Q1 2015 Notes on energy and environmental markets...2015 Q1 23.59 21.23 2.36 Q1 2015 VS Q1 2014-1.90...
Transcript of Q1 2015 Notes on energy and environmental markets...2015 Q1 23.59 21.23 2.36 Q1 2015 VS Q1 2014-1.90...
Milan, May 2015
Notes on energy andenvironmental marketsat 31 03 2015
Overview of Italy and bordering
countries
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
1. Italian Market
• Demand and Supply
• Spot markets
2. Foreign Markets
• Spot markets
3. Environmental Markets: Green and White Certificates, EUA
Contents
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DISCLAIMER - This document has been prepared by A2A for convenience purposes only and for the benefit of investors and analysts solely and is based on public information. However this document shallnot give rise to any liability of A2A or any of its subsidiaries, directors, officers, employees or consultants as per the truthfulness, accuracy, completeness and updating of such information. This documentdoes not constitute an offer or invitation to purchase or subscribe any shares or other securities and neither it nor any part of it shall form the basis of or be relied upon in connection with any contract orcommitment whatsoever.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Summary – Q1 2015
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In Q1 2015 prices decreased slightly: the PUN Baseload closed at 51.78 €/MWh (-0.71 €/MWh compared to Q1 2014) and
the PUN Peakload closed at 59.04 €/MWh (- 3.76 €/MWh compared to Q1 2014).
Consequently, the Peakload/Baseload ratio decreased to 1.14.
The electricity demand was 78.1 TWh: down by 0.1 % compared to Q1 of last year, but seasonally adjusted it increased by
0.2%.
The supply side recorded an increase of 4.2% in thermoelectric production (+1.8 TWh). There was also an increase in
photovoltaic production (+10%) and a strong decrease in hydroelectric production (which has lost 3.4 TWh of production
compared to Q1 2014 due to the exceptional hydraulicity of last year).
The Clean Spark Spread (CSS) reference of Q1 2015 slightly improved compared to the same period of 2014. It is positive on
Peakload (+4.99 €/MWh) – although not by much – but still negative on the Baseload (-2.27 €/MWh), confirming the plight of gas-
fired thermoelectric producers.
The coal-fired plants are still profitable: the Clean Dark Spread (CDS) is 14.8 €/MWh, roughly at the same level of Q1 2014.
The GSE price of the Green Certificates (GC) produced in 2014 was 97.42 €/MWh, much higher than that of 2013 (89.28
€/MWh) due to the collapse in the PUN to which the GSE price formula is inversely linked.
The White Certificates are traded now at around 104 €/Tep.
The EUA price closed Q1 2015 at around 7 €/Ton confirming the positive expectation by the market on the current discussion
about the Market Stability Reserve.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
GWh Q1 2015 Q1 2014Var. %
2015/2014
Net Production
Hydro 9,459 12,806 -26.1
Thermo 44,484 42,709 4.2
Geothermo 1,438 1,339 7.4
Wind 5,214 4,620 12.9
Solar 4,468 4,063 10
Total net production 65,063 65,537 -0.7
Import 14,631 13,667 7.1
Export 1,127 275 309.8
Foreign balance 13,504 13,392 0.8
Pump storage 450 736 -38.9
Demand 78,117 78,193 -0.1
The electricity productionFurther drop in hydroelectric production
Source: Terna - Monthly Report on the Electricity System.
4
• In the first quarter of 2015 the reduction in electricity demand is only -0.1%.
• Hydroelectric production decreased strongly by 26.1%, due to a strong reduction in precipitations compared to the lastyear.
• For the first time over the last 3 years, thermoelectric production increased by 4.2%, partially due to the above mentionedreduction in hydro production. Also photovoltaic production continued to increase (+10%).
• There was also a little increase in the import-export balance (+0.8%).
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
65%
77%
67%62%
40%
63%
79%74%
71%
46%
60%54%
58% 55%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Zona Nord Zona Sud
COAL
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Q1 2015
41%
37%
44%
32%
42%
21%
33%
22%22%
18%
14% 15%17%
29%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Zona Nord Zona Sud
CCGT
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Load factor of thermo plants on day-ahead marketHuge increase in CCGTs load factor in the South Zone
• In the first quarter of 2015 the CCGT’s load factor increased in both the North and the South Zone. In the South Zone itdoubled, thanks to a 1.5 TWh increase in demand, entirely matched by CCGTs’ production, due to the exports to Greece.
