The European Electricity Market Integration and some Thoughts on Gas Markets

1
The European Electricity Market Integration and
some Thoughts on Gas Markets

• Market Coupling and Ways Forward
• Lene Sonne
• Vice President, Market

2
Agenda

• The Vision
• Status of market coupling projects
• Possible ways forward
• EMCC an overarching mechanism First of its kind
• Integrating gas markets

3
Vision for European Electricity Markets
Single European Market Transparent and Liquid
Market, Free trade across all National Borders
Socio-Economics

• Effective utilization of the existing power
  system
• Merit order activation of generators despite
  geographical location
• Implicit auctions
• most efficient allocation method
• should be applied at all congestion points

Basic Requirements
Energy bid/offer information and cross border
capacity PEX-TSO coordination
4
Status of existing Regional Markets
The first Inter-regional Coupling
5
EMCC and Tasks

• EMCC - European Market Coupling Company , private
  limited company (GmbH)
• TSO and PEXs equal Shareholders
• EMCC is located in Hamburg

• Set the correct flows
• Collect congestion revenue
• Publish and maintain information ETC

• Calculate local market prices
• Settlement ETC..

6
Possible ways Forward

• Several regional/local solutions
• Extremely important to coordinate these solutions
• How
• Selecting compatible regions for further
  integration
• An overarching mechanism to coordinate regions

7
Selecting Compatible Regions for Further
Integration

• Condition
• - Efficient exchange on both sides of the
  congestion point
• Analyze Potential benefit compared to challenges
  of integration
• Potential benefits
• secure right direction of flow on
  interconnections
• Sufficient size of cross border capacity
• Challenges of integration
• Number of stakeholders, difficulties of
  multilateral agreements
• Necessary market harmonization
• A gradual process that eventually extends to a
  Pan-European solution

8
Overarching Mechanism to Coordinate Regions less
need for full harmonization
Overarching Mechanims EMCC
MS (Nord Pool
MC (CWE)
Market Coupling
PEX 2
PEX 1
Price area
Price area
9
Governance of the Market Coupling Process

• Several stakeholders involved high level of
  governance challenges
• Stepwise harmonization considered to be the best
  option
• Need for regulatory guidelines
• Indicate best practice for market coupling
• Require commitment from all stakeholders

10
Integrating gas markets

• The development of the gas market has been
  lagging behind compared to the electricity
  market.
• An integrated and well functioning market for gas
  must be the final goal.
• The EU Electricity Gas markets 3rd legislative
  package
• A vision to make the internal gas market work.
• Same development for gas and electricity?
• In principle yes, but differences must be
  recognised.

11
Evolution of Gas and Electricity Markets
Time

• The evolutionary path for gas might be different
  from electricity
• However, the final goal must be an efficient
  integrated European gas market

12
Steps to be taken

• Transparent prices
• Clear trend - gas exchanges are being established
  around Europe
• Further step
• Short-run
• increase utilisation of capacity
• cooperation between TSOs to harmonize capacity
  products
• Medium-run explicit capacity auctions
• Long-run market coupling between existing gas
  exchanges
• An integrated market for gas is possible but
  some serious challenges must to be solved.

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