La disciplina del mercato elettrico

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GOVERNANCE, REGULATION AND MARKET INTEGRATION IN
EUROPE

SALVATORE ZECCHINI APEX Conference Sidney,
October 13, 2008

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Power exchanges in Europe (year 2008)
Source European Energy Exchange (EEX) and
Powernext
3
European power markets restructuring process
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Main European power exchanges ownership structure
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Market integration benefits

• Reduced costs
• -) lower transaction costs for importing and
  exporting electricity
• -) lower operational costs for system operators
  and market participants
• -) lower reliability costs associated to the
  need to procure reserves and other ancilliary
  services
• -) more efficient use of generation resources
• Lower price volatility
• Increased competition
• Improved price signals for investment
• Larger opportunities to invest in renewable
  energy as a result of broader market demand

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Requirements for effective market integration

• Horizontal integration of transmission and
  network operations
• Vertical separation of functions
• Non-discriminatory access to the grid
• A well functioning and liquid wholesale market
• Efficient allocation of scarse transmission
  capacity
• Adequate investment in new capacity

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Competition and Liberalization Indicators
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Liberalization of European electricity markets
Good1
Average2
Low3
Poor4
1 Good all indicators are satisfied 2 Average
3 indicators out of 4 are satisfied 3 Low 2
indicators out of 4 are satisfied 4 Poor no more
than 1 indicator out of 4 is satisfied
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Electricity sector generation (year 2006)
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Electricity sector transmission and distribution
(year 2007)
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Electricity Market Cross border capacity across
Europe (year 2006)
Interconnection capacity (NTC) as a ratio to
installed generation capacity
Source ERGEG 2007
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Electricity consumption and cross-border
exchanges in European regions (year 2005)
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Power prices correlation (2007)
Source European Market Coupling Company (EMCC)
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NRAs (National Regulatory Authorities) Powers

• Independence from the government

• Power to set grid access tariffs

• Power to set reference retail prices

• Power to control access to gas storage

• Power to promote competition

• Sanctioning powers

• Definition of public service obligations and
  quality standards

Source GME elaboration on IERN data
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Market design harmonization issues

• Trading arrangements
• Traded products
• Algorithms and matching rules
• Timing
• Monitoring and transparency rules
• Market liquidity
• Guarantee and settlement system

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European Power Markets Liquidity and Volumes
(2007)
Source Volumes from GME and Reuters data.
Liquidity computed as a ratio on national
consumption based on Nord Pool estimates for the
Scandinavian market and UCTE (union for the
co-ordination of transmission of electricity )
data for the other countries.
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Ergeg Electricity Regional Initiatives
Source ERGEG Annual Report, 2007.
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Issues currently tackled across the electricity
REMs

• First focus on a few key issues to deliver results

work in progress not tackled currently
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Day Ahead transmission capacity allocation (June
2007)
Source ERGEG Monitoring Report Compliance with
Regulation 1228/2003, July 2007.
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Status of existing Regional Markets
The first Inter-regional Coupling
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Market integration models

• Unified Pan-European solution
• Horizontal integration
• Inter-regional Dome Coupling

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Dome Coupling
European / multiregional solution
DOME COUPLING
Regional solution
REGION 1
REGION 2
REGION 3
REGION 4
E
F
G
H
I
C
D
J
L
M
k
B
Market areas
A
Market splitting
Volume coupling
Price coupling
Source Europex-ETSO interim report on
inter-regional congestion management, April 2008.
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The third package for internal energy markets
key proposals

• Effective unbundling
• Ownerhip unbundling
• ISO (Independent System Operator)
• Other solutions
• Improved cooperation of TSOs to develop a
  European Network
• Creation of a European Agency for Regulatory
  Cooperation (ACER)
• Enhancement of national regulators powers

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Conclusion how to integrate national and
regional markets

• Pragmatic bottom-up approach
• -) institutions set up the general framework
• -) technicalities worked out by interested
  parties TSOs, PXs and
• stakeholders
• Expected result progressive convergence of
  national interests
• Dome coupling could represent a compromise
  solution granting
• -) enough flexibility and efficiency
• -) the possibility to extend integration beyond
  the current regional
• setting

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Conclusion which goals the internal European
energy market should pursue?

• To cover the whole of the EU and possibly other
  contiguous areas
• To promote the efficient use of the European
  interconnected networks
• To ensure security of supply
• To provide transparent and competitive price
  formation mechanisms
• To support the development of liquid and
  efficient markets in all areas
• To extend to markets for natural gas