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The KONTEK bidding area

The KONTEK bidding area. Anders Plejdrup Houmøller General Manager Nord Pool Spot. How to couple power markets together. Producers. 50 Hz. End users. High price. Low price. Good congestion management systems will ensure power flow towards the high price area!.

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The KONTEK bidding area

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  1. The KONTEK bidding area Anders Plejdrup Houmøller General Manager Nord Pool Spot Anders Plejdrup Houmøller

  2. How to couple power markets together Producers 50 Hz End users High price Low price Good congestion management systems will ensure power flow towards the high price area! Anders Plejdrup Houmøller

  3. Why implicit auctions?Implicit auctions is the system where the power exchange(s) control the cross-border power flow • The border between Germany and Western Denmark as an example: • All the cross-border capacity is sold at explicit, co-ordinated auctions by the Danish TSO Energinet.dk and the German TSO E.ON Netz. • In 2005, during 23% of the hours the power flowed in the wrong direction (towards the low price area) ! • Naturally, this is a big economic loss for both countries • For any commodity, it is always true that the commodity should move towards the high price • To achieve this is an aim for EU’s internal market, for example • In line with EU’s “Lisbon Agenda” agreed in Lisbon in March 2000: To turn Europe into the world's most competitive economy by 2010. Anders Plejdrup Houmøller

  4. Nord Pool Spot’s German bidding area KONTEK • October 5th, 2005 Nord Pool Spot started a price quotation in the Vattenfall Europe Transmission (VE-T) control area in Germany • KONTEK is the name of this new Nord Pool Spot bidding area. • KONTEK was opened as a result of a co-operation with the German TSO VE-T, the Danish TSO Energinet.dk and Vattenfall AB. • The KONTEK price quotation makes it possible for the market players to trade with Nord Pool Spot in the VE-T control area. • The overall aim for KONTEK was to ensure the right power flow on the Kontek link between Germany and Eastern Denmark. Anders Plejdrup Houmøller

  5. Power flow on the Kontek linkExample for one hour of operation DK East 40 €/MWh Nord Pool Spot buys 1,050 MWh Nord Pool Spot sells 500 MWh Energy flow: 550 MWh Vattenfall Europe Transmission control area Nord Pool Spot buys 200 MWh Nord Pool Spot sells 750 MWh KONTEK 50 €/MWh Ignoring power exchange between Sweden and Eastern Denmark Capacity 550 MW

  6. Spot prices April 1st – May 14th, 2006 Rolling 24-hours averages EUR/MWh 60 EEX Phelix Base 50 40 30 20 10 Nord Pool Spot KONTEK bidding area Correlation coefficient between the hourly prices during this period: Correlation(EEX, KONTEK) = 0.88 0 April May Sources: Nord Pool Spot and EEX

  7. Spot turnover Oct. 11th, 05 – May 14th, 06Nord Pool Spot turnover GWh/day Rolling 7-days averages Source: Nord Pool Spot 16 Bought from Nord Pool Spot in the KONTEK area 14 12 10 8 6 4 2 Sold to Nord Pool Spot in the KONTEK area 0 Oct Nov Dec Jan Feb Mar Apr The difference between the purchase curve and the sale curve is the average net power exchanged per day between Germany and Denmark via the Nord Pool Spot trading system.

  8. Transparency at the power market • In order for market economy to work properly, you need transparency • All market players must have access to all relevant information. • For the power market, there is a connection between the establishment of good cross-border trading systems and full transparency • As the combination in-transparent power markets and explicit auctions is an advantage for the big power producers • Example: Assume a big power plant has an unplanned outage early in the morning. • With in-transparent power markets and explicit auctions: Now the owner of the power plant is the only one who knows, that you should buy capacity in direction towards his home country at the daily, explicit auctions! • Hence, the introduction of full transparency removes the big producers’ incentive to back explicit auctions at the expense of implicit auctions. Anders Plejdrup Houmøller

  9. Intra-day markets – 1And intra-day congestion management • Implicit auctions is a “day-ahead congestion management system”. • How about “intra-day congestion management”? • Answer: You can establish an intra-day market, where the commercial players can utilize unused cross-border capacity. • Example: • Assume the power exchanges close at noon. • Assume the power exchanges publish the spot prices and the planned cross-border power flows at 1 p.m. • Then – for example – at 2 p.m., the intra-day market opens: Now the players can utilise unused cross-border capacity on a “first-come-first-served” basis. • Actually, this is the system we have in Finland, Sweden and Eastern Denmark • The Elbas intra-day market. Anders Plejdrup Houmøller

  10. Intra-day markets – 2And intra-day congestion management • Hence events happening after noon – unplanned outages, unexpected weather conditions, etc. – can be taken into account by players trading power in a direction, which at the outset was the “wrong” direction. • Hence also securing utilisation of the cross-border capacity according to “intra-day events”. Anders Plejdrup Houmøller

  11. Thank you for your attention! Anders Plejdrup Houmøller

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