Christophe Gence-Creux SG FUI, Paris, 4 th November. Target models and roadmap proposed by the PCG

2SG FUI, Paris, 4 th November The XV th Florence Forum invited ERGEG to establish a Project Coordination Group of experts, with the tasks of developing a practical and achievable model to harmonise interregional and then EU-wide coordinated congestion management, and of proposing a roadmap with concrete measures and a detailed timeframe, taking into account progress achieved in the ERGEG ERI.  Six workstreams were created to follow this objective. The XVI th Florence Forum in June 2009 encouraged the PCG  to finalise the generic target model before summer 2009 and  to prepare, in cooperation with ERGEG ERI, a roadmap including a concrete action plan on the regional and inter-regional implementation for the target model for different timeframes.  Each participant in ERI is kindly requested to provide its comment with regards to the draft proposition on the target model and the roadmap Background

3SG FUI, Paris, 4 th November 1. Synthesis of the target models time Products exchangeable on a secondary market Multi-annual Annual (Y+1)Y+2Y+3 Monthly Physical capacity used implicitly Flow-based or ATC-based pan- European price coupling Auctions of long-term FTRs and/or PTRs with UIOSI via a single platform capacity D-1 12h midday As soon as possible after midday on D-1 Intraday market Continuous trading through a common platform On D At H-1 Balancing mechanism Platform for exchanges between TSOs

4SG FUI, Paris, 4 th November  Main issues  The proposed amount of capacities is maximised  The proposed products can be physical or financial rights issued by TSOs  Pure financial products not directly linked to the level of capacity (like the CfDs available on Nordpool) can be proposed as a complement to physical/financial rights issued by TSOs  Firmness must be guaranteed  An effective secondary market must be implemented  Two different visions for the target models  100% FTRs (with physical execution of FTRs through market-coupling). A potential concern about OTC access  100% PTRs with UIOSI: no guarantee to have capacity for the DA (market- coupling) timeframe  Two possible interim solutions  A mix of PTRs/FTRs  PTRs with a minimum capacity reserved for the DA timeframe 2. Forward markets

5SG FUI, Paris, 4 th November Goal Price coupling all over Europe Only one algorithm Gate closure set at noon Ready by 2015 Main issues Governance: role of PXs, TSOs, OTC, decisions procedures … Better solved with top-down approach Prerequisites for implementation that need to be solved at regional level: management of different products, common regulation … 3. Day-ahead markets

6SG FUI, Paris, 4 th November Two levels Intra-regional cross-border (XB): to be decided at a regional level Inter-regional XB: continuous trading (potentially completed with auctions for significant additional intraday capacity). Ready by 2015 Main issues Ease of use: easy access, single screen, liquidity, transparent… Taking into account OTC trade Efficiency in solving the imbalance: trade up to H-1, fast, portfolio optimisation Maximisation of the social welfare: efficient use of the capacity 4. Intra-day markets

7SG FUI, Paris, 4 th November Goal Multilateral TSO-TSO mechanism with common order book No reservation of interconnection capacity No charges for using interconnectors for balancing purposes Main issues Full harmonisation of balancing markets is not necessary Importance of intra-day markets in the efficiency of the BM In case of common order book, common intra-day gate closure Each new integration step shall be assessed Costs shall not overcome the benefits (legal, technical…) 5. Balancing mechanisms

8SG FUI, Paris, 4 th November Goal: Maximum capacities should be provided at each time horizon in respect with TSOs security standards Main issues Increased level of coordination/cooperation amongst TSOs Establishment of a common grid model and sharing of best available information Coordinated reliability margin assessment Harmonisation and improvement of methodology and information about production and consumption amongst TSOs Coordinated (curative) redispatch measures Two possibilities based on the same common grid model and base cases Flow-based Allocation The market determines at the time of the allocation where to use the available capacities Coordinated Transfer Capacities Market assumptions have to be made by TSOs without knowing the markets preference when calculating capacities 6. Capacity calculation

9SG FUI, Paris, 4 th November Goal Definition of a “governance framework” for good operation and development of regional/ interregional solutions Main issues Important European “public interest goals” Multiple national jurisdictions Involvement of different parties having their own incentives The way forward Focus on the key functions The WG has started with the DA market and will continue with the other timeframes 7. Governance

10SG FUI, Paris, 4 th November Thank you for your attention!