MW

SUM, Buy

Price [NOK/MWh] -2100 21000

2 0

6 6 2

4 -4 0 -12

50 100 101 150 151

2 0

4

200 201

4 2

51

2 0 -12

SUM, Sell

4 8 12

100

200

300

Price

12 10 8 8 6 6 4 4 2 2

Buy

Balance price : 126 kr/MWh

Turnover :6 MW

MW

0 0 -4 -12 -12

Sell

Aggregation of bid curves

Norway Power’s Elspot schedule Hour 9 = 4 MW


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Participant X, MW

Norway Power, MW

Participant Z, MW

SUM, Buy

Price [NOK/MWh] -2100 21000

2 0

6 6 2

4 -4 0 -12

50 100 101 150 151

2 0

4

200 201

4 2

51

2 0 -12

SUM, Sell

12 10 8 8 6 6 4 4 2 2

0 0 -4 -12 -12

What is Norway Power’s schedule if the price in NO2 becomes 200.5 NOK/MWh?

Linear interpolation between the price and voume points. At price 200.5 NOK/MWh

Norway Power will be buying 3 MW.


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Norway Power’s schedule Hour 9

Obligations to consumers 10 MW

Access to power in Hour 9 10 MW – Contract with SWE AB 2 MW – Generation inflexible 2 MW – Generation superflexi 2 MW – Purchase from Nord Pool Spot 4 MW @ 126 NOK/MWh

Norway Power’s schedule is in balance


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Terminology


Basic principles



BREAK


Balancing markets





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Balance is important!

Stable operation of the power grid requires:

Production = Consumption All participants have an obligation to bid in balance

– Producers cannot sell more than their total production capacity – Consumers cannot buy more than their expected consumption


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Structure of the related markets


Time 6 years 24 hours 13:00

Delivery hour

Financial market

Elspot market

ELBAS market

Regulating market

Nov 1st Nov 2nd

Cash settled Physical delivery of power Financial market (Nasdaq OMX) Cash settled futures, forwards and options. Clearing services.

Reference price

Elspot market (Nord Pool Spot) Day-ahead auction. Equilibrium between supply and demand is established for delivery the following day. Elbas market (Nord Pool Spot) Intraday market with continuous trading up to one hour before delivery. Approximately 34 hours. Regulating market (TSO’s) Operated by the respective TSOs where final adjustments are made to achieve balance between supply and demand. Price set after delivery by TSO, participant is price taker.

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Balancing markets

All participants have an obligation to bid in balance

If they not produce/consume what they have gotten on the Elspot-auction Imbalance

Two alternative ways to «solve» the imbalance: 1.Regulation market – after delivery

2.ELBAS – prior to delivery


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1. Regulating market Operated by the TSO’s

– Participants submit bids to their national TSO

Two-price system – Up and down regulation price

Common system where all Nordic bids are collected – When needed the best bid is activated regardless of country/area

Participants submit bids after Elspot – Example:

– Surplus of production Up-regulation bids – Flexible consumption Down-regulation bids


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Regulating power market


Price [EUR/MWh]

Volume [MWh]

Consum

er A

Consum

er B

Producer Z

Producer Y

Producer W

10

15 17

25

30

100 200 300 400 500

DOWN-REGULATION BIDS UP-REGULATION BIDS

Market price

150 MW UP-REGULATION

Up-regulation price

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Imbalance in Regulating power market

CASE: Going to delivery hour in imbalance

The TSO’s will have to either up- or downregulate

Activate bids from the merit-order

All activations sets the regulation price

You (Participant) have to pay for the imbalance caused – Invoiced after the delivery hour

You do not know what price you will face! – Price taker!


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2. ELBAS ELectrical Balancing Adjustment System Operated by Nord Pool Spot

Continious intraday trading – 24/7

Available in all the Nordic bidding areas – DK, NO, FI, SE, EE, GE, NL, BE

Trades are done between two hour prior to delivery and until end of next day spot market

Gate closure differs from TSO’s – Norway : 2 hours - Belgium : 5 min – Netherlands : 1.5 hours - Germany : 30 min – Denmark, Sweden, Finland, Estonia : 1 hour


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Imbalance in ELBAS CASE: Oslo Power in NO1 has from Elspot obligations to produce 200 MWh in hour 9

In hour 5 : 120 MW turbine falls out

Oslo Power will have an imbalance in the delivery hours – Statnett (Norwegian TSO) will invoice them at an unknown price

