Slovenian and Spanish electricity markets

1. Slovenian and Spanish electricity markets Z.Bregar, M.Sc., EIMV Milan Vidmar Electroinstitute Ljubljana, Slovenia

2. Slovenian:Spanish • two spot markets, X futures, X options • Spanish: large in volume and percentage, closed auction, 1998, stability, a starting model • Slovenian: small (v&p), +continuos t., +standardized prod., 2002, stability, rising, expectations to develop more

4. Spanish system in 2003 • installed capacity: approx. 60,000 MW • 12,500 MW: special system • renewables, waste and cogeneration • special financial conditions are provided • 47,400 MW: ordinary system • diverse structure: hydro, coal thermal, oil-gas thermal and nuclear • evenly distributed

5. Installed cap. in 2003

6. Energy in 2003 • demand: 223,480 GWh • ordinary system gross: 196,290 GWh • hydro: 38,734 GWh, nuclear: 61,848 GWh, coal: 72,562 GWh, fuel-gas(CC): 23,146 GWh • self cons.: 8,066 GWh, pump.:4,738 GWh • import/export: 1,142 GWh (small, <1%) • special system: 38,852 GWh

7. Energy in 2003

8. Electricity market 2003 • market operator company: OMEL • big market: 228,571 GWh, 8,185 mill.Euro • practically all energy, apart from bilaterals and special system is traded • 86 % generated by conventional production plants • daily some 15,000 transactions • aver. price: 3.73 cents Euro / kWh

9. Wedn., 15 Sept. 2004

10. Same trends • demand: from 20,263 to 25,811 MW • price: from 1.47 to 4.91 cEuro/kWh • high demand: high marginal prices • low demand: low marginal prices • marginal price is the price of the most expensive unit that is required to meet the demand

11. Marginal price • there are 24 values of marginal prices • in a particular hour: only ONE price • for all the buyers and the sellers • sellers: base load, intermediate, peak load • buyers: consumers, retailers, ...

12. Principles • service traded in an hour: 1 MWh • same service: same payment • the origin of electricity is not relevant • the time of submitting is not relevant, provided it was before 10:00

13. Hour 12

14. Extreme prices • demand: 32,000 MW at different prices • but: 14,500 MW at the maxi.price (18)! • supply: 37,000 MW at different prices • but: 21,000 MW at price zero (0)! • just declaration: marginalp. if accepted !!

15. Construction • 101 buy-bids in the demand curve • 422 sell-bids are forming the supply curve • all buy-bids confront all sell-bids • bids have first to be gathered, only aftervards they can be • separated in two categories and • sorted • from 8:30 to 10:00 is the trading time

16. Trading time • 8:30 system information is displayed • from 8:30 to 10:00 participants • place their bids • verify and modify their bids • no information on matching is provided • 10:00 closing time, matching • marginal price • acceptance or rejection

17. Results • marginal price: 4.25 cEuro/kWh • volume: 25,481 MW • left part: accepted, right part: rejected • 45 of 101 buy-bids accepted • 223 of 422 sell-bids accepted

18. 24 markets? • the same process of matching procedure is applied to hour 1, hour 2, ..., hour 24 • are they independent? NO! • hourly markets are inter-dependant • the results in one hour depend upon the results of the matching in other hours • ONLY ONE, coordinated market

19. Complex bids • simple: price (cE/kWh) and volume (MW) • complex: additional constraints • +minimum income for sell-bids • +maximum payment for buy-bids • +indivisible bids • +blocks, min. consequent hours of operation • +ramps, load gradients, MW/min • ...

