GDF suez Power_Nominations_Introduction_2

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Introduction Power Markets:

Trading and Portfolio Management Date 2 Introduction Power Markets The balancing responsibility

PowerPoint Presentation:

Trading and Portfolio Management Date 3 Generation Transport Distribution Load Vertically integrated utility FR Consumer Consumer FR Consumer BE Consumer NL Vertically integrated utility NL Vertically integrated utility BE The past : vertical integrated utilities

Before liberalisation:

Trading and Portfolio Management Date 4 Before liberalisation Simplified: every country was in “balance” Limited number of cross-border exchanges Cross-border 400/220 kV lines as mutual support But: customers did not have a “choice”

PowerPoint Presentation:

Trading and Portfolio Management Date 5 Consumer P NL Consumer Q NL Consumer R NL Supplier A NL Supplier B NL Supplier C NL Generator 1 NL Generator 2 NL Generator 3 NL Wholesale Market The liberalised market model Generator 1 BE Generator 2 BE Generator 3 BE Generator 1 FR Generator 2 FR Generator 3 FR Supplier A BE Supplier B BE Supplier C BE Supplier A FR Supplier B FR Supplier C FR Consumer P BE Consumer Q BE Consumer R BE Consumer P FR Consumer Q FR Consumer R FR

The European wholesale market model:

Trading and Portfolio Management Date 6 Sellers Sellers Sellers Sellers Sellers System Operator Buyers Buyers Buyers Buyers Buyers Import Export PX Bilateral market (OTC) Balancing market Capacity auction The European wholesale market model

The horizon of different markets:

Trading and Portfolio Management Date 7 The horizon of different markets

Long-term and short term Buy/Sell:

Trading and Portfolio Management Date 8 Long-term and short term Buy/Sell Baseload Sell on PX Buy on PX Peakload

This looks a chaos, how to organise this in order to keep the system stable ?:

Trading and Portfolio Management Date 9 This looks a chaos, how to organise this in order to keep the system stable ? As electricity cannot be stored, total generation = total load at every moment Measurement: frequency 50 Hz

How to achieve the balance of the system ?:

Trading and Portfolio Management Date 10 How to achieve the balance of the system ? Cascade principle Every TSO is responsible for the balance of his balancing area Every market player has to be in balance Requirement to be fulfilled administratively on D-1 and in real time.

Different names for the same balancing responsible party (BRP) function: :

Trading and Portfolio Management Date 11 Different names for the same balancing responsible party (BRP) function: ARP = Access Responsible Party RE = Responsable d’équilibre BKV = Bilanzkreissverantwortliche PV = Programma Verantwoordelijke …

Cascade principle:

Trading and Portfolio Management Date 12 FR/BE : 2X400 kV +2x220 kV Cascade principle BE/NL : 4x400 kV (*) PV PV PV PV PV PV ARP ARP ARP RE RE RE RE RE RE RE BKV BKV BKV BKV BKV BKV BKV BKV BKV BKV RE RE

Possible energy exchanges for a BRP:

Trading and Portfolio Management Date 13 Possible energy exchanges for a BRP Generation Load Sometimes including losses (to be delivered in kind)! Sometimes TSO buy grid losses Buy from another BRP Sell to another BRP PX can be considered as a particular other BRP Import Export

BRP exchanges on D-1 on hour X:

Trading and Portfolio Management Date 14 BRP exchanges on D-1 on hour X BRP1 BRP4 BRP3 BRP2 PX: 0 MWh 200 MWh from TSO1 1000 MWh 300 MWh to TSO3 1400 MWh 100 MWh 600 MWh 5000 MWh 200 MWh 300 MWh 100 MWh 4700 MWh 500 MWh from TSO2 200 MWh 200 MWh to TSO2 4800 MW

Energy exchanges on D-1:

Trading and Portfolio Management Date 15 Energy exchanges on D-1 Netted of Long term exchanges (Y, M, ..) Short term exchanges (D-1 buys and sells)

Balancing Responsible Parties at D-1 for hour X:

Trading and Portfolio Management Date 16 Balancing Responsible Parties at D-1 for hour X TSO : checks the status of each BRP; If ok, control area is ok TSO checks also import/export volumes with neighbouring TSOs BRP4 : 0 MWh BRP3 : 0 MWh BRP2: 0 MWh PX: 0 MWh BRP1 : 0 MWh

Balancing Responsible Parties in real time for hour X:

Trading and Portfolio Management Date 17 Balancing Responsible Parties in real time for hour X TSO : needs -12 MWh residually to bring his balancing area again in balance (origine: balancing market) BRP4 : +5 MWh BRP3 : +12 MWh BRP2: -10 MWh PX: 0 MWh BRP1 : +5 MWh