Can use ELBAS to buy 120 MW at a known price – E.g. In Hour 7

No imbalance and no «unknown» costs



1. Hourly contracts – Price, volume and the hour (PH/id) must be specified – The participants are free to pick and choose

2. Block contracts – Price, volume and the hour (PH/id) must be specified – Can be defined for one hour or several consecutive hours – ”All or nothing” - Buyers have to accept the whole block bid

All trades are done in Euro (€), minimum € 0.10

Minimum volume trades is one (0.1) MWh

ELBAS - Two products


Bid = price on buy order

Ask = price on sales order

Bqty = buy order volume

Aqty = sale order volume

Grey areas = expired trades

Light areas = available trades

The main window - market

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Historical ELBAS volumes


00,5

11,5

22,5

33,5

TWh


ELBAS - development In 1999 ELBAS was introduced in

Finland and Sweden, making it the world’s first cross border intraday market.

ELBAS has throughout the years been implemented in Finland, Sweden, Denmark, all four TSO areas of Germany, Norway and Estonia.

APX-Endex use a licence for ELBAS in the Netherlands and Belgium.

Participants from neighbouring areas are trading on ELBAS via explicit cross border capacity.

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Why trade on ELBAS? Reduction of risk

– Only national counterparts in the balancing market – More imbalance in the future due to increased share of wind power – Market markers 24/7

Increase potential income – Automatic access to counterparts from Nordic and German areas increase liquidity – Bring together different production mix with different marginal costs to mutual

benefit – Trades done closer to the hour of delivery are based on more accurate market

information

More efficient use of remaining cross-border capacity after day-ahead

Participants not dependent on counterpart, price or volume


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Terminology


Basic principles



BREAK


Balancing markets





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Production mix in the Nordic The Nordic power market is

dominated by hydro power – Easy regulated

Nuclear power – High uncertainty

Fossil fuels

Wind

Other renewable energy – Solar, Biomass

Hydro power has the lowest marginal cost in the system – Water reservoir levels important


Wind power 3 %

Other renewables

7 %

Fossil fuels 18 %

Nuclear power 20 %

Hydro power 52 %

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SOURCE: ENTSO-E Statistical Yearbook 2010

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Nordic production per type


0

2

4

6

8

10

12

1 5 9 1317212529333741454953 4 8 1216202428323640444852 4 8 1216202428323640444852

2009 2010 2011

Nuclear Other Thermal Power Hydro Wind PowerTWh

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Power production in the Nordic

Marginal cost

CHP

Gas turbines

100 200 400 TWh

Coal

Oil

Hydro Nuclear

300

Yearly consumption in the Nordic market Nord Pool Spot - June 11th 2013

WET HYDROLOGICAL

YEAR

82

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Power production in the Nordic

Marginal cost

CHP

Gas turbines

100 200 400 TWh

Coal

Oil

Hydro Nuclear

300

Yearly consumption in the Nordic market Nord Pool Spot - June 11th 2013

DRY HYDROLOGICAL

YEAR

83

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Exchange Nordic Area Monthly values 2001 – 2012

NPS PENG PRESENTATION 84

-5 000

-4 000

-3 000

-2 000

-1 000

0

1 000

2 000

3 000

4 000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

GWh

Denmark Finland Norway Sweden Net

+ Import / - Export

Net import

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Exchange to/from Nordic Area 2011-2013


-800,0

-600,0

-400,0

-200,0

0,0

200,0

400,0

600,0

800,0Poland Germany Russia Estonia Netherlands Net

IMPORT

EXPORT

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Exchange to/from Nordic Area 2009-2011


-600,0

-400,0

-200,0

0,0

200,0

400,0

600,0

800,0Poland Germany Russia Estonia Netherlands Net+ import - export

IMPORT

EXPORT

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Installed generation capacity (MW)

Norway Sweden Finland Denmark Estonia Total Hydro 30.164 16.200 3.133 9 4 49.510 49 % Nuclear - 9.151 2.646 - - 11.797 12 % Fossil fuel

1.166 5.035 9.004 8.867 2.324 26.396 26 %

Wind 450 2.163 197 3.802 156 6.768 7 % Other RES

- 3.152 2.057 - - 5.209 5%

Other - - 44 697 - 741 1 % 31.780 35.701 17.081 13.375 2.484 100.421


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Nordic inflow


0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

1 6 11 16 21 26 31 36 41 46 51 4 9 14 19 24 29 34 39 44 49 2 7 12 17 22 27 32 37 42 47 52 5 10 15 20 25 30 35 40 45 50

