Market Coupling and other related issues

Market Coupling:
Progress with coupling FUI and CWE
Charlotte Ramsay
16th June 2010
Drivers for Market Coupling
Target model for Day Ahead Timeframe
Progress with CWE and North West Region
Coupling FUI and CWE/NW Region
• GB and Ireland
• BritNed and IFA
• Next steps
– Other considerations for implementing market coupling
• Two power exchanges in GB
• Firmness
• Charging
Drivers for Market Coupling
Moving towards a single market for electricity
Efficient use of available capacity on all borders
Maximisation of capacity available on all borders
Legal Requirements:
– CMGs require market based capacity allocation methods
– Under the 3rd package:
• Capacity allocation models may become mandatory
through the Framework Guideline/Network code process
• Regional approach to cross-border capacity allocation
• For FUI
– Britned’s exemption requires day-ahead implicit auctions
European Target Model
Main Features
Forward Market
• TSOs sell forward capacity
• Options: physical or financial reservation for day
• Harmonised terms
Day-ahead capacity
• Single Price Coupling across Europe:
o Single matching algorithm
o Common market rules
Intra-day capacity
• Regional: implicit continuous or implicit auction
• Inter-regional: implicit continuous.
• TSO-TSO with Common Merit Order
Capacity Calculation
• Improved coordination amongst TSOs
• Coordinated redispatch
• Move to flow based
Already in place in TLC and NordPool
Soon to be in place across CWE and ultimately the North West Region …
Completion of
CWE, and coupling
to EMCC / Nordics
NW region and
“enduring solution”
Proposed roll out of Market Coupling
PX initiative:
Markets initially included in PCR - 2860 TWh
Markets which showed interest to join
Markets that could join next as part of an agreed
European roadmap
*Source: Europex slides from the 18th Florence Forum
Other considerations for FUI-NW Region Market Coupling
Input from Ofgem Consultation:
• Two power exchanges in GB
– Not a material issue
• Firmness
– Support for firmness, but diverse views how it is applied
– Diverse views on risk sharing between traders, TSO/IC owners
and consumers
– Diverging views on adopting a common approach to firmness
• Charging
– Many respondents highlighted potential distorting impact of
TRIAD / Transmission charges
– Review underway coordinated by Ofgem and National Grid
Coupling FUI and CWE / NW region
• Irish Market (SEM) design issues
– GB to couple first – Ireland to follow
• BritNed Interconnector comes online in Q1 2011
– Exemption decision condition = implicit auctions in day ahead
– BritNed needs a market coupling solution in Q1 2011
• GB coupling options
– Price coupling on both BritNed and IFA (enduring solution)
– Price coupling on BritNed and IFA to follow (spur solution)
• Timing for roll out of the “enduring solution”
– Commitment from NW region TSOs to deliver in 2011, but not
in time for BritNed
• Next steps
– Roadmap to enduring solution for NW Region (NW TSO group)
– BritNed develop spur solution (in line with roadmap)
2.2 Approach to Firmness ? Common for all ICs?
C/B from changing our approach
Who pays/risk sharing
• TSOs/IC owners in better position to bear risks(AEP,Consumer Focus,EON, Statoil ASA, IPR)
• TSOs to share the risk and face equal exposure (NG,IPR)
• NG: Firmness capped (110% of initial price paid) or pass through cost to TSOs revenues &
end consumers
• Also in favour of cost socialisation: Eirgrid, Moyle Vs no cost socialisation (consumer focus)
• Moyle: currently IFA & Moyle earn nothing in the event of outage, sufficient incentive to
maximise capacity. Could still work if the costs of physical firmness were socialised.
• If firm IC was required then firmness of transmission system would be necessary (Moyle)
• Some recognize the higher costs for DC lines (Statnett) and for IFA in particular (RTE, NG,
Common approach for all ICs?
• Some support for harmonisation of firmness rules and for common approach for all ICs (RTE,
Britned-as long as their business model is protected-, EON-financial firmness-, Centrica,
Statoil ASA, RWE)
• Consumer Focus: degree of latitude could improve investor confidence
• EDF: Not one policy for firmness, case by case approach ; competition law can be used when
restricting IC capacity so no need for regulation

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