1 WHOLESALE ELECTRICITY MARKET DESIGN AND STRUCTURE Massimo Parati Market Department Italian Regulatory Authority for Electricity and Gas Milan, March 4, 2010
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1 WHOLESALE ELECTRICITY MARKET DESIGN AND STRUCTURE Massimo Parati Market Department Italian Regulatory Authority for Electricity and Gas Milan, March.
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Slide 1
1 WHOLESALE ELECTRICITY MARKET DESIGN AND STRUCTURE Massimo
Parati Market Department Italian Regulatory Authority for
Electricity and Gas Milan, March 4, 2010
Slide 2
2 Agenda 1. Wholesale Market Design a) Long term forward and
derivative markets b) Short term forward markets and balancing
market 2. Wholesale Market Structure a) Wholesale market prices
trend b) Market Concentration and Pivotal Market Players
Slide 3
3 Agenda 1. Wholesale Market Design a) Long term forward and
derivative markets b) Short term forward markets and balancing
market 2. Wholesale Market Structure a) Wholesale market prices
trend b) Market Concentration and Pivotal Market Players
Slide 4
4 Long term forward and derivative markets Over-The-Counter
(OTC) trading: free trading of customized forward electricity
contracts (physical delivery) MTE: forward market managed by
Gestore dei Mercati Energetici (GME); regulated trading of yearly,
quarterly and monthly standard forward contracts (physical
delivery) IDEX: future market managed by Borsa Italiana (BI);
regulated trading of yearly, quarterly and monthly standard future
contracts (cash settlement or physical delivery)
Slide 5
5 Long term forward and derivative markets Central Counterparty
OTCNone MTEGME IDEX CC&G (Cassa di Compensazione e Garanzia)
clearing house Long term forward and derivative markets
Slide 6
6 OTC MTE IDEX MGP Notification to GME of production and
consumption schedules for physical delivery PCE Notification to GME
of forward and future contractual positions to settle by physical
delivery
Slide 7
7 Agenda 1. Wholesale Market Design a) Long term forward and
derivative markets b) Short term forward markets and balancing
market 2. Wholesale Market Structure a) Wholesale market prices
trend b) Market Concentration and Pivotal Market Players
Slide 8
8 Short term forward markets and real-time market MGP:
Day-Ahead Market managed by GME (the Power Exchange - PX) MI (two
sessions: MI1; MI2): Intra-Day Markets managed by GME (the Power
Exchange - PX) MSD ex-ante and MB (five sessions: MB1; MB2; MB3;
MB4; MB5): Ancillary Services Markets managed by TERNA (the
Transmission System Operator - TSO)
Slide 9
9 Short term forward markets and balancing market Central
Counterparty MGPGME (PX) MI1 and MI2GME (PX) MSD ex-ante, MB1, MB2,
MB3, MB4 e MB5 TERNA (TSO) Short term forward markets and balancing
market
Slide 10
10 Short term forward markets and balancing market Pricing rule
MGP Zonal Marginal Prices (for sellers) and Single National Price
(for buyers) MI1 and MI2Zonal Marginal Prices MSD ex-ante, MB1,
MB2, MB3, MB4 e MB5 Pay-as-Bid Short term forward markets and
balancing market
Slide 11
11 Short term forward markets and real-time market
Slide 12
12 MGP In the Day-Ahead Market, hourly energy blocks are traded
for the next day Market Participants submit offers/bids where they
specify the minimum/maximum price at which they are willing to
sell/purchase the designated quantity After the gate closure,
supply offers/demand bids are accepted in the economic merit order
and in such a way as to satisfy transmission limits between
zones
14 MGP Accepted supply offers are valued at the clearing price
of the zone to which they belong. This price is determined, for
each hour, by the intersection of the demand and supply curves and
is differentiated from zone to zone in case of binding transmission
limits (inter-zonal congestions -> market splitting) Accepted
demand bids are valued at the single national price (PUN), which is
equal to the average of the zonal clearing prices, weighted by the
amount of energy purchased in each zone
Slide 15
15
Slide 16
16
Slide 17
17 MI In the Intra-day Market participants are allowed to
modify the schedules resulting from the Day-Ahead Market by
submitting additional demand bids or supply offers Supply offers
and demand bids are selected under the same criterion as for the
Day-Ahead Market; contrary to the Day-Ahead Market, accepted demand
bids are valued at the zonal price
Slide 18
18 MSD ex ante and MB Participation in this market is
compulsory for and limited to the dispatching users only on the
production side Dispatching users: are required to offer all the
available capacity from their units, which TERNA has authorized to
provide dispatching services must submit incremental bids (in order
to increase injections) and decremental bids (in order to decrease
the injections) bids are differentiated for secondary reserve and
for other services TERNA procures resources required for managing,
operating and controlling the system, in order to: solve
intra-zonal congestions create a reserve margin balance injections
and withdrawals in real time
Slide 19
19 TERNA uses ancillary services for the security management of
the national system and to assure the service quality Congestion
management Secondary reserve (f / P control) Tertiary reserve
Realtime balancing Primary frequency control Primary voltage
control Load rejection Black start capability Secondary voltage
control Mandatory services (outside MSD) Dispatching Services
Market (MSD) Regulated contracts Interruptible customers MSD ex
ante and MB
Slide 20
20 Agenda 1. Wholesale Market Design a) Long term forward and
derivative markets b) Short term forward markets and balancing
market 2. Wholesale Market Structure a) Wholesale market prices
trend b) Market Concentration and Pivotal Market Players
Slide 21
21 Wholesale market prices trend
Slide 22
22 Wholesale market prices trend
Slide 23
23 Wholesale market prices trend
Slide 24
24 Wholesale market prices trend
Slide 25
25 Wholesale market prices trend
Slide 26
26 Wholesale market prices trend
Slide 27
27 Agenda 1. Wholesale Market Design a) Long term forward and
derivative markets b) Short term forward markets and balancing
market 2. Wholesale Market Structure a) Wholesale market prices
trend b) Market Concentration and Pivotal Market Players
Slide 28
28 Market Concentration and Pivotal Market Players
Slide 29
29 Market Concentration and Pivotal Market Players Residual
demand analysis: the aim of this analysis is to measure the
unilateral market power by calculating the share of hourly demand
that a producer can monopolize in one or more market zones
(residual demand); in other words, a so-called pivotal producer has
the power to push the market clearing price as high as she wants
(up to the cap) without losing that share of demand
Slide 30
30 Market Concentration and Pivotal Market Players
Slide 31
31 Market Concentration and Pivotal Market Players
Slide 32
32 Market Concentration and Pivotal Market Players