2010 2011 2012 2013

Nordic total Norway Sweden FinlandGWh

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Hydro Reservoir levels Norway, Sweden, Finland


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System price Daily average 1999 - 2011


0

20

40

60

80

100

120

140

160

NP SYS

EUR/MWh

Low levels in hydro

reservoirs

High reservoir

levels

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Terminology


Basic principles



BREAK


Balancing markets





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Settlement – Elspot and Elbas Delivery

– Nord Pool Spot and participants send Elspot and/or Elbas net positions to TSO

Counterparty – Nord Pool Spot becomes counterparty in all trades

Monetary transactions – Invoice/Credit note send out every banking day

Automatic clearing – All trades will automatically be transferred to clearing at Nord Pool

Spot


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Collateral Collateral call

– To ensure that the transaction will be fulfilled

Based on a rolling net position for the last 7 trade days – Positions monitored by NPS pre and post calcualtion

Sellers post the minimum collateral – Their outstanding self billing invoices acts as collateral call

Minimum 30 000 EUR – Can be EUR/SEK/NOK/DKK

Can be placed as cash on pledged account or as on on-demand bank guarantee


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Banking structure NPS/Participants

One main concentration bank handling communication with 22 approved settlement banks

NPS approve settlement banks – Participants chose which bank they want to use

NPS receive daily updates on transactions and account balances – Done prior to price calculation

Worst case: if a purchaser do not have the collateral call/money available sanctioned


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Sanctions Nord Pool Spot can:

Set individual collateral calls for participants

Exclude or suspend participants for breach of rules

Limit trading for participants

TSO’s can:

Demand Nord Pool Spot to suspend participants


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Terminology


Basic principles



BREAK


Balancing markets





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Market coupling Price coupling

– In price coupling all market data and all market rules of the coupled markets are included in the central market coupling calculation.

Volume coupling – Same input is required from the PXs as for price coupling – Only the determined flows between each exchange area

are adapted by each power exchange which again calculates the prices for the different market areas separately

– Viewed as a step towards closer integration and price coupling.


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ITVC – European Market Coupling Interim Tight Volume Coupling

Cooperation between several power exchanges – NPS, EPEX, APX and Belpex

Coordination organ EMCC (European Market Coupling Company) – Owned by EPEX, NPS, Energinet.dk, TenneT, 50Hertz

Connects the Nordic Region with Central Western European (CWE)

Optimizes the power flow on the interconnections connecting the power exchange regions

The calculation algorithm is physically operated by trading desk personnel of EPEX,NPS and APX, taking turns of the operation every third month.


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BE EL-S**

FR ETS

NL EL-S*

700

SE3 SESAM

FIN SESAM

DK1A

SESAM

SE4 SESAM

NO3 SESAM

NO4 SESAM

NO2 SESAM

NO1 SESAM

DK1 SESAM

DK2 SESAM

GE/ AT ETS

950/1500

550 600

EST SESAM

NO5 SESAM

R-im SESAM

L-im SESAM

L-ex SESAM

Regional interconnectors

EMCC interconnectors

SE2 SESAM

SE1 SESAM

Market coupling area


Market coupling procedure: 1. EMCC collects orderbooks from

all power exchanges 2. Runs a complete price and flow

calculation for all market areas in the two regions

3. Sends the resulting power flow on EMCC interconnections as purchase- or sales-orders back to all power exchanges

4. Final price calculations done locally in Nordic region by NPS and on Continental side in CWE cooperation between EPEX, APX and BelPex

5. Prices published seperately by each power exchange

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Ongoing project(s) NWE – North Western Europe

– Price coupling of the North West European PX’s

PCR – Price Coupling of Regions: – Ongoing project with the following exchanges involved:

– NPS – EPEX (Germany and France) – APX (Netherland) – BELPX (Belgium and Luxemburg) – OMEL (Spain and Portugal) – GME (Italy)

– Harmonization of the price calculation algorithm


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Questions?

Ellen Charlotte Stavseth

Trading Adviser

Nord Pool Spot AS

E-mail: [email protected]


THE NORDIC/`Baltic POWER MARKET...The power exchange All participants in Elspot needs to be...

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