ENERGY COMMODITIES CONFERENCE 2018 · 2019-06-24 · ENERGY COMMODITIES CONFERENCE 2018 Thursday...

ENERGY COMMODITIES

CONFERENCE 2018 Thursday May10th | gazARTE Live, Athens

“Greek Electricity Market :

Current status and transition to the EU Target Model”

Dr. Christoforos Zoumas

Director, Electricity Markets Operation, LAGIE

Overview

Market evolution & current status

Opening-up market and competition for wholesale and retail:

the Greek NOME-equivalent mechanism

Market reform towards the EU Target Model: key design factors

Extending the single day-ahead market

Overview of Forward, day-ahead and intraday markets

The Hellenic Energy Exchange:

conveying the Market to new operation standards

Challenges & Opportunities

"Greek Electricity Market: Current status and transition to the EU Target Model", Thursday May10th | gazARTE Live, Athens

Market evolution & current status


"Greek Electricity Market:

Current status and transition to the EU Target Model"

Market Evolution:

Strongly governed by Law & Regulation


4

Mandatory Pool / Day-Ahead Scheduling

NOME Auctions

Target Model

1999

2005 2016 2018

2019

L.2773/1999 System &

Market Code

L.4389/2016

L.4414/2016

L.4425/2016

L.4512/2018

L.4533/2018

Exchange

Rulebooks

Market Evolution: Figures

Price

(€/MWh)

Volume

(TWh)

Participants

5


26

36 40

35 31

35 37 40

45 45

10

30

50

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

55,59 55,47 55,07 56,28

54,73

51,63 53,16 53,07

55,26 55,80

40

50

60

43,35 45,66

59,36 56,60

41,47

57,47 51,92

42,84

54,68 49,88

20

40

60

80

Market Evolution: Design flaws & issues raised

Market open-up and main issues

New entrants acquired gas-fired units and RES :

non-equivalent portfolios and asymmetric competition

price formation issues : Marginal Prices non-relevant to short-term scarcity

No interest for physical bilateral contracts between producers and suppliers:

gas price levels prohibiting competitive physical hedging for vertically integrated companies

Capacity Market : designed to provide adequate capacity and security of supply.

Failed to act as a hedging mechanism for suppliers

Preservation of bidding rules for thermal units (30%-rule) distorted the SMP and conveyed the market interest to uplift accounts

Single-byer and absence of forward-hedging market

resulted in hindering the opening-up of the retail market

Lack of effective regulation and continuous risk-management in DAS resulted in transactions deficits and retail market setback

6


Opening-up market and competition for wholesale and retail :

the Greek NOME-equivalent mechanism




Forward Electricity Products Auctions System

The Greek equivalent to France NOME mechanism

Entered in force by Law 4389/2016 and other supplementary legislation & regulation

A strictly regulated mechanism to provide access to incumbent owned lignite and

hydro production for enhancing competition at the wholesale and retail market level

Adopted as a measure equivalent to the structural arrangements of the “small-PPC”

Yearly schedule of released capacities linked to ambitious retail share reduction

targets

PPC as a seller of Forward Products and Eligible Suppliers entering a supplementary

transactions contract

Auctions of Yearly forward products with obligation of physical delivery and a

predetermined Reserve Price reflecting variable costs of lignite and hydro production

Secondary Market enabling efficient market-based reallocation of volumes among

suppliers and entry of Traders

Physical delivery and settlement of acquired quantities effectuated in DAS via

supplementary clearing

8


FEPAS: Quantities & Auction Prices

Released Quantities & Delivery Auction Products & Prices

9


FEPAS: Secondary Market & Usage Declarations

Quantities and Prices Beneficiaries: Suppliers & Traders

10


FEPAS: Price hedging & Local vs. Exports Utilization

SMP vs. weighted FEPAS Price FEPAS Volumes: Local & Exports Analysis

11


FEPAS: retail market share targets 12


FEPAS: conclusions & future

Over the last two years FEPAS gained increasing interest and acceptance

Started with eleven (11) Eligible Suppliers in 2016, doubled in 2017

100% of Suppliers active in the retail are now using “NOME” quantities

Traders also involved: exploiting opportunities in the Secondary Market and increasing demand and price levels at the auctions

Retail Market Development

Development of retail network of existing and new entrants

Retail rice discounts reaching up to 35%

Bundled gas and power products exploiting the opening of the gas retail

Competition widen: PPC provides discounts for prompt-payers

Market share targets: ambitious time-schedule taking into consideration the country economic status and the numerous issues to be addressed in the electirictymarket

Steps-forward: Lignite Units disinvestment and Derivatives Market

Schedule of Lignite Units disinvestment (L.4533/2018) to affect the released quantities