20. Coordination • complex bids cause inter-dependance • can be either accepted or rejected, 0 or 1 • combinatorial, decisions, hard problem • first all bids simple, then iterations to acchieve coordination among hours, A*-alghoritm

21. Settlements • origin of electricity is not known • the market acts like a buyer for those who sell electricity and like a seller for those who buy electricity • financial guarantee

23. Slovenian sys. in 2003 • installed capacity: 2,456 MW • more then 15 times smaller • diverse structure: 767 MW: coal thermal, 103 MW: coal cogeneration, 350 MW: oil-gas thermal, 338 MW: nuclear, 816 MW: hydro • demand: 12,677 GWh • +16 % import

24. Installed cap. in 2003

25. Energy in 2003

26. Electricity market 2003 • el. market company: Borzen, 2001/2002 • energy traded: 386.9 GWh • 45 % growth from 2002 • value traded: 16 million Euro • aver. price: 3.59 cEuro/kWh

27. Wedn., 15 Sept. 2004

28. Several prices • several standardized products bring several different average price levels • total: 677 MWh • 64 % Band power at 3.52 cE/kWh • 17 % Peak power at 3.99 cE/kWh • 11 % Euro-peak power at 4.08 cE/kWh • 5 % Hourly power and • 3 % Off-peak power 2.58 cE/kWh

29. Standardized products

30. Separation • each standardized product is considered a totally independent substance • thus is traded only on its own market • markets are totally separated • [Band] sell-bid : [Peak+Off-peak] buy-bid • CROSS market contr. are NOT POSSIBLE

31. Standardization • of trade products is a basic condition for any organized trading, you cannot trade non-standard items on the market (MKSA) • Spanish implicitly: 0.1 MW, 0.1 cE/kWh, for 1 hour, only one product: X separation • Slovenian: it is a step towards the organized market with futures and options, risk managment, hedging, ...

32. Consequences • the number of all bids (buy and sell) on an individual standardized products market decreases • this is a design for a large market • general expectations of opening and enlargment

33. Complex bids • market bids and limited (price) bids • an iceberg bid: fraction shown in ord.book • fill-or-kill: immed.in full or cancel • stop-limit, stop-market: ... • this does unify, but only each individual standardized market • a certain level of unification is achieved through TSO’s transmission constraints managment

34. Continuos trading • instantly connect buy-bids with sell-bids • 0. pre-trading: order book • 1. start: the initial price • 2. trading: • the new bid is either connected to order book bids or itself input into order book • the price varies, participants see it • 3. post trading: average price, indexes

35. Order book • contains current lists of yet unprocessed • sell-bids • buy-bids • sell-bids are sorted ascen. (by price) • buy-bids are sorted descen. • the best bids float atop • stuck: if the best sell-bid is more expensive then the best buy-bid

36. Order book example

37. A new bid alternative • if it is worse than his kind in the order book then it can not be processed and is inself input in the order book • if it is better then previous best of his kind in the order book, then check the oposite side best bid: • either one or several contracts can be done • or not: the new bids goes into order book

38. bids rarely have equal sizes in MW, since they are issued by independent market participants • a single bid is thus usually contracted to several oposite bids and at different prices • internally: the bid is fractioned • settlement price is calculated for each bid as the weighted average of contracts

39. Price changes

40. The price • is visible to participants • participants place their bids with respect to the current price • variation is limited • static: 60 % of the starting price • dynamic: 30 % betwee consecutive contr. • weighted average price for the market is calculated after the trading is closed

41. Settlements • buyer and seller are known, but this would bring to numerous billings • multilateral clearing, the market organizer is presented as a buyer for the sellers and as a seller to the buyers • not all the bids are directly confronted • the price depends on time of submission • the price depends on the market used

42. Various markets • Preferential dispatch • Transmission rights market • Network losses • Woody biomass • Emission allowances • Green certificates • Guaranties of el. from renewables origin

43. Conclusion • Spanish market: enlargment: Iberian market, also starting futures and options, +stand.prod., +continuos trad. • Slovenian market: enlargment, regionally, Southpool, futures and options, European creation of a regional market, a starting point, a pillar in this construction

44. Thank you mag. Zvonko Bregar, EIMV, Elektroinštitut Milan Vidmar, OENES, Oddelek za energetiko in načrtovanje energetskih sistemov, e-mail: zvonko.bregar@eimv.si tel: 01 / 474 - 36 - 29 fax: 01 / 474 - 29 - 23