The Nord Pool Power Market Model

w w w . n o r d p o o l g r o u p The Nord Pool Power Market Model Modelo Nord Pool: Parte 1: Desarrollo y regulacion del sector electrico. Un analisis basado en fuentes renovables

w w w . n o r d p o o l g r o u p Energy transition

Nordic energy mix 2013 www.nordpoolgroup.com/consulting We are ambassadors for modern power markets across the world

Nord Pool Consulting works with Governments, BILDE Power Exchanges, Regulators, TSOs, DSO, Universities and other stakeholders on:

 Market design

 Rulebook development

 Market regulation

 Power market systems

 Capacity building

 Competence building

www.nordpoolgroup.com/consulting From feasibility studies to international power markets

European target model Southern African Power Pool

NORDPOOL COLORS Use Eyedropper from Font Color or Day-Ahead prices are Shape Fill dropdown 100% 40% 90% 80% 70% 60% DARK determined simultaneously BLUE LIGHT BLUE across Europe GREEN FINLAND BLACK SWEDEN The Price Coupling of Regions (PRC) initiative now RUSSIA enables the coupling of Day Ahead electricity markets in 23 countries representing over 90% of European NORWAY SECONDARY ACCENT COLORS power consumption. ESTONIA OFF-WHITE

LATVIA WHITE

DENMARK LITHUANIA

BELARUS IRELAND UK

NETHER- POLAND LANDS GERMANY UKRAINE BELGIUM

LUXEMBOURG CZECH REPUBLIC SLOVAKIA MOLDOVA Part of PCR initiative today AUSTRIA FRANCE HUNGARY 4 MMC SWITZERLAND ROMANIA SLOVENIA Independent CROATIA BOSNIA & SERBIA HERZEGOVINA BULGARIA ANDORRA MONTE- KOSOVO ITALY NEGRO MACEDONIA

ALBANIA TURKEY PORTUGAL SPAIN GREECE

nordpoolgroup.com/academy 92

South-east Europe India ASEAN

www.nordpoolgroup.com/consulting The future is electric!

www.nordpoolgroup.com/consulting A world view based on facts gives reason for optimism The world today 2018: BRICS and few other nations

https://www.gapminder.org/ www.nordpoolgroup.com/consulting Oslo: European green capital 2019 Carbon targets for 2020 50 % and 2030 95 %

www.nordpoolgroup.com/consulting www.nordpoolgroup.com/consulting 1.000.000 electric cars in Europe Why is electricity production important?

Source: IPCC and EPA (2014): https://www.epa.gov/ghgemissions/global-greenhouse-gas-emissions-data www.nordpoolgroup.com/consulting When we run out of oil and gas, then what?

www.nordpoolgroup.com/consulting n o r d p o o l g www.nordpoolgroup.com/consulting www.nordpoolgroup.com/consulting www.nordpoolgroup.com/consulting www.nordpoolgroup.com/consulting www.nordpoolgroup.com/consulting www.nordpoolgroup.com/consulting Energiewende across Europe

www.nordpoolgroup.com/consulting European target model: One common energy market The European target model shall ensure the completion of the EU Internal Energy Market for electricity. Guidance and standards for each timeframe: Day Ahead (DA), Intra-Day (ID), Balancing and Forward Market.

A fair and transparent Day-ahead power price is a key factor for the target model’s success. FINLAND

SWEDEN RUSSIA PCR (Price Coupling of Regions) • The initiative of 7 Power Exchanges to develop a single price NORWAY coupling solution, launched Feb 2014 ESTONIA • EUPHEMIA algorithm LATVIA

DENMARK LITHUANIA MRC (Multi-Regional Coupling) NORTHERN IRELAND • Coupling of regions and efficient management of available BELARUS IRELAND transmission capacities between areas and countries UK POLAND • Implicit capacity allocation NETHER- LAND GERMANY UKRAINE BELGIUM XBID (Cross Border Intra-Day) LUXEMBOURG CZECH REPUBLIC • Development of a common Intraday trading platform with shared SLOVAKIA MOLDOVA

order book and capacity management module FRANCE AUSTRIA HUNGARY SWITZERLAND ROMANIA SLOVENIA The integrated European electricity market is expected to increase CROATIA BOSNIEN & SERBIA liquidity, efficiency, social welfare and transparency of prices and flows. HERZEGOVINA BULGARIA MONTE- ITALY NEGRO KOSOVO MAKEDONIA

SPAIN ALBANIA TURKEY PORTUGAL GREECE

22 The Nord Pool model

10 years Day-ahead Intraday Intrahour 1,5 months

Time Financial market Financial market Hedging of future prices EPADs Power Purchase Agreements (PPA) Elspot Finance of new projects EU ETS Reference price

(system price) delivery Physical GO

Day-ahead market (AKA DAM; Elspot) Elbas The DAM is a daily auction that closes at 12:00 every day. System price and area prices are calculated for delivery each hour the following including ATC Balancing market Intraday market (AKA IDM; Elbas) The ID is a continuous (24/7) market and closes shortly before each delivery hour. Remaining transmission capacity after the TSO publication DAM prices is allocated to ID. settlement

