Amsterdam Power e Xchange An auctioned electricity market

Amsterdam Power e. Xchange An auctioned electricity market B. Den Ouden CEO, Amsterdam Power Exchange Spotmarket BV

Independent n n n Shareholder: grid company 100% Shareholder grid company: Dutch state Completely independent Firm trading system Back-up systems Always produces a price Pagina 2 Amsterdam Power e. Xchange Dutch state 100% Grid operator Tenne. T 100% Amsterdam Power e. Xchange

Daily spot market: 2 -sided auction, anonymous bids, batch process Prijs Vraag Amsterdam Power e. Xchange Conditional bids Aanbod 24 x + blocks: marktprijs Daily program Verhandeld volume Pagina 3 Hoeveelheid

Full bid curve transparency Amsterdam Power e. Xchange curvescurves. html Pagina 4

Price (movements) Av. 2001: 33 €/MWh Pagina 5 Amsterdam Power e. Xchange Av. 2002: 30 €/MWh

Spot volumes as % of national consuption Pagina 6 Amsterdam Power e. Xchange

Market suffers somewhat… n ENRON demise n USA traders have left the stage n Ongoing mergers/consolidations n Market power issues n Skepticism about electricity liberalization Pagina 7 Amsterdam Power e. Xchange

No. of market parties directly active Pagina 8 Amsterdam Power e. Xchange

Amsterdam Power e. Xchange Acquisitions n Pagina 9 International n Multi-commodity Added value n APXUK n n En. MO First combined exchange in electricity & natural gas Brand in Europe

Monthly volumes (gas scale 50% reduced) Amsterdam Power e. Xchange GWh/month Natural gas Pagina 10

Volumes UK gas: En. MO Mln MWh/mnd Pagina 11 Amsterdam Power e. Xchange

Belgium and the Netherlands: physical flows 93% 10% 29% 91% 21% 36% ‘Rare’ 87% Pagina 12 Amsterdam Power e. Xchange

Implicit auctioning: partial in the first step? Amsterdam Power e. Xchange Belgium-Dutch border: Yearly auction 325 n Monthly auction 225 Daily explicit auction ~ 550 MW n n n Daily implicit auction ~ 550 MW Long term contracts: still physical in this phase Pagina 13

Development into full market coupling Amsterdam Power e. Xchange Belgium-Dutch border: Yearly auction 325 n Monthly auction 225 Daily explicit auction ~ 550 MW n n n Daily implicit auction ~ 1100 MW Long term contracts: financial Pagina 14

Trading system for implicit auctioning: Exchange price varies with potential im/exports Price: with exports > isolated area > with imports > imports Volume Pagina 15 Amsterdam Power e. Xchange

Implicit auctioning Price Elasticity Curves for each area Elasticity curves Area Prices Depicting price influence of potential im/exports to/from each individual area price of area X Y Isolated price X Isolated price Y Exports 0 Imports © June 2003 Amsterdam Power Exchange Spotmarket BV www. apx. nl Pagina 16 Amsterdam Power e. Xchange

Implicit auctioning: coupling the areas Import in X = export in Y Daily capacity ? Area Prices price of area X price of area Y Isolated price X Isolated price Y Flow X->Y 0 Flow Y-> X © June 2003 Amsterdam Power Exchange Spotmarket BV www. apx. nl Pagina 17 Amsterdam Power e. Xchange To be supplied by TSO’s………

Implicit auctioning: unconstrained Unconstrained case Area Prices Price for both areas identical: enough capacity to set price at intersection of curves price of area X price of area Y Area price X = Area price Y Available transmission capacity Flow X->Y 0 Flow Y-> X © June 2003 Amsterdam Power Exchange Spotmarket BV www. apx. nl Pagina 18 Amsterdam Power e. Xchange

Implicit auctioning: constrained Constrained case Area Prices for areas differ: set at maximum im/exports price of area X price of area Y Area price X Area price Y Available transmission capacity Flow X->Y 0 Flow Y-> X © June 2003 Amsterdam Power Exchange Spotmarket BV www. apx. nl Pagina 19 Amsterdam Power e. Xchange

Block bids: user-definable multi-hour Suited for thermal generation Demand Blocks Example + “price peak shaving” Supply Blocks example Pagina 20 Amsterdam Power e. Xchange

Some improvements of auction system Old system Handling Centrally, internet Preparation bids Only on-line Speed Slow to Medium Data im/export Typing + “bid generator” Security settings Limited, central only Algorithm Licensed IT maint. /operat. Outsourced Back-up Cumbersome Pagina 21 Amsterdam Power e. Xchange New system Local client Off-line + on-line Fast to very Fast Copy&paste: XML, Excel Many, locally customized Own development Partly in-house Automated

Bid interface Pagina 22 Amsterdam Power e. Xchange

It’s not only auctions…. n Continuous trading system n Developed for: – Electricity market UK – Other products – Derivatives markets n Possibility to combine with auctions in one system n “One stop shop” Pagina 23 Amsterdam Power e. Xchange

…but auctions are still the best! (At least for our type of market) n n n Amsterdam Power e. Xchange Fast and reliable Easy, user-friendy Concentrate all the daily liquidity Integrate hourly trading & block trading Enable implicit cross-border auctions Generate one clear index for OTC reference and derivatives sound basis for financial market Pagina 24