Final Version 1404/2008
Action plan covering 2008 activities for the implementation of day-ahead implicit
auction (market coupling / market splitting / dome coupling) in Central-South
Europe as a mean to allocate cross border capacity
1.
Background
On 23rd January 2008, during the 6th Implementation Group meeting for the Central-South
Europe, Power Exchanges (PXs) and Transmission System Operators (TSOs) were
mandated by Regulators to provide an action plan for day-ahead market coupling by the
end of February.
In the same meeting it was agreed that although the action plan must have a regional
scope, a step-wise approach should be followed by identifying those borders where market
coupling could be implemented at an earlier stage, in compliance with Regulation 1228/03.
.
The objective of the action plan described in this document is to identify the issues that
need to be addressed and the actions that must be taken in order to implement implicit
auction (market coupling /market splitting / dome coupling) in the CS region.
Since market coupling is one of several ways to implement implicit auction for the
congestion management, in this action plan we generally use the term “implicit auction”,
instead of “market coupling”.
The time schedule proposed in this action plan is indicative and may be subject to
changes on the basis of the needs and the scope of each action.
2.
Study on the existing methods for day-ahead allocation of cross border
capacity in the region
The study focuses on the Italian borders. The relevance of adding other borders will be
addressed to the IG.
The aims of the study are:
-
to identify the potential for efficiencies gains from the adoption of implicit auctions
instead of explicit auctions as a mean to allocate cross border capacity at dayahead stage;
-
to give, where possible, a quantitative background to assessment of the superiority
of implicit auctions in short term trading, as stated by the first ETSO-Europex JWG
as well as EU documents (report on the 1228 cross-border regulation);
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-
to give, where possible, a quantitative background to the evaluation of the
opportunity to adopt implicit auction mechanisms for each of the analyzed borders.
For each border of the CS region, given the results of the present allocation methods, the
study should:
-
Detect capacity that has been left unused;
-
Analyse procedures for completing a cross border transaction (e.g. auctions,
nominations, UIOLI and similar procedures, calculations of additional available
capacity, time constraints, other transaction costs);
-
Where possible, detect inefficiencies such as “adverse” cross-border flows, that is
scheduled flows in the opposite direction to the one that would have been efficient
given the prices of neighbouring price areas;
-
Develop a simulated example to show the loss or improvement of social welfare as
a result of the previous factors.
In the 6th IG meeting, the AEEG requested GME to carry out this study and to present the
results at the 2nd Stakeholder Group meeting (21 April 2008).
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3.
Assessment of differences in market designs in the CS region and
identification of coordination requirements with other relevant regions
In the 6th IG meeting PXs were requested to present, [by the end of June 2008], an
assessment of the differences in market designs with a view of identifying a suitable
implicit auction approach as well as those borders where an implicit auction mechanism
could be tested and implemented at an earlier stage.
These assessments should be done by specialised working groups including both PXs and
TSOs, and coordinated in a final version to be presented to Regulators.
This study will be divided in two parts.
3.1.
Assessment of differences in market designs in the CS region
The assessment should highlight and compare those features of the local day-ahead
energy markets that have an impact on the implementation of implicit auction mechanisms,
such as:
-
Overview of trading arrangements (existence of pool and so on; entity in charge of
allocating internal and cross border capacity);
-
features of the products traded (presence of block bids and complex bids, price and
volume step in bids, presence of physical/financial products);
-
description of the algorithms and matching rules (continuous trading vs implicit
auction, presence of internal price areas, presence of price caps);
-
impact of the current Italian Market Splitting on the cross-border implicit auction
project for the CS region;
-
timing;
-
features of guarantees and settlement;
-
governance, institutional and regulatory framework
-
governance of PXs
-
governance of TSOs
-
governance of market rules
-
regulation authorities potentially involved (e.g. Energy, Competition),
relations between PXs and TSOs, interaction with TSOs and PXs of other
countries/regions;
-
monitoring and transparency rules;
-
market liquidity;
-
shareholders (operators, TSOs, governments).
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3.2.