Organized Financial & Forward (OTC/Bilateral) market to gradually replace FEPAS

13


Market reform towards the EU Target Model:

key design factors




Market Reform: key factors & Guidelines

HLMD target: select the appropriate market modeling options in order to

re-organize the wholesale electricity market and tackle the existing flaws,

extend the single day-ahead scheduling (DAS) to forward, day-ahead, intraday and

balancing markets compatible for market coupling under the CACM regulation,

and taking into consideration :

the local & regional market characteristics, participants shares and interests

the proper functioning of the markets in terms of liquidity and price formation

HLMD deliverables

Qualitative high level design for each necessary market

Quantitative analysis on specific market design options

List all the necessary Legislative & Regulatory interventions

15


Market Reform: Projects, Law & Regulation

HLMD project: assigned to ECCO International Inc. under the monitoring of RAE and with the active support of ADMIE & LAGIE

Project kick-off: April 2014

HLMD presented to the market participants: November 2014

L.4425/2016: Setting the necessary interventions for the establishment of markets with obligation of physical delivery

HLMD Guidelines: published by RAE (dec. 67/2017) for setting-up the regulatory framework required for drafting the Market Codes.

DLMD project: Development of the DLMD and the Market Codes

managed by the EC-Joint Research Center

Under the close monitoring of RAE and active support of ADMIE & LAGIE

Project kick-off: June 2017

Contracted consultants delivered by September 2017:

DLMD and Codes for each market

High level description of Market Platforms specifications

Qualitative and quantitative analysis for specific parameters requested by the Regulator

16


Extending the single day-ahead market

Overview of Forward, day-ahead and intraday markets




Derivatives/Forward Market: Design options (1/2)

Traded Products & Participants

Participants: electricity market participants or financial institutions

Base-load or Peak: Yearly products cascaded to Quarterly and Monthly sub-products

Cash Settlement or Physical Settlement

Participation in the exchange-based organized market

Voluntary on a portfolio basis

Order types : Market – Limit – Linked – Iceberg (Price Tick 1c€/MWh, Volume tick 1MWh)

Order characteristics (GFD, GTC, GTD, FAK, FOK , AON, Stop Order)

Trading Method

Continuous : matching priority of price / time

Last trading day: 3 days prior the product reference month for products with physical

delivery

18


Forward Market: trading design options (2/2)

Price and Position Limits by relevant Regulatory decisions

Contract daily price variation limits (± Χ % of the previous day settlement-price)

Possibility to enforce position limits to Participants

Bilateral Contracts

Pre-agreed trades or OTC bilateral: cash-settled or with obligation of physical delivery

Contracts registration and clearing via the CCP

Limits set by Regulator on bilateral & exchange-based contracts volumes to maintain

the liquidity and price formation of the DAM

19


Derivatives Market: Clearing & Settlement (1/2)

Clearing & Risk Management

Central Clearing by Clearing House (ATHEX-Clear) according to EMIR requirements for CCPs:

Calculates the positions of the participants

Calculates required margins, evaluates guarantees and defines credit limits

Guarantees the financial leg of the transactions (using Guarantees, Clearing Fund, Own Resources)

Executes the Cash Settlement

Apply sanctions for non-performing Clearing Members

Facilitate the physical delivery to the DAM

Clearing Members (General or Direct):

Function as Counterparties to the Clearing House

Participate to Clearing Fund and provide guarantees to the Clearing House

Provide clearing services to Non Clearing Participants

Set Credit Limits for Non Clearing Participants

20


Derivatives Market: Clearing & Settlement (2/2)


Risk Mitigation Measures

Preorder risk management (Credit Limits based on prefunded guarantees)

Margins

Default Fund

Clearing House Own Fund

Settlement

Next working day settlement using Target2

Settlement to be performed by designated Settlement Banks (any Greek or

International Bank)

21


Day-Ahead Market Trading: Design options (1/2)

Traded Products & Participants

Participants: Producers, Suppliers, Traders, RES Aggregators: Regulator License + TSO

Balancing Contract

Day-ahead hourly energy products

Physical Settlement of forward traded positions: Nominations to DAM


Semi-compulsory for the Producers (orders submitted to cover availability)

Bidding: Asset based to maintain price formation transparency and facilitate market

monitoring

Unit-based for dispatchable units, per Bidding Zone for Demand

Per Interconnection for non-coupled interconnections (Traders’ explicit participation)

Aggregated (portfolio) for RES per-technology and bidding zone

Order types: Simple Step-wise and Linear, Block

Selection of available order types under approval of the IBWT/MRC/PCR and RAE

22


Day-Ahead Market: trading design options (2/2)

Bidding Conditions & Validations

Bidding price CAPs and Floors under relevant Regulatory decision

Credit Limit validations for Buy Orders imposed by the Clearing House and the

Clearing Members

Bidding for the whole available capacity for dispatchable units

Trading Method

PCR Auction : matching priority of Order price / time

Solution: Common EUPHEMIA/PCR Algorithm in Isolated or Coupled mode

Trading Results

EL - Bidding Zone Price and Net-Position

Harmonized Clearing Prices applicable as per ACER decisions (3.000 €/MWh | -500 €/MWh)

