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Identification of the needs to modify auction rules in the FUI region

Identification of the needs to modify auction rules in the FUI region. Congestion management meeting – 11 January 2007. Proposed Agenda. 11.00-11.15 Opening and Welcome + Roundtable

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Identification of the needs to modify auction rules in the FUI region

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  1. Identification of the needs to modify auction rules in the FUI region Congestion management meeting – 11 January 2007

  2. Proposed Agenda 11.00-11.15Opening and Welcome + Roundtable 11.15-12.20Identification of the needs for improving current CM methods on interconnectors in the FUI region 12.20-12.30 Conclusion and summary of all the needs 12.30-14.00 Lunch 14.00-16.00 Open discussions on the concrete implementation of these improvements and on the prioritization of their achievement 16.00-16.30 Conclusion and proposition of a timetable for implementation 16.30-17.00 Recommendation to the RCC what steps need to be taken to ensure the necessary implementation of these improvements in due time

  3. IFA auction rules that have to evolve to be compliant with the CM guidelines (1/2) • Reserve Price: “Other than in the case of new interconnections which benefit from exemption under article 7 of the Regulation, establishing reserve prices in capacity allocation methods shall not be allowed” §2.9 • UIOLI/UIOSI: “They [access rights] shall be subject to UIOLI or UIOSI principles at the time of nomination” § 2.5 “Market participants shall firmly nominate their use of the capacity to the TSOs by a defined deadline for each timeframe. The deadline shall be set such that TSOs are able to reassign unused capacity for reallocation in the next relevant timeframe —including intra-day sessions. § 2.11 “[..] the nominations of transmission rights shall take place sufficiently in advance, before the publication of the capacity to be allocated under the day-ahead or intra-day allocation mechanism” § 4.2 • Intraday allocation mechanism “By not later than 1 January 2008, mechanisms for the intra-day congestion management of interconnection capacity shall be established” §1.9 “Successive intra-day allocations of available transmission capacity for day D shall take place on days D-1 and D, after the issuing of the indicated or actual day-ahead production schedules.” § 4.3 “[…] For intra-day trade continuous trading may be used.” §2.1 • Firmness of capacity “TSO shall optimize the degree to which capacity is firm” § 2.4 “The access rights for long and medium term allocations shall be firm transmission capacity rights” §2.5 “TSOs shall offer to the market transmission capacity that is as ‘firm' as possible” Regulation 1228 Example: On several European interconnections, TSOs can guarantee both, the realization of the exchange programmes corresponding to firmly allocated PTRs, and daily PTRs (except for cases that constitute Force Majeure)

  4. IFA auction rules that have to evolve to be compliant with the CM guidelines (2/2)

  5. Auction rules in Europe have to be harmonised (1/3) • The lack of Market integration is identified as one of the main shortcomings in the European Electricity market: Sector Inquiry: “ In order to achieve a single European network from the perspective of the network user, there is a need for appropriate harmonisation of market design, especially regarding methods having an effect on cross border trade”  ERGEG supports this Commission’s view when it announces in its work program for 2007 that “Market integration and cross border issues, access to infrastructure […] are priorities in 2007.”

  6. Auction rules in Europe have to be harmonised (2/3)

  7. Auction rules in Europe have to be harmonised (3/3)

  8. Target mechanism for intraday trade in the Central-West region: continuous trading platform • This mechanism is proposed by the TSOs of the CW region. The principles are supported by their regulators, EFET and EURELECTRIC • Principles of this mechanism: • A single capacity platform has the information concerning intraday cross-border capacities in the whole region • One or several continuous trading platforms are connected to this single capacity platform and receive the information concerning capacities • Market players of any country submit their intraday bids for offer or demand of energy to a continuous trading platform • When two bids match: • If they are in the same country, the transaction is made • If they are not in the same country, and if there is enough cross-border capacity: • the transaction is made • the capacity is allocated for free by the capacity platform to the trading platform (non market-based mechanism, cf. article 2.1 of the Guidelines) • the capacity platform updates the cross-border capacity

  9. Intraday capacity from B to A Intraday capacity from A to B Capacities are updated Capacity is nominated Market player 2 Market player 1 Bid for offer of energy Bid for demand of energy Target mechanism for intraday trade in the Central-West region: continuous trading platform • Information flows: Continuous trading platform 2 Country A Country B Capacity platform TSO B TSO A Continuous trading platform 1 • Bids match • There is enough capacity from A to B

  10. How to implement this target mechanism? • This target mechanism implies to complete first the following steps: • A detailed study from the TSOs is needed, particularly regarding the possibility/opportunity to have several competing intraday platforms • Its cost has to be estimated • The possible interaction with cross-border balancing trade has to be analysed • An interim solution has thus to be considered in order to meet the requirements of the Guidelines on the 1st January 2008. Two possibilities: • Intraday explicit auctions • Market-based • Big drawbacks: high cost and high technical constraints that reduce flexibility (only 2 gate closures on the France-Spain Interconnection) • Improved pro-rata mechanism • Largely used by RTE (interconnections with Germany, Switzerland, Belgium, and Spain before June 2006) • Low cost, easy to implement • Non market-based (as the target mechanism!)

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