Intraday Capacity Pricing...Author Matthew Ramsden Created Date 10/24/2014 5:32:13 PM
22
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary. Intraday Capacity Pricing European Energy Regulators’ Workshop CLIENT: Ofgem DATE: 27/10/2014
Transcript of Intraday Capacity Pricing...Author Matthew Ramsden Created Date 10/24/2014 5:32:13 PM
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Intraday Capacity Pricing European Energy Regulators’ Workshop
CLIENT: Ofgem
DATE: 27/10/2014
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Contents
Approach
Challenges
Options
Assessment
Further analysis
Q&A
2
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Approach
3
Specify principles
Identify challenges
Develop options
Assess options
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Principles
Allocative efficiency
No distortion
Investment signals
Fairness of allocation
Simplicity
4
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Challenges
Allocative efficiency
No distortion
Investment signals
Fairness of allocation
Simplicity
5
Avoid unutilised capacity
where there is a price
differential
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Challenges
Allocative efficiency
No distortion
Investment signals
Fairness of allocation
Simplicity
6
Potential difference in rent
distribution between DA and
ID markets
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Challenges
Allocative efficiency
No distortion
Investment signals
Fairness of allocation
Simplicity
7
Reduced ID congestion
rents
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Challenges
Allocative efficiency
No distortion
Investment signals
Fairness of allocation
Simplicity
8
Difficult with continuous
trading during sudden
changes
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Challenges
Allocative efficiency
No distortion
Investment signals
Fairness of allocation
Simplicity
9
Find balance between
theoretical optimum and
practical issues of
transparency
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Options
10
…but outturn spread not
known in advance…
Capacity is being used to
arbitrage a price spread…
…so need (some) price
discovery
Allocate tranches at
different prices
Energy bids/offers visible in
neighbouring market
adjusted by this price
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Price scaling
11
Price
Import Export
Max import
capacity
Max export
capacity
Net flow
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Price scaling
12
Price
Import Export
Max import
capacity
Max export
capacity
Net flow
Example
start point
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Price scaling + move to zero price
13
Price
Import Export
Max import
capacity
Max export
capacity
Net flow
As Gate
Closure
approaches
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Dynamic pricing
14
Price of next
available
tranche
Price of capacity
in hypothetical
auction (not
observable)
Time before Gate Closure
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Dynamic pricing
15
Price of next
available
tranche
Price of capacity
in hypothetical
auction (not
observable)
Time before Gate Closure
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Dynamic pricing
16
Price of next
available
tranche
Price of capacity
in hypothetical
auction (not
observable)
Time before Gate Closure
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Options
17
…but outturn spread not
known in advance…
Capacity is being used to
arbitrage a price spread…
…so need (some) price
discovery
Allocate tranches at
different prices
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Options
18
…but outturn spread not
known in advance…
Capacity is being used to
arbitrage a price spread…
…so need (some) price
discovery
Allocate tranches at
different prices
…or sell rights and let
market participants decide
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Options
19
…or sell rights and let
market participants decide
►Auction capacity rights
shortly after DA auction
►Track rights by
participant on ID
exchange
►Reflect starting state of
implied flows
►UIOLI towards Gate
Closure
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Assessment
20
Dfdsfds Principle
Price Scaling Move to zero price
Dynamic pricing
Auction of rights
Allocative efficiency
No distortion dsfds
Investment signals
Fairness of allocation
Simplicity dsfjsdl
Compliance sfd
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Further analysis
Define parameters
– Little empirical evidence – so start simple
– Change process to enable updates as ID market develops
– Metrics to evaluate performance against principles
Define approach for capacity changes
Assess system requirements
21
Copyright 2014 by Baringa Partners LLP. All rights reserved. Confidential and proprietary.
Q&A
22