Sell & Buy Orders acceptance status for each Order/Participant

Cross-borders schedules for coupled & non-coupled borders

23


Day-Ahead Market: Clearing & Settlement (1/2)


Central Clearing by Clearing House:

Calculates the positions of the participants

Calculates required margins, evaluates guarantees and defines Credit Limits

Guarantees the financial leg of the transactions (using Guarantees, Clearing Fund, Own

Resources)

Executes the Cash Settlement

Take-on the Clearing of coupled Cross-border flows

Apply sanctions for non-performing Clearing Members

Clearing Members (General or Direct):

Function as Counterparties to the Clearing House

Participate to the Clearing Fund and provide guarantees to the Clearing House

Provide clearing services to Non Clearing Participants

Set Credit Limits for Non Clearing Participants

24


Day-Ahead Market: Clearing & Settlement (1/2)

Risk Mitigation Measures

Preorder risk management (Credit Limits based on prefunded guarantees)

Margins

Default Fund

Clearing House Own Fund

Settlement

Next working day settlement using Target2

Settlement to be performed by designated Settlement Banks (any Greek or

International Bank)

25


Intra-Day Market Trading: Design options (1/3)

Gradual multi-phase approach

1st Phase: Three (3) Local Intraday Auction Sessions

2nd Phase:

One (1) Local Intraday Auction Session

Two (2) Regional Auction Sessions with implicit allocation of Cross-border capacity

Continuous-Trading on XBID Pan-European Intraday Coupling


Voluntary for all Intraday Market Participants

Bidding: Sessions bidding conditions as per Day-Ahead Market

Products

Local & Regional Auction Sessions : Hourly products (partially or for the whole day)

XBID Continuous Trading:

Half-hourly. Partial or whole-day contracts’ extension

26


Intra-Day Market Trading: Design options (2/3) 27


Intra-Day Market Trading: Design options (3/3)

Order types

Local Sessions: Simple Step-Wise & Linear

Regional Sessions: As per Local Sessions. Block Orders under evaluation for acceptance in the IBWT

EU XBID: Limit, Linked, Iceberg (Price Tick: 1c€/MWh, Volume Tick: 0.1 MWh)

Execution & Time Specs: NON, FOK, IOC, AON, GFS, GTD

Bidding Conditions & Validations

Bidding price CAPs and Floors under relevant Regulatory decision

Credit Limit validations for Buy Orders imposed by the Clearing House and the Clearing Members

Orders Matching

Price / time

Intraday Results

Local & Reginal Sessions: As per Day-Ahead Market

EU XBID: Volume and Price for each matched Order

28




The Hellenic Energy Exchange:

conveying the Market to new operation standards


Law 4512/2018: Setting-up new Business & Role

Energy Derivatives Products:

Setting-Up Derivative Products: Including Cash Settled Products

Provisions for setting up the specific Organized Market Operation and for OTC Bilateral

Setting-up the Hellenic Energy Exchange & Energy Clear

Hellenic Energy Exchange:

Take-on operation for Power Spot & Derivatives Markets

Provisions for developing products for Environmental & GAS Markets

Energy Clear:

100 % Subsidiary of Hellenic Energy Exchange

Act as a Clearing House for Day-Ahead and Intraday Markets (physical commodities)

ATHEX Clear:

Act as a CCP for the Energy Derivatives Market

30


Hellenic Energy Exchange: Business Model 31


Hellenic Energy Exchange:

Build on existing experience & infrastructure

LAGIE: contribute the Markets Branch

Spin-off the Markets Operation, Regulatory Affairs and Monitoring

Experience on Spot Markets Operation & Clearing, EU Market integration and development

LAGIE Renewables Branch to follow the Operator of Renewable Sources and Guarantees of Origin (legal successor of LAGIE).

ATHEX: provide infrastructure & support

IT & Market Platforms development, operation and maintenance

Corporate Organization

Clearing, Risk Management and Settlement

Selected Business Plan

Capitalize on existing expertise and invest on the necessary infrastructure

Provide competitive services to Market Participants in Greece

32



For Market Participants

Adapt to the new market organization for trading and clearing

Invest on infrastructure, knowhow and people

For the Energy Exchange

Establish its operations for the new markets in time:

Systems adaptation and development: Q3-Q4 2018

Dry-runs: Q1-2019

Operational ready: Q2-2019

Succeed to provide competitive services to the Participants

Take position in the Region and develop necessary synergies

34


….thank you for your attention !




ENERGY COMMODITIES CONFERENCE 2018 · 2019-06-24 · ENERGY COMMODITIES CONFERENCE 2018 Thursday...

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