1. Power market structure and market price development in the SEE region
Power market structure and market price development in the SEE region. What could new power exchanges bring?
Budva 1st December 2016

2. Nord Pool operations and offices
Owned by the Nordic and Baltic Transmission System Operators (TSOs)
Regulated by the Norwegian Water Resources and Energy Directorate (NVE)
Nominated NEMO in Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Great Britain, Latvia, Lithuania, the Netherlands, Poland, Sweden
Finland
Sweden
Russia
Norway
Estonia
Latvia
Northern
Ireland
Denmark
Lithuania
Belarus
Ireland
*) In the UK, Nord Pool operates under the N2EX brand UK
Poland
Nether- land
Germany
Ukraine
belgium
Day-ahead and intraday markets*
Intraday market only
Serviced markets
Nord Pool assisting in the market developments
Nord Pool office
Luxembourg
Czech Republic
Slovakia
Moldova
France
Austria
Hungary
Switzerland
Romania
Slovenia
Croatia
Bosnien & Herzegovina
Serbia
Bulgaria
Montenegro
Kosovo
Makedonia
Spain
Albania
Turkey
Portugal
Italy
GreeCe
Nord Pool Consulting

3. European target model
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.
The Price Coupling of Regions (PCR) / Multi Regional Coupling (MRC) initiative now enables the coupling of Day Ahead electricity markets in 23 countries representing over 90% of European power consumption.
Common price calculation with Implicit cross boarder capacity allocation.
Main Objective is to maximize social welfare and ensuring that power will flow based on economic signals, i.e. from a low price to a high price area.
Calculation methodology ensures that the last unit of energy that has to be produced to fulfil the consumers demand, sets the price for all previous scheduled production.
Part of MRC initiative today
4 MMC
Independent
Finland
Sweden
Russia
Norway
Estonia
Latvia
Northern
Ireland
Denmark
Lithuania
Ireland
Belarus UK
Poland
Nether- land
Germany
Ukraine
belgium
Luxembourg
Czech Republic
Slovakia
Moldova
France
Austria
Hungary
Switzerland
Romania
Slovenia
Croatia
Bosnien & Herzegovina
Serbia
Bulgaria
Italy
Monte- negro
Kosovo
Makedonia
Spain
Albania
Turkey
Portugal
GreeCe
Nord Pool Consulting 3

4. Price coupling is a key feature of the European target model
Implicit auction
Capacity and energy effectively traded together
Typically improves market liquidity, with electricity flows from low price areas to high price area
Price coupling
Single algorithm simultaneously determines volumes, interconnector flows and prices in all zones
Flows should be consistent with prices as one-step process
Volume coupling
Can be loose or tight
Single algorithm determines interconnector flows, which go into separate auction for each zone
Two-step process so flows may not be consistent with final prices
Explicit auction
Capacity and energy traded separately, through regular capacity auctions.  
Can result in an inefficient utilization of interconnectors
Explicit vs. Implicit Auctions
Power flow in wrong direction
1 page
Source Pöyry Management Consulting
Result of Market Coupling of Norway with Netherlands January 2011

5. What will the European model and exchanges bring?
Value of differences in a region, complementary production, security of supply, etc.
A proven solution which ensures that power will flow based on economic signals, i.e. from a low price to a high price area
Increase of social welfare for the region
Efficient use of interconnectors and production
Transparency in prices and flows
Power exchanges will be central counterparties to all trades and also be collateralized to minimize risk in market
Implementation of day-ahead markets allows for stepwise market opening
Import and export areas could be used to optimize cross boarder trading where a common market structure is not yet fully established.

6. SEE markets and European market coupling (1/2)
Albania
Albania has signed up to implement the EU Target model through the Energy Community as well as through the new Energy Law
A Day Ahead market in Albania will promote transparency, unlock the value of Albanian hydropower and is expected reduce import prices
MoU between Albania and Kosovo on market integration
According to the adopted market model the PX shall be technically ready in the end of June 2017
Albanian/Kosovo day-ahead market will be European target model compatible
Flexibility in ownership structure of the Albanian power exchange allows other markets to join and get ownership
By being an early mover, Albania could become a market leader in the region
Part of MRC initiative today
4 MMC
Independent
MRC compatible markets in development
Nord Pool Consulting

7. SEE markets and European market coupling (2/2)
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
Macedonia is looking into the best suitable solution to start a market.
As Montenegro aims to start a day-ahead market it will be important to ensure that this new market will be MRC/PCR compatible and ready to start European market coupling when this becomes possible.
As an interim step, market coupling with Albania /Kosovo should be of great interest for the Montenegro day-ahead market and support liquidity building.
Part of MRC initiative today
4 MMC
Independent
MRC compatible markets in development
Nord Pool Consulting

8. Nord Pool as a service provider “PX in a box”
Day Ahead Trading Platform
Cross-Border Intraday
Trading Platform
Accessibility Platform
Settlement, Clearing
& Risk Platform
Transparency Platform
Nord Pool Consulting

9. nordpoolgroup.com Wilhelm Söderström
Senior Consultant, Nord Pool Consulting
nordpoolgroup.com
POWERING ASEAN: CAN THE NORDIC MODEL WORK?