Electricity trading Power exchanges in Europe Contents

Electricity trading Power exchanges in Europe

Contents n Legislative framework n Organization of the power market n Legislative framework n Power exchanges n Future of power market 2

Legislative framework AUTHORIZATION TO CONSTRUCT. GENERATION FREE COMPETITION WHOLESALE MARKET TRANSMISSION DISTRIBUTION NATURAL MONOPOLY REGULATED TPA PROTECTED CUSTOMER-REG. PRICE SUPPLY ELIGIBLE CUSTOMER 3

Organization of the power market TSO electricity flow electricity payments services payments DSO Power Exchange Market operator power exchange contracts and payments 4

Organization of the power market - roles of operators n MARKET OPERATOR n – Market organization n n – Evaluation and settlement (financial) of differences n n n Bids processing and spot price determination Trade settlements Regulation energy settlement Evaluation and settlement of differences Statistics and balances SYSTEM OPERATOR – Technical operation and network management n n n Transmission provision Measurement Management of the system Transmission across the border Organization of the ancillary service market 5

Organization of the power market Power market Bilateral contracts Market of forwards Day ahead (spot) market Intraday market Market of regulatory energy (balancing) Anciliary services market Continuous trading Commodity exchange Market operator (MO) MO cooperating with OS Operator of the system (OS) 6

Organization of the power market Austria 7

Organization of the power market Austria Balance Group: BG Balance Group Representative: BGR Balance Group Coordinator: BGC A&B BGC EXAA BG/BGR BG BGR BG BGR APCS BGC MAVIR EXAA BG/BGR EGL GRTN Control Area VKW TIRAG ELES Control Area APG 8

Organization of the power market - power exchanges UK POOL Nord Pool ENMO APX UK EEX LPX UKPX Gielda Energii EEX ELEXON OTE IPE Powernext SPX EXAA Borzen OMEL GME OPCOM 9

The Nordic Power Exchange – Nord Pool History: – Established in 1993, the oldest and the most respectful power exchange in Europe – The world’s first international commodity exchange for electric power – The main reason for power trade and exchange between Nordic Countries is the difference between power generation from hydro and thermal sources. The combination of power supplies is advantageous for all market participants. – Ownership n n n Nord Pool ASA Statnett SF (Norway) Svenska Kraftnaet SF (Sweden) Fingrid Oyj (Finland) Energinet. dk (Denmark) 10

The Nordic Power Exchange – Nord Pool Structure Elspot Elbas Nord Pool Eltermin Eloptions Real time market Clearing 11

The Nordic Power Exchange – Nord Pool Geographical organization Nord Pool Odense Denmark Nord Pool Stockholm Sweden Nord Pool Oslo Norway EL-EX Helsinki Finland 12

The Nordic Power Exchange – Nord Pool Participants 13

The Nordic Power Exchange – Nord Pool n Markets in Nord Pool Elspot n The market for physical trading of electricity for delivery in the following day (day ahead hourly market) – hourly bids – block bids n n n The price is determined on the basis of the total quantity of electricity the participants announce that they will be buying and selling. The system price is the balance price for the aggregate supply and demand curves. Elspot determines the system price (reference price) both for the financial market and for the rest of the power market. 14

The Nordic Power Exchange – Nord Pool n Markets in Nord Pool Elbas n n Continuous physical market for balance purposes, i. e. trade in electricity up to one hour before delivery. Available only to Swedish and Finnish participants, a supplement to Elspot. 15

The Nordic Power Exchange – Nord Pool n Markets in Nord Pool Eltermin n Financial market for price hedging and risk management when buying and selling electric power The market consists of futures and forward contracts Participants can hedge purchases and sales for up to three years 16

The Nordic Power Exchange – Nord Pool n Markets in Nord Pool Eloptions n n Eloptions is a part of Nord Pool’s financial market and is important instrument for risk management and forecasting future income and costs related to trade in power contracts Trade in power options gives the right to buy and sell an underlying instrument for a specific underlying period – Two types of options can be traded n n European-style options Asian-style options 17

The Nordic Power Exchange – Nord Pool n Elspot traded volumes – Increase of traded volumes, growth of trading territory n n Norway Sweden (liberalization in 1996) Finland – 1998 Denmark – 2000 n 18

The Nordic Power Exchange – Nord Pool n Nord Pool traded volumes Traded volume in Nord Pool (TWh) 1200 1000 800 600 400 2001 2000 1999 1998 1997 19 Elspot market Financial market

The Nordic Power Exchange – Nord Pool n Nord Pool services Real time market – trading of balancing energy - system operator Clearing n Nord Pool claring house – power exchange contracts – bilateral contracts 20

Amsterdam Power Exchange Spotmarket B. V. – APX n APX characteristics APX Adjustment Market February 2001. Adjustment market is designed to correct imbalances, which arise unexpectedly during the day due to variations in load or production. It is an extension of the current trading system based on auctions. Number of registered participants Ø 39 Ownership Ø 100% Tennet Day-Ahead Market May 1999. The Day-Ahead-Market is based on the twoside auction model. On the basis of the submitted bids demand supply are compared on a daily basis. Classification in merit order along with matching, results in a price for every hour for delivery the next day. 21

Amsterdam Power Exchange Spotmarket B. V. – APX n APX traded volumes – 2001 - 9% of national consumption – 2002 - 20% of national consumption 22

European Energy Exchange AG – EEX n EEX characteristics Spot Market base load, peak load blocks (June/August 2000) EEX Futures Market (March 2001) Merger of European Energy Exchange AG, Frankfurt/Main and Leipzig Power Exchange Gmb. H, Leipzig in 2002 Financial clearing Number of registered participants Ø Spot Market 96 Ø Futures Market 34 Ownership structure Ø nine countries 46, 5% - Eurex (joint venture Deutsche Börse and SWX Swiss Exchange) 53, 5% - 48 companies from 10 countries (Nordpool, Sachsen Landes Bank, etc. ) 23

