1. BALTIC BALANCING MARKET Ingrid Arus Baltic Balancing Market Harmonisation WG meeting 17 01 2008

2. Introduction and background Conditions for create a common balancing market Why now? ERGEG Guidelines of Good Practice for Balancing Markets Integration Main goal of WG – to study different options to create a common Baltic balancing market

3. 2006 Tallinn Lithuania: The development of common Baltic energy market Common balancing market Common reserve capacity market Estonia: Work out energy policy together Create transparency (for grid access) Licensing – make market entry easy Establish one balancing market Baltic Minifora meetings :

4. 2006 Vilnius Lithuania: Common Baltic reserve and regulation power market Estonia: Harmonized market rules Latvia: Baltic Power Exchange increased trade possibilities; true reference price for electricity; integration of Baltic and Nordic market

5. Baltic Minifora meetings: 2007 Riga Lithuania (all Baltic regulators): Licensing – proposals for common rules Conclusion: Regulators can take interim steps to facilitate the entry of prospective participants into our domestic markets and into Common Baltic Electricity Market Estonia (from Baltic Energy Strategy) weaknesses: Limited marketplace Small number of players Absence of common energy policy

6. Baltic Minifora meetings: 2007 Tallinn Lithuania: What do we need for the functioning market? harmonised rules of the game many players future vision Estonia: ERI Convergence and Coherence Report: Main issues: congestion management; common policy for import from 3rd countries; balancing rules; transparency Where is Baltic market?

7. Baltic Minifora meetings: 2007 Tallinn It was agreed to establish a new working group, which includes the representatives of the Baltic TSO-s, regulators and independent market participants. The goals are to harmonize existing balance system in Baltic region and create common Baltic (balancing) market in future. The working group will be coordinated by the Estonian TSO (Põhivõrk).

8. Baltic Electricity Market Where is Baltic Market? What we need for creating a common market? (PRE-)CONDITIONS: 100% OPENED MARKET (ESTONIA – 35% 2009; 100% - 2013) CONDITIONS: COMMON RULES –FOR CONGESTION MANAGEMENT –FOR MARKET ENTRY – LICENSING –COMMON POLICY FOR IMPORT FROM THIERD COUNTRIES –HARMONISED PRINCIPLES OF BALANCING –TRANSPARENCY –HARMONISED ADMINISTRATIVE PROCEDURES OBJECTIVE : EFFICIENT MARKET –EASY ENTRY TO THE MARKET – MORE PARTICIPANTS –COMPETITION –LOWER COST

9. Why now? Preparation the opening of Estonian electricity market for all players Estonian (Baltic) electricity market rules harmonisation with rules applied in Nordel Estlink price area project – started 11.2007 I phase: Price area Estlink, Implicit auction to cover at least part of the Estlink capacity – 09.2008 II phase: Price area Baltic, Final target is to create Spot price area to Baltic countries and intraday market Elbas – ½ - 2 years after I phase

10. ERGEG Guidelines of Good Practice for Balancing Markets Integration ERGEG is committed to the development of an effectively competitive single market for electricity across the whole EU, while at the same time taking into account security of supply and system reliability. Balancing market integration - as a key issue for an internal electricity market. Directive 2003/54/EC assigns to the regulator the sole competency for the functioning of the balancing market within a Member State. According to the Article 23, Paragraph 2: “The regulatory authorities shall be responsible for fixing or approving, prior to their entry into force, at least the methodologies used to calculate or establish the terms and conditions for the provision of balancing services”.

11. Principles and Benefits of Efficient Electricity Balancing Markets THE PURPOSE of balancing markets is to serve short-term operational security of supply (security of grid operation) in a market oriented way and to deal with imbalance settlement. BALANCING MARKETS: should promote effective competition should not aggravate market power should be non-discriminatory BALANCING MARKET shall have clear rules and transparent processes THE RESPONSIBLE REGULATORS must clarify the regulatory route by which the integrated balancing market is monitored and its rules enforced. Appropriate STANDARDS for AUTOMATIC DATA and INFORMATION EXCHANGE between BRP and market actors during planning, operation and settlement phases of balancing shall be in place to ensure secure system operation and to facilitate transparency. IMBALANCE ARRANGEMENTS and PRICING RULES shall be made compatible in a truly integrated balancing market.

12. Principles and Benefits of Efficient Electricity Balancing Markets –TSOs and other market participants can operate in an economically efficient manner –More participants –Competition –Decreased cost

13. Main target of WG Final target: Common Baltic Balancing Market WG: To study perspectives, principles and timeline for creating the Baltic Balancing Market Define the scope of Baltic Balancing Market Identify purpose and possible gains Examine the effects for market participants (inc. TSOs) Harmonisation of definitions Harmonisation of planning time-scale; responsibilities in time-scale; Common reserve and regulation market Balance settlement harmonisation –number of balances –balancing energy price

14. THANK YOU FOR YOUR ATTENTION!