• Coal load factors reduced slightly in the first three months of 2015 in the North Zone, and were substantially stable in the South.
5
(*) Load factor calculated for CCGTs not subject to dispatching restrictions (thermal load, CIP6, …)
Source: A2A Trading/Bidding & Dispatching calculations based on GME data
approx.2,000 hours/year
approx.4,800 hours/year
*
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
The electricity demandDemand increased by 0.2% seasonally adjusted
Source: Terna - Monthly Report on the Electricity System, Ref-E
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• In the first quarter of 2015 the electricity demand amounted to 78 TWh, with a small reduction of -0.1% (- 76 GWh)compared to Q1 2014.
• On a seasonally adjusted basis, there was an increase of +0.2 %.
• The reduction in consumption is particularly significant in North East (-1.4%) and in the Centre (-1.9%), while there is anincrease in South (+3%).
xx% Increase/reduction 2015 vs 2014
GWh Period Demand
2014 Q1 78,193
Q2 75,487
Q3 78,117
Q4 77,209
YEAR 309,006
2015 Q1 78,117
Q1 2015 VS Q1 2014 -0.1%
20.000
22.000
24.000
26.000
28.000
30.000
32.000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
GW
h
Italian electricity demand
2012
2013
2014
2015
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Diff [%] -2.0% +0.7% +1.1%
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
0
2
4
6
8
10
12
14
16
18
Distribution Thermo Industrial
bcm
Gas consumption Q1
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Gas consumption in ItalyThermoelectric and distribution uses increased by 13% in 2015
Source: Snam Rete Gas.
7
+13%
22.9 bcm
Total Consumption
in Q1 2015
• In Q1 2015 there was an increase in the gas consumption in the thermoelectric sector by over 13%, due to a lower
hydraulicity that contributed to an increase in CCGT production.
• Also distribution consumption increased strongly in Q1 2015 by 13%, thanks to a colder winter.
+13%
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
€/MWh gas PB GAS PREZZO TTF
SPREAD PBGAS-
TTF
2014 Q1 25.49 24.32 1.17
Q2 21.18 18.96 2.22
Q3 21.79 18.10 3.69
Q4 25.87 22.02 3.85
year 23.58 20.84 2.74
2015 Q1 23.59 21.23 2.36
Q1 2015 VS Q1 2014 -1.90 -3.09 1.18
Italian market: PB-GAS prices analysisWidening PB GAS/TTF spread
Source: GME data and internal analysis, Ref-E
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• In the first three months of 2015, gas prices reduced further by 1.9 €/MWh gas for PSV and by over 3 €/MWh for TTF; the
spread between the two markets has consequently widened.
• In this quarter the PB-GAS “G-1” platform has been frequently activated, showing price spikes of near 36 €/MWh.
0
5
10
15
20
25
30
35
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
gas
PB GAS
2012 2013 2014 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Italian Market: spot prices analysisPUN Baseload stable at around 52 €/MWh, Peakload decreased by over 3 €/MWh
Source: Gestore Mercato Elettrico (GME)
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• In the first quarter of 2015 the PUN decreased with respect to the
same period in 2014 by 0.71 €/MWh, even if in February and
March the prices were higher than in 2014 due to colder
temperatures, less hydraulicity and the effect of market coupling.
• The average Peakload prices, closing at 59.04 €/MWh, suffered a
substantial reduction with respect to 2014 (- 3.76 €/MWh).
• In April the Baseload and Peakload prices were, respectively, 47.84
€/MWh and 47.74 €/MWh with the Peakload price lower than the
Baseload price for the first time.
