Experiences with new Power Exchanges 18.05.2017, Sarajevo Nord Pool Experiences with new Power Exchanges 18.05.2017, Sarajevo

Nord Pool is Europe’s leading power market Nord Pool offices Nordic/Baltic and UK – day-ahead and intraday Intraday with access to Nordic volumes Serviced markets Nord Pool nominated as exchange Turkey Bulgaria Romania Moldova Ukraine Belarus Lithuania Latvia Estonia Russia GreeCe Albania MaCedonia Kosovo Monte- negro Serbia BosniA & Herzegovina Croatia Slovenia Hungary Italy Austria Switzerland Portugal Spain ANDORRA France Slovakia Czech Republic Luxembourg belgium Ireland UK Nether- landS Poland Germany Denmark Finland Sweden Norway 2016 European intraday: 5 TWh UK day-ahead: 109 TWh Nordic/Baltic day-ahead:391 TWh 2 Nord Pool Consulting. 2017.

Expansion since the 1990s 2016 Nord Pool Spot is rebranded to Nord Pool. Nord Pool is appointed NEMO in Belgium, Germany, Luxembourg and Poland.  Nord Pool is together with IBEX opening the Bulgarian power market and together with Cropex opening the Croatioan power market. 2015 Nord Pool Spot introduce a new Day Ahead Web and Intraday Web.  Nord Pool Spot is appointed Nominated Electricity Market Operator (NEMO) across 10 European power markets; Austria, Denmark, Estonia, Finland, France, GB, Latvia, Lithuania, the Netherlands and Sweden. 2014 Nord Pool Spot takes sole ownership of the UK market. North-Western European power markets are coupled through the Price Coupling of Regions (PCR) project. Nord Pool Consulting is launched. 2013 Elspot bidding area opened in Latvia. Intraday market, Elbas, introduced in both Latvia and Lithuania. 2012 Nord Pool Spot opens bidding area in Lithuania. 2011 Elbas licensed to APX and Belpex as the intraday market in the Netherlands and Belgium respectively. 2010 Nord Pool Spot and NASDAQ OMX Commodities launch the UK market N2EX. Nord Pool Spot opens a bidding area in Estonia and delivers the technical solution for a new Lithuanian market place. 2009 Norway joins the Elbas intraday market. The European Market Coupling Company relaunches the Danish-German market coupling on 9 November. Nord Pool Spot implements a negative price floor in Elspot. 2008 Highest turnover and market share recorded in the company's history until then. Elspot market share 70%. 2007 Western Denmark joins the Elbas market. SESAM, the new Elspot trading system is set into production. 2006 Nord Pool Spot launches Elbas in Germany.  2005 Nord Pool Spot opens the Kontek bidding area in Germany, which geographically gives access to the Vattenfall Europe Transmission control area. 2004 Eastern Denmark joins the Elbas market. 2002 Nord Pool's spot market activities are organized in a separate company, Nord Pool Spot AS. 2000 The Nordic market becomes fully integrated as Denmark joins the exchange. 1999 Elbas is launched as a separate market for balance adjustment in Finland and Sweden. Elspot area trade begins 1 July. 1998 Finland joins Nord Pool ASA. Nord Pool opens an office in Odense, Denmark. 1996 A joint Norwegian-Swedish power exchange is established. The exchange is renamed Nord Pool ASA. 1995 The framework for an integrated Nordic power market contracts was made to the Norwegian Parliament. Together with Nord Pool's license for cross-boarder trading (given by the Norwegian Water Resources and Energy Administration), this report made the foundation for spot trading at Nord Pool. 1993 Statnett Marked AS is established as an independent company. Total volume in the first operating year is 18.4 TWh, at a value of NOK 1.55 billion. 1991 Norwegian parliament's decision to deregulate the market for trading of electrical energy goes into effect.

We continue to see steady growth

Number of customers:

European target model – the same basic solution Part of MRC initiative today 4 MMC Independent UK Estonia Latvia Lithuania Portugal Sweden Finland Spain Italy Austria Poland Denmark Norway Nether- land Germany Luxembourg belgium France Russia Switzerland Belarus Ireland Northern Hungary Slovakia Czech Republic Croatia Turkey Monte- negro Kosovo Bosnien & Herzegovina Serbia Moldova Romania Ukraine Albania Makedonia Bulgaria GreeCe Slovenia European target model – the same basic solution The European target model shall ensure the completion of the EU Internal Energy Market for electricity. Guidance and standards for each timeframe: Day Ahead (DA), Intra-Day (ID), Balancing and Forward Market. A fair and transparent day-ahead power price is an key factor for the models success. Price Coupling of Regions (PCR) The initiative of 7 Power Exchanges to develop a single price coupling solution, launched Feb 2014 EUPHEMIA algorithm Multi-Regional Coupling (MRC) Coupling of regions and efficient management of available transmission capacities between areas and countries Implicit capacity allocation Cross Border Intraday Trading (XBID) The integrated European electricity market is expected to increase liquidity, efficiency, social welfare and transparency of prices and flows. THE SERVICED PX concept opens for easy access . 6

SEE markets and European market coupling Croatia and Bulgaria Operates MRC/PCR markets Nord Pool as service provider of systems and PCR operation. Waiting for possibility to couple with neighbouring countries. CROPEX will launch an Intraday market during first quarter of 2017, IBEX last quarter of 2017 Albania and Kosovo on path of developing MRC compatible markets Macedonia in progress with an Action Plan to create Power Exchange and launch MRC compatible markets. Montenegro aims to start a day-ahead market, it will be important to ensure that this new market will be MRC compatible and ready to start European market coupling when this becomes possible. Bosnia and Herzegovina seeking best option to go forward with the market establishment – should also be MRC compatible solution from the beginning Serbia running separate markets and Power Exchange with PCR compatible platform Part of MRC initiative today 4 MMC Independent MRC compatible markets in development Nord Pool Consulting. 2017.

Stepwise market implementation – key to the success Volume Historical consumption level Volume that has to be purchased in the market Year 1 Year 2 Year 3 Year 4 Year 5 Power sector reforms and organized market implementations can be done in a step-wise manner DAM – Corner stone of the European Target Model IDM – Supporting market for DAM Balancing Power market – Vital part of the big picture Market interlinked imbalance settlement – Incentivized balancing responsibility Allow market liquidity and participant base increase to secure to operations Build trust and confidence among market participants Accelerating integration with neighbor market zones based on the MRC and PCR compatibility. DAM & BM IDM & Market Coupling Market based Imbalance Supporting segments Nord Pool Consulting. 2017.

Case example – Gradual growth in IBEX Highest daily traded volume Average price 15 979 MWh 33,67 EUR/MWh on the 13.04.2017

Nord Pool as a service provider “PX in a box” Cross-Border Intraday Trading Platform Day Ahead Trading Platform Urgent Market Messages Settlement, Clearing & Risk Platform REMIT and OTC Reporting Nord Pool Consulting. 2017.

Power Exchange – Service provider task division Price and volumes calculation, Coupling Functions Technical support “First line” support Settlement and risk management Customer acquisition process Market development Market surveillance Power Exchange responsibilities Service provider responsibilities

Power Exchange start up from Service Provider point of view Consulting (organizational setup, market rules, capacity building) System establishment Testing Trainings Operations Support and continued development (IDM, MC projects etc.) Cooperation/Consulting agreement IT delivery agreement Operational Agreement/SLAs Nord Pool Consulting- 2017.

Thank you for your attention Thank you for your attention! Matias Peltoniemi Senior Consultant, Nord Pool Consulting Email: Matias.Peltoniemi@nordpoolgroup.com