PowerPoint Presentation:

Trading and Portfolio Management Date 18 Time (hours) 9 11 10 12 8 Power (MWh) Generation Schedules Generation Schedules Generator and import Schedules Imbalances (Balancing mechanism) Actual Generation+import Off take and export Schedules Actual Off take and export Balancing the system

UCTE: one of the European synchronous areas:

Trading and Portfolio Management Date 19 UCTE: one of the European synchronous areas www.ucte.org Technical rules Reserves Operations …. Other synchronous grids: Nordel, UK, Turkey, Baltic States with Russia …

ETSO:

Trading and Portfolio Management Date 20 ETSO www.etso-net.org Commercial codes Congestion management NTC, ATC, ..

PowerPoint Presentation:

Trading and Portfolio Management Date 21 E.g :Transaction between Switzerland and Germany Kirchoff’s law: an energy exchange between 2 markets follows the way with the lowest resistance

Difference between commercial and physical flows:

Trading and Portfolio Management Date 22 Difference between commercial and physical flows

Loop flows:

Trading and Portfolio Management Date 23 Loop flows

Let us have a look at the ETSOVISTA website:

Trading and Portfolio Management Date 24 Let us have a look at the ETSOVISTA website https://www.etsovista.org

Introduction Electricity Markets:

Trading and Portfolio Management Date 26 Introduction Electricity Markets Power Market versus Market Power !

PowerPoint Presentation:

Trading and Portfolio Management Date 27 Market power is the ability of a firm to profitably raise the price of a product; Market power exists in nearly every product market, the most of which are not regulated -- only perfectly competitive markets exhibit no market power; Market power is not always bad -- Market power provides incentives for firms to innovate and is the basis for the patent laws; In general, it is far more costly to eliminate all market power than to allow the some market power to exist. For this reason, perfect competition is not the appropriate standard – economist generally refer to “workable competition” as a competitive standard with an acceptable level of market power. References to market power by economists and policymakers generally pertain to unacceptable levels of market power. What is Market Power and when is it a Problem?

Nature of Market Power in Electric Markets:

Trading and Portfolio Management Date 28 # Generators with Capacity Share >5% Top 3 Generators’ Capacity Share # Retailers with Mkt Share >5% Top 3 Retailers’ Market Share Austria 5 45% 7 67% (7) Belgium 2 96%(2) 3 53% Denmark 3 78% 6 38% Finland 4 45% 4 33% France 1 92% 1 90%+ (1) Germany 4 64% 3 50% Greece 1 97%(1) 1 100% (1) Ireland 1 97%(1) 1 90%+ (1) Italy 4 69% 4 72% (2) Netherlands 6 59% 7 48% Portugal 3 82% 1 99% (1) Spain 4 83% 4 94% Sweden 3 90% 3 47% UK 8 36% 10 42% Nature of Market Power in Electric Markets

PowerPoint Presentation:

Trading and Portfolio Management Date 29 Competitive situation Capacity withholding Bids Volumes Price 1 Bids Volumes Price 1 Market power in electricity markets Capacity withholding

PowerPoint Presentation:

Trading and Portfolio Management Date 30 Competitive situation Capacity withholding Bids Volumes Price 1 Bids Volumes Price 1 Price 2 Market power in electricity markets Capacity withholding

PowerPoint Presentation:

Trading and Portfolio Management Date 31 Competitive situation Capacity withholding Bids Volumes Price 1 Bids Volumes Price 1 Price 2 Market power in electricity markets Capacity withholding

PowerPoint Presentation:

Trading and Portfolio Management Date 32 Competitive situation Strategic bidding Bids Volumes Price 1 Bids Volumes Price 1 100000 $ Market power in electricity markets Economic withholding

PowerPoint Presentation:

Trading and Portfolio Management Date 33 Competitive situation Strategic bidding Bids Volumes Price 1 Bids Volumes Price 1 Price 2 Market power in electricity markets Economic withholding

PowerPoint Presentation:

Trading and Portfolio Management Date 34 Competitive situation Strategic bidding Bids Volumes Price 1 Bids Volumes Price 1 Price 2 Market power in electricity markets Economic withholding

One of the tools for market power analysis: the Lerner index:

Trading and Portfolio Management Date 35 One of the tools for market power analysis: the Lerner index LI= (Price-cost)/price In a competitive market LI is zero Easy to understand Is a standard measure of market power Requires a lot of data, regulators are mandated to ask these data

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