Vision for the internal electricity market Matti Supponen Unit B2 “Internal Market II: Wholesale markets; Electricity & Gas” European day-ahead and intra-day pilot projects 1st NWE Stakeholder Workshop 9 December 2011

Contents Drivers of the European electricity market European electricity market target model Infrastructure package Issues

Drivers in energy policy regarding electricity Decarbonisation Renewables targets Security of supply Competitiveness

Renewables in energy mix The 20-20-20 EU policy by 2020 100% -20% -20% +20% 8,5% Greenhouse gas levels Energy consumption Renewables in energy mix

Roadmap 2050

Surplus and deficit areas (2008) TWh Surplus 40 25 20 15 TWh Deficit 20 80 5 15 40 25 25 25 TWh Storage Hydro 50 25 25 20 20 45 10 10 50 TWh Wind 30 30 30 10 35 25 25 15 10 10 25 10 10 20

Correlation Wind Energy Production ↔ Control Program DE Trendline + Export - Import Source: Amprion GmbH h-Values, 2010 7 7 Wind Energy Production - Effects on the Market | 2010 | © Amprion

Infrastructure

Overlay network? ~ ~ ~ ~ ~ ~ ~ ~ ~ Overlay network Transmission Virtuelle Erzeugung Virtuelle Last Transmission 380/220kV Distribution 110kV ~ Distribution ~ ~ ~ ~ )* Source: Klaus Kleinekorte in VDE DACH 2010 conference

European infrastructures priorities by 2020 for electricity Baltic energy market inter- connection plan Interconnections in South West Europe Interconnections in Central-South East Europe Offshore grid in the Northern Seas and connection to Northern and Central Europe Electricity highways Smart grids in the EU

Energy & Climate Objectives National / regional TYNDP with PCIs EU infrastructure priorities TYNDP and CBA (electricity: 2014, gas: 2015)  Overview of the process of identification of projects of common interest Regional Groups to propose regional PCI lists Approval by concerned Member States Energy & Climate Objectives ACER opinion Commission decision on Union-wide PCI list By 30 July 2013 National / regional TYNDP with PCIs

Measures to facilitate the implementation of projects of common interest A new method to identify and select concrete projects of common interest (PCIs) necessary to implement the priority corridors Shortening and streamlining permit granting procedures and improving public involvement Removing regulatory obstacles for investments in infrastructures of European relevance Providing appropriate direct support and financial support for projects of common interest

Market design Forward markets based on spot markets Cross-border trade optimisation based on day ahead market coupling Long term cross border trade with financial products Further cross-border trade optimisation through allowing intra-day trade with the remaining capacity Final optimisation through a pan European balancing system

Congestion management 1998  Congestion management 1998 Implicit auctions Only explicit auctions Other methods Nord Pool

Congestion management 2000  Congestion management 2000 Implicit auctions Only explicit auctions Other methods Nord Pool Arnhem auction office

Congestion management 2010  Congestion management 2010 Implicit auctions Only explicit auctions Other methods Nord Pool APX EMCC CASC CAO

Congestion management 2014?  Congestion management 2014? Implicit auctions Only explicit auctions Other methods Euro Pool

European electricity day ahead spot market  European electricity day ahead spot market Liquid (>30% spot trade/consumption) Some liquidity (15%< <30%) Little liquidity (5%<<15% No liquidity (<5%) Nord Pool (74%) LITPX APX (NL 21% UK 4%) POLPX OTE (~5%) HUPX BELPEX (12%) EPEX (DE/AT 23% FR 11% CH 13%) OPCOM (9%) EXAA (4%) OMEL (83%) IPEX (69%) Hellenic Pool (~100%) South Pool (0%) Volumes from 2008 data

Matti’s price zones for Europe 20

Matti’s price references for Europe Northern Electricity Price Index NEPI Wind Electricity Price Index WEPI Central Electricity Price Index ČEPI Iberian Electricity Price Index IEPI Southern Electricity Price Index SEPI 21

Issues Heretic local market designs Governance of market coupling Relations between power exchanges Calculation of cross-border capacity Price zones Loop flows Sharing of congestion rents Flow based methods Who will build and pay new infrastructure?

Loop flows Physical flow +++ Surplus Commercial flow 1000 MW --- Deficit

Loop flows Physical flow +++ Surplus Commercial flow 1000 MW --- Deficit

Loop flows 25

Looking forward to the discussion