Assessment of the features of other European implicit auction projects for the
congestion management
This assessment should highlight and compare the features of those day-ahead implicit
auction mechanisms for the congestion management that are already in place or that are
on the way to be developed in other European regions. In particular this study should be
focused on those features that have an impact on the integration (i.e. via explicit auction,
market coupling / dome coupling procedure …) with the implicit auction mechanisms
proposed in the CS region. This study should underline the coherent and divergent issues
with other regional implicit mechanisms. Parties acknowledge that some countries are part
of several regional initiatives and it should be taken into account in order to arrive at
coherent solutions. Therefore, such assessment should also focus on the opportunities
offered in terms of interregional integration between the Central-South region and other
regional initiatives.
4.
Preliminary feasibility study, part 1: Identification of general features for
implicit auctions models in the Central-South region and identification of the
borders where implicit auctions can be developed at an earlier stage
The results of the assessment differences in market designs in the CS region and
identification of coordination requirements with other relevant regions should give all the
background information in order to identify the general features of implicit auction models
that could be implemented in the Central-South region as a mean to allocate cross border
capacity.
In particular a special focus should be given to the identification of the requirements for an
efficient coordination with the “auction office project” that the TSOs of the pentalateral
group are developing.
Therefore, the implicit auction models should be “implementable” in all the borders of the
CS region either directly or subsequently through, e.g. explicit auctions / market coupling
/dome coupling/ market splitting or similar procedures.
Moreover, due to the presence of differences among countries and PXs of the CentralSouth region and considering that in the 6th Implementation Group meeting it was agreed
that a step-wise approach should be followed (i.e. the presence of borders where implicit
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auction should not be established or can be established only at a latter stage should not
delay the implementation of implicit auction in the other borders), the IG should identify
those borders where implicit auction could be implemented at an earlier stage [end of July
2008] in compliance with the Regulation n°1228/2003.
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5.
Preliminary feasibility study, part 2: Development of possible implicit auction
models for the borders where implicit auction can be developed at an earlier stage
(pilot project)
[By October 2008], PXs and TSOs and Regulators involved in the borders where implicit
auction can be established at an earlier stage should develop feasible implicit auction
models. The involved parties should keep the other parties informed on the design phase
and the development of the implementation process in order to ensure the compliance with
the “general features” identified in the first part of the preliminary feasibility study (see par.
4). Parties not involved should also provide information relating to projects that may affect
the aforementioned “general features” so as to enable the coordination with other ongoing
projects in relevant regions and the coordination with other ongoing projects in the region.
With this second stage of the feasibility study, the accounted models should identify the
general technical (market and grid model) and legal/governance aspects.
The detailed description of technical and governance aspects of the models is a task to be
carried out during the implementation phase of the project (after the MoU is signed).
6.
Development of a proposal for a MoU with a timetable for detailed design and
implementation
[By end of 2008], PXs and TSOs involved in the pilot project will present to Regulators a
draft proposal of MoU for the detailed design and implementation of implicit auction on the
CSE Region, detailing the various steps of the project, as a mean to allocate cross border
capacity in the identified borders.
The MoU:
- shall be open to the participation of PXs and TSOs of the borders not initially involved in
the project;
- shall include a timetable for the detailed design and implementation that shall be agreed
upon by interested parties prioritising the implementation on the basis of the results of the
above mentioned preparatory studies, feasibility studies and models.
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Who & When
What
[Indicative dates]
Study on the existing methods for day- GME and, if other borders are added to the
ahead allocation of cross border capacity in study, in collaboration with the relevant PXs
and TSOs; 2nd SG meeting, 21April 2008
the region
Assessment
of
differences
in
market
designs and identification of coordination Working groups [by end of June 2008]
requirements with other relevant regions
Identification of general features for implicit
auctions models in the Central-South region
and identification of the borders where IG [by July 2008]
implicit auctions can be developed at an
earlier stage
Development of possible implicit auction
models for the borders where implicit Involved PXs, TSOs and Regulators [by
auction can be developed at an earlier October 2008]
stage
Development of a proposal for MoU and Involved PXs, TSOs and Regulators [by
definition of timetable for implementation
end of 2008]
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