€/MWh PUN BL PUN PL PL/BL
2014 Q1 52.49 62.80 1.20
Q2 46.48 49.80 1.07
Q3 50.44 53.48 1.06
Q4 58.85 69.77 1.19
year 52.08 58.97 1.13
2015 Q1 51.78 59.04 1.14
Q1 2015 VS Q1 2014 -0.71 -3.76 -0.06
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
PUN Baseload
2012 2013 2014 2015
0
20
40
60
80
100
120
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
PUN Peakload
2012 2013 2014 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
47% 48%58% 60% 55% 55% 50%
12% 11%
10% 9%7% 10%
11%
12% 12%
11% 12%17% 15%
17%
19% 22%
19% 18% 18% 15% 17%
9% 7% 3% 2%2% 3% 3%
1% 3% 2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Q1 15
Fer
Olio e altri
Import
Carbone
Idro
Gas
Analysis of spot prices: marginal technology on MGPFurther drop in the CCGTs’ relative share to cover the demand
Source: Gestore Mercato Elettrico (GME)
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• In the first quarter of 2015 the number ofhours where CCGT technology set themarginal price on the energy marketsreduced further: the CCGTs representsthe marginal technology in 50% of thehours.
• The contribution of non-hydroelectricrenewable sources was stable, and theirimpact was confirmed at around 2-3% ofthe hours.
• The relative significance of the imports andcoal increased both at 17%.
0
20
40
60
80
100
120
140
160
North C North C South South Sicily Sardinia North C North C South South Sicily Sardinia
Q1 2014 Q1 2015
n.
ho
urs
Marginal Technology in hours where Price < 10 €/MWh
RES
Oil
Hydro
Import
CCGT
Coal
Others
• In the hours with very low prices (<10
€/MWh), the marginal technology is CCGT
for 50% (probably because of the strategies
on MGP and on MSD and because some
CCGTs in Siciliy are “must run”) and
renewables for 30%.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Impact of renewable sourcesZonal hours at zero price in the first quarter of 2015
• In Q1 2015 the number of hours in whichthe zonal spot price was zero decreasedcompared to the same period of 2014.
• Only Sicily this year had few hoursequal to zero (20 hours), mainly duringa peak in eolic production.
Note that the launch of Market Couplingmay require Italian market to adopt negativeprices. It is therefore likely that, in the newscenario with negative prices allowed, thezero prices seen until now will becomenegative values, further depressing theaverage Italian price.
Source: internal analysis
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The greater the latitude the lower the impact ofphotovoltaic production
-20
20
60
100
Sicily South Sardinia C South C North North PUN
Number of hours at 0 price
Q1 2013 Q1 2014 Q1 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
€/MWh
clean spark
spread on BL*
clean spark
spread on PL*
clean dark
spread on BL**
2014 Q1 -6.35 3.96 13.55
Q2 -2.72 0.60 9.04
Q3 1.75 4.79 11.23
Q4 -0.89 10.03 18.42
Year -2.03 4.86 13.07
2015 Q1 -2.27 4.99 14.84
Q1 2015 Vs Q1 2014 4.08 1.03 1.29
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Italian Market: clean spark/dark spread analysisCSS still under pressure, but slightly improving
• CSS on BL increased by 4.08 €/MWh, more than the CSS on Peakload (+1.03 €/MWh), because Baseload prices increasedmore than peakload.
• CDS increased by 1.29 €/MWh.
(*) Clean spark spread: difference between the PUN and the sum of: gas cost (PSV), CO2, CV cost (2014) and variable transport costs. The efficiency used for the CCGT technology isconventionally set at 53%. The CCT component is excluded because the spreads are measured with respect to PUN.
(**) Clean dark spread: difference between PUN and the sum of: coal cost including logistics, CV cost (2014), CO2 cost (CCT not included). The efficiency used for the COAL technology is 35%.
Source: internal analysis
-5
0
5
10
15
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
Clean Spark spread on Peakload
2014 2015
0
5
10
15
20
25
1 2 3 4 6 7 8 9 10 11 12
€/M
Wh
Clean Dark spread on Baseload
2014 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Liquidity of the wholesale forward marketMore interest in medium-short term products
Volumes in thelast 12 months
~640 TWh
Source: internal analysis
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• In Q1 2015 the forward market volumes surpassed theunderlying physical market by 1.9x (148 TWh vs 78 TWh).
• ¾ of the transactions have physical delivery (through a
broker or on MTE), while the remaining part are financiallysettled.
• The volumes traded through brokers are still predominantwith respect to those traded on IDEX or MTE.
• From June 2014 the German market EEX lists Italianfutures, thereby making the Italian market more liquid andmore accessible to foreign traders (reaching 27% of themarket share in only 10 months!).
