Open market coupling 1 Open Market Coupling 2nd Miniforum/ Stakeholder Meeting in ERI Northern Europe Copenhagen, June 27, 2006 Dr. Frank-Peter Hansen

Open market coupling 2 Agenda  Study Group on Congestion Management  Open Market Coupling Concept  Studies launched by the Study Group  Next steps

Open market coupling 3 Agenda  Study Group on Congestion Management  Open Market Coupling Concept  Studies launched by the Study Group  Next steps

Open market coupling 4 Starting point of the Study Group on Congestion Management  Discussion initiated by the Mini Fora of Winter 2004/2005  Aim of the study group:  Evaluation of different congestion management mechanisms in order to identify an appropriate solution for congestion management at the German borders  Participants:  Federal Ministry of Economics and Technology  All German Transmission System Operators  EEX European Energy Exchange AG  EFET European Federation of Energy Traders  VIK Verband der Industriellen Energie- und Kraftwirtschaft e.V.  VDN Verband der Netzbetreiber e.V.  VDEW Verband der Elektrizitätswirtschaft e.V.

Open market coupling 5 Main topics of the Study Group Three main topics to analyze were identified  Interdependence of auctions and need for coordination  Specification of the concept of Open Market Coupling (OMC)  Evaluation of different congestion management methods in order to compare the OMC concept with other approaches

Open market coupling 6 Agenda  Study Group on Congestion Management  Open Market Coupling Concept  Studies launched by the Study Group  Next steps

Open market coupling 7 Open Market Coupling l  One of several concepts for implementation of cross-border trade  Concept introduced by European Energy Exchange (EEX)  Hybrid auction: Combination of implicit and explicit auctions  Long-term: Explicit auctions (year, month)  Day-ahead: Coexistence of explicit and implicit auctions

Open market coupling 8 Open Market Coupling ll: Overview Einzelstundengebote Kombinationsgebote Power exchange Aggregated bid and offer curves for each hour All block bids Auction Office Available capacity, PTDF Einzelstundengebote Kombinationsgebote TSO Einzelstundengebote Kombinationsgebote Trader Bids for single hours Bids for blocks Capacity bids Price independent bids Capacity Source: EEX

Open market coupling 9 Open Market Coupling lll  Prerequisites (among others)  Explicit auctions on all relevant borders  Sufficient liquidity at participating exchanges  Compatibility of trading schedules, time frames, products, etc.  Specifics of the concept still to be determined, but flexible approach  Combination of explicit and implicit auctions  Participation of several countries/ power exchanges possible  Stepwise application possible

Open market coupling 10 Agenda  Study Group on Congestion Management  Open Market Coupling Concept  Studies launched by the Study Group  Next steps

Open market coupling 11 Approach of the Study Group  Several open questions identified:  Legal issues of introduction of Open Market Coupling  Technical issues  Economic issues – evaluation of different concepts for congestion management  Commission of studies on these legal, technical and economic issues regarding the implementation of the concept Status:  Completion of legal and technical study  Results of the economic study expected for August 2006

Open market coupling 12 Results of the legal study on Open Market Coupling  No major concerns from a legal point of view  Conform to requirements of European and German legislation (incl. energy law, contractual law, tax law, stock exchange rules)  Auction office should be set up as a public limited company  Shares should be held by TSOs (and power exchanges)  German stock exchange rules (Börsengesetz) do not preclude the consideration of prices of foreign exchanges in the market clearing price determination

Open market coupling 13 Technical study on Open Market Coupling  Questions to be resolved by the study:  Technical implementation of a market coupling mechanism  Focus of the analysis: modelling accuracy and computing time  Results of the study:  Procedure used (mixed integer linear optimisation problem, no iteration) is able to solve the optimisation problem including all side conditions  Price calculations are feasible within an appropriate time frame, even with high degree of modelling accuracy

Open market coupling 14 Economic study on Open Market Coupling  Questions to be resolved by the study:  Cost/benefit analysis  4 Reference scenarios:  Capacity assessment: based on bilateral NTC-values or load flow based capacity calculation  Capacity allocation: explicit auction or hybrid system  Quantitative analysis focus on border between  France/Netherland and Germany  Western Denmark and Germany due to data availability reasons

Open market coupling 15 Contents  Study Group on Congestion Management  Open Market Coupling Concept  Studies launched by the Study Group  Next steps

Open market coupling 16 Next steps  Discussion of results of the ecomic study within the Study Group in summer 2006  Depending on results discussions with adjacent countries about conclusions to be drawn

Open market coupling 17 Thank you for your attention!