1. Cross Border TSO Balancing Procurement - a Generator/Trader Perspective Malcolm Taylor Head of Electricity Trading Association of Electricity Producers ☏ +44 (0)207 930 9390 mtaylor@aepuk.com www.aepuk.com mtaylor@aepuk.com

2. Background & Aims Developing Regional Markets Efficiencies of cross-border trading Parallel development to energy trading Model 1: Provider 1 ↔TSO 2 Model 2: Provider 1 ↔TSO 1 ↔ TSO 2 First Steps with Model 2 Introduces further beneficial competition in balancing services provision Does not distort commercial energy trading over Interconnector Improves transparency & facilitates non-discriminatory access Protects Security of both Systems Does not reserve interconnector capacity preferentially for TSOs Compatible with both markets & developments Does not prevent subsequent development of model 1

3. The Challenge of Market Compatibility Intra-Market and Inter-Connector differences Gate closures per day Neutralisation Period Settlement period duration Detailed price formulation Other connected markets

4. The Proposals for Balancing Service Up to 5 @ 100 MW tranches Settlement Period begins at Gate Closure + 1h Service Duration 1h Consistent with expected evolution of Inter-Connector timings Simultaneous web-site posting of prices Gate closure + 15 mins Subsequent web-site posting of bids/offers used End of delivery period + 15 mins Prices formulated consistent with intra-market methodologies Principles of price formation (including constraints effects) published Emergency assistance/ Rescue arrangements remain Use of inter-Connector charging to be determined

5. Generator/Trader Response Useful codification and formalisation of process Improved transparency will help market functioning Inter-Connector usage charges impact competition amongst providers Interaction in UK of 1h balancing services and ½ h Settlement Periods Review progress after 6-12m