European Energy Exchange AG – EEX n EEX traded volumes (85, 7 TWh in 2005 – 17%) 2003 2002 2001 2000 24

Mercardo de Electricidad OMEL n OMEL characteristics Intraday Market January 1998 n OMEL Ownership structure Spot Market January 1998 Futures Market ? End of 2003 ? OMEL FC&M, Sociedad Rectora del Mercado de Futuros y Opciones sobre Cítricos BNP Paribas, sucursal en España Banco Santander Central Hispano Unión Eléctrica Fenosa Hidroeléctrica del Cantábrico Iberdrola Endesa Gas Natural SDG Asociación Española de la Industria Eléctrica Abengoa BBVA Analistas Financieros Internacionales Ibercaja Santander Central Hispano Investment Others 10, 00% 6, 00% 5, 71% 5, 71% 5, 00% 4, 00% 15, 73% Number of registered participants Ø Spot Market 127 Ø „obligatory pool“ 25

Mercardo de Electricidad OMEL n OMEL traded volumes 26

Austrian Energy Exchange – EXAA n EXAA characteristics Spot Market n. Ownership structure Company March 2002 (hours) February 2003 (blocks) Share in % Spread Market October 2003 Number of registered participants Ø Spot Market 33 27

Austrian Energy Exchange – EXAA n EXAA traded volumes 2003 2002 28

Austrian Energy Exchange – EXAA 29

Polish Power Exchange – Gielda Energii SA n GE characteristics Gielda Energii The Day Ahead Market 4 July 2000 n. Ownership structure Electricity Delivery Futures Market 23 May 2001 (2006 stopped) 2003 Green Electricity Market 4 July 2001 Number of registered participants Ø Spot Market 27 30

Polish Power Exchange – Gielda Energii SA n GE traded volumes 2001 2002 31

French Power Exchange – Powernext SA n Powernext characteristics Number of registered participants Powernext Ø Spot Market Day Ahead Market November 2001 n. Ownership 51 2003 structure HGRT Ø Réseau de Transport d'Electricité – RTE (51%) Ø ELIA (24, 5%), Ø TENNET (24, 5%) 32

French Power Exchange – Powernext n Powernext traded volumes 33

NETA – New Electricity Trading Arrangements n Electricity Trading Arrangements – Introduced in England Wales in 2001, designed to provide greater competition (replacement of obligatory UK Pool) – Based on bilateral trading between generators, suppliers, traders and customers n n day ahead markets forwards and futures markets Balancing Mechanism Imbalance Settlement process 34

NETA – New Electricity Trading Arrangements Day ahead markets Forwards and futures markets UKPX, APX UK UKPX, IPE Balancing Mechanism ELEXON Imbalance Settlement Process NETA Market players 35

UK Power Exchange n UKPX characteristics OM Group 100% UKPX Spot Market June 2000 ä Nordpool Futures Market March 2001 trading system 36

Automated Power Exchange – APX (International) n APX UK characteristics Spot Market Energy Contract Volume Notification Agent (ECVNA) The Spot Market Third Party ECVNA. comprises continuous trading of contracts for physical electricity via an anonymous trading platform. All trades executed in the Spot Market are automatically notified to the ECVAA and settled electronically among participants. In addition to notifying physical contracts that have been traded on APX UK’s system, APX UK offers a service whereby participants can notify physical contract volumes matched bilaterally. 37

International Petroleum Exchange - IPE n IPE characteristics Gas Oil Futures Brent Crude Futures International Petroleum Exchange Electricity Futures March 2001 Gas Futures January 1997 • The IPE is Europe's leading energy futures and options exchange and its contracts are used as global benchmarks for physical pricing. It currently lists contracts for four major energy products. 38

ENMO (UK) n ENMO characteristics On-the-Day Gas Commodity Market October 1999 The Gas Day Physical Futures Market July 2001 ENMO Electricity Spot Market ? ? Forward Electricity Market ? ? ä National Grid and Altra Energy Technologies, together with Logica Esis will offer within En. MO also electricity markets on a single screen via the internet or a dedicated line. ä Participants will be then able to trade spot or forward in both commodities. The exchange will offer a fully cleared service for all of its products. 39

Romanian Power Market Operator - OPCOM n OPCOM characteristics C. N. Translectrica, S. A. Ø transmission system operator Ø 100% state owned company OPCOM Spot Market 2002 Number of registered participants 51 40

Czech Power Exchange - OTE n OTE characteristics Ministry of Industry and Trade 100% OTE Spot Market January 2002 Number of registered participants 26 Balancing Market January 2004 Intraday Market January 2004 ä OTE’s electronic trading system was created by Logica/Soluziona and is based on OMEL system 41

Czech Power Exchange - OTE Bilateral Contracts Registration Daily Physical Trading Daily Market Bids/Offers Registration Daily Spot Market Settlement Invoicing A. S. Settlement Deviation valuation Deviation settlement 16: 00 12: 00 D-2 D-1 19: 30 11: 00 D D+1 19: 30 D+2 End of Month + 4 42

Czech Power Exchange - OTE n OTE daily traded volumes and prices in 2004/5 43

Summary – trading systems Nord Pool based trading system LPX UKPX Nord Pool Gielda Energie Power Next EXAA OMEL based trading system OMEL APX Siemens based trading system OTE GME APX UK 44

Future of power market n n n Predominance of bilateral contracts Development of spot and financial markets – risk management Develompment of OTC clearing services Vision of unified homogenous internal power market in Europe - ? ? ? Market splitting - tool of congestion management – – – UK Scandinavian market Dutch market German market CE market 45