NODES flexibility market Financial settlement Physical Financial DSO level demand response market Physical delivery delivery settlement Organized market Nord Pool Balancing markets (AKA Reserve market) Bilateral trading (OTC) TSOs Intra-hour market for maintaining 50 Hz Statnett: 100 % carbon neutral Norway

www.nordpoolgroup.com/consulting Energy transition

Nordic energy mix 2013 www.nordpoolgroup.com/consulting Wind and solar generation % 2017

www.nordpoolgroup.com/consulting Nord Pool development

27 Development since the early 1990s

www.nordpoolgroup.com/consulting Development of cross boarder trading arrangements

Integrated markets

”The Nord Pool-model” Zonal pricing/market coupling

Daily transmission capacity auctions

Long-term transmission capacity auctions

Bilateral deals

Isolated markets

29 We continue to see steady growth

Gross Bidding Agreements: 600 All buy and sell volume from the biggest producers and consumers 524 TWh 500

400

300

200

100

0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

www.nordpoolgroup.com/consulting Market regulation and Nord Pool Market Surveillance

The Physical and Financial Power Market

Oslo Plaza, 16th January 2019 Nord Pool’s stakeholders

 “Reregulation, not deregulation”

 Regulated in Norway by Norwegian Water Resources and Energy Directorate (NVE)

 NVE is a directorate under Norwegian Ministry of Petroleum and Energy

 100 % owned by Nordic and Baltic transmission system operators

 Nominated NEMO in Austria, Belgium Statnett SF (Norway) 28.2% Elering AS (Estonia) 2% Denmark, Estonia, Finland, France, Germany, Great Britain, Ireland, Svenska kraftnät (Sweden) 28.2% Litgrid AB (Lithuania) 2% Poland, Latvia, Lithuania, Luxembourg, the Netherlands and Energinet.dk (Denmark) Augstsprieguma tīkls AS Sweden 18.8% (Latvia) 2%

 A free but regulated market fair for Fingrid Oyj (Finland) 18.8% everyone, not Laissez-faire

www.nordpoolgroup.com/consulting Nasdaq’ stakeholders

33 Which regulations are relevant in the electricity wholesale market?

Electricity wholesale market regulation

CACM

REMIT

Transparency Regulation Transparency Nord Pool’s Trading Rules Trading Pool’s Nord

Wholesale market participant (Nord Pool member)

35 REMIT – The first set of common rules for wholesale energy markets in Europe

REMIT – REgulation on wholesale Market Integrity and Transparency

Aims to ensure on European level:

• Confidence in the market integrity

• Prices that represent a fair and competitive interplay between supply and demand

• No profits are drawn from market abuse

36 REMIT ensuring parties

ACER – Agency for the Cooperation of Energy Regulators • Collects and analyses wholesale market data • Detects and prevents possible market abuse

National Regulatory Authorities • Responsible for carrying out investigations and giving sanctions

Nord Pool as an Organised Market Place • Have arrangements in place to identify breaches: market manipulation and insider trading • Reports possible breaches to the national regulatory authority REMIT Best Practice report • The report is based on input and knowledge sharing of nine market participants, one sector organisation and staff from Nord Pool

• There is no “one size fits all” when it comes to compliance. The report represents a list of “ideas” or “recommendations” for all types of market participants

– Compliance Regime

– Inside Information

– Market Manipulation

38 Market Manipulation

39 Alleged manipulation by Iberdrola

“Following an investigation, the competition watchdog fined Iberdrola €25 million in November 2015 for manipulating the Spanish wholesale electricity market.”

40 Capacity hoarding Important to note

• No intention is required

• There is no requirement for it to

actually be an impact on supply, Drawing by Dominik Dominik byDrawing

demand or price Joswig Inside information and insider trading

43 Inside information

 Inside Information - Information that would be likely to significantly affect prices if made public – Cannot be used for trading – Must be kept confidential – Cannot be used as basis for giving advice on trading

 Inside information regarding your own business must be published in an effective and timely manner – Disclosure may be exceptionally delayed in some cases

44 Was the information disclosed timely and effectively?

Elering managed to prove that it was!

45 Compliance REMIT Urgent Market Messages

 Notify the market about planned or unexpected changes to generation, consumption and transmission

 Comply with European energy market regulations on information disclosure with automatic forwarding of data direct to the ACER REMIT platform and optional reporting to ENTSO-E Transparency Platform

 Connected API integrates your systems with UMM, enabling seamless information transfers between you and the market

 View real time notifications of events, disturbances and price impacts on short and long term markets

 Available in European markets and accessible alongside all Nord Pool applications via a single, web-based interface Disclosure of inside information and insider trading

UMM has to be published

Trader can react on the Gets inside information about information e.g. outage

47 Daily value traded and cleared over Nord Pool: Security of Settlement EUR 100.000.000,-

 Since 1993 Nord Pool has cleared approx. 20 million trades over the Day-ahead market with 100 % success rate of delivery of electricity and settlement  Nord Pool clears just over EUR 35.000.000.000 per year

 Producers and consumers need a safe and predictable market place!

www.nordpoolgroup.com/consulting The Danish energy transmission and economical growth - de-coupling economic growth, energy consumption and emissions

150

140

130

120

110

100

90

80

70

60 1990 1995 2000 2005 2010 2015

GDP in fixed prices CO2 emissions Gross Energy Consumption

Index: 1990 = 100

nordpoolgroup.com/consulting Thank you for your attention!

[email protected] www.nordpoolgroup.com/academy

w w w . n o r d p o o l g r o u p Additional curriculum

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