Download - SEE Wholesale Market Opening Study [Update From a Presentation to PHLG in June 2009], World Bank

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SEE Wholesale MarketOpening Study

[update from a presentationto PHLG in June 2009]

15th Athens Forum

Athens, Nov 25-26, 2009

Kari Nyman

Sustainable Development Dept

Europe and Central Asia RegionThe World Bank


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Topics of this Presentation

Electricity Shortages threaten the EnergyCommunity, including its Observer Countries

Effective Electricity Market Opening

Role of Transmission System Operators Regional Day-Ahead Market (DAM)

Action Plan Preparation and Implementation of aRegional DAM & Improvements to Bilateral TradingPractices

Summary of Market Development Actions


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World Bank Project on South East Europe(SEE) Wholesale Market Opening

ESMAP and PPIAF (two multi-donor trust

funds) provide financing WB contracted a consortium of PoyryEnergy and Nord Pool Consulting

Draft Final Report is available www.energy-community.org Next Step: Action Plans to be agreed

Implementation, by the willing & others tofollow Energy Communitys current gradualprogress expected to continue


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Electricity Shortages Threaten theEnergy Community incl. Observers

Current situation is well-known to all Energy Community Secretariat provides regular

benchmarking reports to the Athens Forum, PHLG andMinisterial Council meetings

Conclusions of the 14th Athens Forum:

Contracting Parties to intensify their efforts Utmost importance of transparency WB project to help overcome market obstacles

Effective electricity market opening forprivate investment, for security ofelectricity supply, for economic growth and

quality of life/social progress


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Allow state utilities to sell to the market in

addition to the regulated customers Reduce volumes of tariff sales & allow volumes of marketsales to increase - over time, gradually (see next slide)

Promotes effective market opening

Promotes internal cash generation by state utilities fortheir future investment and ability to survive in futuremarket competition with private companies

Promotes energy efficiency when consumers increasingly

have to pay the real price for electricity Successfully done in Romania in 2001-2007,

up to 50% market opening; and further

progress expected from 2010


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Transition Period: Market and Regulated PricesEligible Consumer and Supplier

Estimated consumptionin t0

M

Wh/h

timet0 t1 t3t1, t2 and t3 to be

decided by Authorities

demand response

Volume purchased atmarket price

t2

Volume purchased atregulated price fromgenerator or supplier


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Open the market gradually Social safety nets for the poor households Each country can set the pace of opening/market sales,

taking into account progress of social safety nets andoverall economic conditions; but

Announce market opening plans for predictability &consult market participants about modifications

Require transparent contracting when stateutilities buy and sell electricity Auctions or other transparent processes advisable when

state utilities award bilateral contracts Good governance in the use of resulting revenues

Consider Virtual Power Plants


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Role of Transmission System Operators

TSOs more than electricity transmission

More expected of TSO in liberalized andincreasingly regional electricity markets: Transmission service including interconnections; Integration of renewable energy SmartGrids; Facilitation of electricity markets & market couplings; Security of Supply - encompasses all of the above

TSOs should proactively assume leadership,not wait to be mandated by regulators Unbundling from vertically integrated utilities

Operational and financial autonomy


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Regional Day-Ahead Market --Centralized Approach

Centralized regional approach - regional powerexchange & regional market operator - is the in-

principle ideal approach to developing afunctioning regional market: Cost-effective

Feasible most SEE systems are too small for nationalmarkets? Faster to implement & easier to coordinate and harmonize

- compared to decentralized approaches

Easier for prospective private generation investors tounderstand Regional cooperation and ownership - ideally TSOs would

jointly establish and hold equal shares in the regionalmarket operator.


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Regional Day-Ahead Market --Decentralized Approach

Immediate acceptability of a centralizedregional approach & a regional marketoperator is not evident

Mandatory Top-down approach will not

work - countries should decide (andimplement) their preferred choice whethercentralized or decentralized

If SEE countries prefer decentralizedapproaches, countries should implement aregional market through a decentralized

approach.


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Regional Day-Ahead Market --One Possible Decentralized Scenario

Decentralized development can follow a number of

routes, including the following scenario: Bulgaria and Serbia develop their national markets Bulgaria and/or Serbia couple their markets with the

already functional Romanian market (OPCOM PX)

Romania and Hungary are working to couple their markets Other SEE countries join the BG-HU-RO-SR market

coupling (or couple with Austria or Greece), one by oneover time, when confident about the effective functioning

of the market coupling and after having developedcapability and facilities to join the market coupling

Turkey and Ukraine are developing their national marketsand could also join the BG-HU-RO-SR coupling


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Action Plan for Energy CommunityContracting Parties Implementation

[Revised] Target: Action Plan approved in June2010 and implemented in 2010-2014

Regulators to issue the implementation mandate tothe TSOs - country-by-country (with regulatorycoordination at ECRB/EWG)

TSOs to be responsible for implementation Regulators to monitor TSOs progress Athens Forum to get progress reports

PHLG and the Ministerial Council to receiveprogress reports and take decisions/correctivemeasures as needed sustained political will is keyto progress and success


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Action Plan - Improvements to CurrentBilateral Trading Practices

In parallel to developing the regional Day-AheadMarket, countries should improve bilateral trading

Bilateral trading is active but has several well-known shortcomings: Prices paid by importing countries are high - often much

higher than available reference prices in the SEE region(e.g. OPCOM and Greek prices)

Trading is not transparent - information about availablepower for trading and about actual trades and prices notreadily available, slow progress in market monitoring

Perception of a closed market - favored traders havingpreferential/exclusive access to electricity and cross-border transmission links


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