Name Surname Milan, November 2010 European Federation of Energy Traders 1 The Central South Region and the European Target Model – How to ensure consistency?

Name Surname Milan, November 2010

European Federation of Energy Traders

1

The Central South Region and the

European Target Model –

How to ensure consistency?

Milan, 16 November 2010

Andrea Siri/Riccardo RossiTF Italy

2Milan, November 2010

Content

Single Price Coupling and Italy/Slovenia market coupling project

European Infraday Market

Transmission Rights Allocation from 2011

3Milan, November 2010

European Price Coupling by 2015

The day-ahead market establishes a reference price for transmission rights with financial settlement and financial

contracts...

• Day-ahead capacity allocation single price coupling by 2015 Single pricing algorithm

Harmonized gate closure times

Sharing of all bid data between PXs

Compatible bids/products

4Milan, November 2010

Transparency and involvement – Markets are based on trust

• Market coupling is a milestone toward the Single European Electricity Market increases efficiency in x-border capacity use

GE

/DK

– E

xpl.

Au

ctio

ns

GE

/DK

– EM

CC

• Markets are based on trust: lack of transparency can have devastating effects on markets

• The success of the project basically depends on the confidence that market participants place in it

5Milan, November 2010

Consistency, market based solution tests and full transparency

• Market Coupling Project Italy/Slovenia Consistency with the target model has to be ensured

Full and detailed transparency on arrangements

• Lesson learned by CWE Market coupling project Tests are

needed; stakeholder involvement is necessary

• Questions and suggestions: Which are back up/fall back solutions Necessary to encourage trust

What are the results of preliminary tests? Full transparency needed

Are tests with market participants planned? At least 2weeks

Bids submitted at the same price Market based rules

What happen in case results from PXs are inconsistent? pre-defined rules

6Milan, November 2010

Basics and features for a European Infraday Market

• Basics agreed: Accessibility for all market parties Visibility/Tradability of all offers European wide Transparent for market parties Quickly/easily implementable across EU Efficient utilization of X-Border capacity Market based allocation of additional significant infraday capacity

• Main Features: Reduce balancing needs Portfolio Optimisation Ability to trade until close to real time (h–1, delivery hour h) Fast Matching + must allow block bids X-Border OTC offers to be published and traded like any other deal

Clear preference for continuous trading + market based capacity allocation when significant additional capacity becomes available

7Milan, November 2010

A Target Model by 2015 (Florence Forum Dec 2009)

Where appropriate, specific National/Regional ID solutions may be developed

A specific National/Regional ID solution is not obligatory Any specific National/Regional ID trading solution must be compatible

with the Inter-Regional Target Model

8Milan, November 2010

Remarks and preferences on Terna ID proposal

• No mention of any involvement of X-border trading

• No equal access to all market parties in the National ID Market

• Two auction sessions (MI 3 and MI4) in day D instead of

continuous trading

• Proposal to include X-border capacity only in the CS-IG

meeting (29.09.2010) X-border ID capacity auctions before MI3, MI4

Gap in tradable hours: 00-12 missed Capacity calculation Unclear No renominations possible till h–1 the delivery hours h

4 hrs between gate closure

Rem

arks

9Milan, November 2010

Remarks and preferences on Terna ID proposal

• From the EU Rules (1228/2003)• TERNA proposal is welcomed : a step forward • Road map for arriving at x-border full infraday implementation• Road Map to be addressed and fixed• Infraday market open to all market participants• Organised on a continuous trading basis• Renominations possible till h-1• Transparent decision process and market based arrangements• ID X-border capacity Terna proposal:

• Sessions need to cover all hrs of the day• Gate closure as close as possible to the first hour of delivery• Need to allow for bilateral X-border infra-day trading

• What about Countries in CS where not yet applied?

EF

ET

’s p

oint

of

view

10Milan, November 2010

Target model for TRs Allocation

• Target Model

100% of forecast available capacity forward in line with forward energy market horizons

FTRs or PTRs with Use-it-or-Sell It (UIOSI) A secondary market for trading transmission capacity

rights is a high priority Financial firmness of capacity rights is essential in order to

hedge x-border positions Compensation for capacity curtailment needs to be market-

spread based, predictable and standardized The costs of guaranteeing firmness should be met from

TSOs allowed revenues (with appropriate incentives

11Milan, November 2010

CS ERI consultation for Q2/2011 onEFET remarks

• Full harmonisation with CASC rules ideal for 2011• Interim period for Yearly and Monthly/Daily for Q1/2011• Is another interim mechanism needed for Q2>Q4/2011? Why?• Specific remarks

• Harmonised set of rules = no rules defined per border! (see Annex I > IV)• Bank guarantee : same structure, legal entity, duration, applicable law, …• Harmonization of payments terms (e.g. deadlines, …)• Harmonization of IT platform (different access procedure, internet link, …) • Testing phase for checking new platforms and Deep training for users• Cross collateral coverage best practice implementation (likewise EEX) where

applicable• Fee, charges, pre-defined and not let to “unknown” calculation• Market data availability: simple internet area with full set of real updated info

(capacity allocated, daily TRM, capacity resold, hourly commercial interconnection flow, hourly physical interconnection flow, …, updated load flow????)

12Milan, November 2010

Thanks for your attention

European Federation of Energy Traders

Amstelveenseweg 9981081 JS Amsterdam

Tel: +31 (0)20 5207970Email: [email protected]

www.efet.org