Market Coupling:
Progress with coupling FUI and CWE
region
Charlotte Ramsay
Ofgem
16th June 2010
Overview
–
–
–
–
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
Models
Main Features
Forward Market
• TSOs sell forward capacity
• Options: physical or financial reservation for day
ahead
• Harmonised terms
Day-ahead capacity
allocation
• Single Price Coupling across Europe:
o Single matching algorithm
o Common market rules
Intra-day capacity
allocation
• Regional: implicit continuous or implicit auction
• Inter-regional: implicit continuous.
Balancing
• 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
INTER-REGIONAL SOLUTIONS?
PX initiative:
PRICE COUPLING OF REGIONS*
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,
Eirgrid)
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