No. deals in thelast 12 months
~ 41500
N.B: Data related to EEX, IDEX, MTE include OTC cleared deals.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
The cost of financing for renewable and assimilated sources
14
The «5th Conto Energia» ceased toapply on 6 07 2013 upon reaching theaccumulated annual cost of 6.7 billion€.
In 2013, 221 MW without incentivescame into operation and theinstallation of 500 MW and 1 GW isexpected for 2014 and 2015 (*)
Source: GSE – AEEG data - (*) Source: Deutsche Bank
This cumulativecost may not
exceed 5.8 billion €per year.
EnergyComponent at45% of the bill
total cost(18.6 c€/kWh)
In recent years the impact of the electricity component of the price to the end-customer has dropped from 60% to 46%. Conversely, theimpact of the system charges has significantly increased (from 9% to 23%), mainly due to the increase in the A3 component.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Contents
15
1. Italian Market
• Demand and Supply
• Spot markets
2. Foreign Markets
• Spot markets
3. Environmental Markets: Green and White Certificates, EUA
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
European spot electricity marketsHuge increase of prices in France and Switzerland
Source: internal analysis
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• The first quarter of 2015 was characterized by a decrease in prices in Germany and in Italy, above all in Peakload
prices. In France and Switzerland prices were much higher than Q1 2014 due to the colder winter compared to
the very mild season of 2014. In Italy the big reduction was concentrated in January (more than 8 €/MWh), while
starting from February prices in 2015 have been higher than those of 2014.
• The highest increase is on the French market, where the Baseload prices increased by 19%.
-4% 19% 9% -1% -5% 7% 4% -6%
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Spot price spreads between bordersSpreads reduction with France and Switzerland
• The spreads decrease between the spot prices of France and Switzerland on one side and the Italian North Zone on the
other side could be explained by means of:
• Italian wholesale price reduction for the end of Green Certificate mechanism (from 2 to 0 €/MWh);
• higher prices in France and Switzerland due to the lower temperature compared to those of 2014;
• the start of Market Coupling with France and Austria on February 24th. Cross border capacity is allocated, on a dailybasis, directly by a spot market algorithm in order to optimize the economic result (welfare). As a consequence,whenever the prices in France, Austria or Slovenia are higher than those in Italy, the market resolution algorithmreduces (or even reverts) the energy flow towards the North Zone (which increases its price) until the prices arecoupled.
• Spread with Germany remained almost unchanged due to the consistent price reduction in Germany for higher renewable
production.
Source: internal analysis
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Spreads 1st Quarter PzNORD - FR PzNORD - DE/AU PzNORD - CH
€/MWh €/MWh €/MWh
Spreads Q1 2014 14.12 18.39 9.28
Spreads Q1 2015 5.65 19.85 7.04
Spreads Q1 2015- Q1 2014 -8.47 1.46 -2.24
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Peak/Base ratio trendItaly and France Peak/Base ratio decreased further
In the first quarter of 2015 the Italian ratio fell to 1.14, due to a strong reduction in Peakload prices.
Source: internal analysis
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1,0
1,1
1,2
1,3
1,4
1,5
1,6
Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015
Peak/Base ratio
GERMANY FRANCE SWITZERLAND ITALY
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Correlation between Brent and Power in ItalyHigh level of correlation ONLY with strong movements of oil
• The 2014 confirmed the «disconnection»between the Brent prices and the electricityprices in Italy, more closely tied to gas which isfollowing different dynamics from those of oil.
• This correlation became more significantonly in the last months of 2014 due to thestrong decrease in Brent, which reached 44 $/bin the first week of 2015. Currently after reaching60 $/b level, oil is no more punctually affectingpower movements, more linked to gas.
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Source: internal analysis
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Correlation between forward Power and TTF in ItalyGas: key driver for power
• Correlation between gas and power is at a veryhigh level and in some weeks the movementspractically mirrored each other.
• This sign confirms the importance of gas as a keydriver for electricity prices.
• Even in this period of lateral movements, the twocommodities are moving very tightly.
Source: internal analysis
20
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Contents
21
1. Italian Market
• Demand and Supply
• Spot markets
2. Foreign Markets
• Spot markets
3. Environmental Markets: Green and White Certificates, EUA
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Environmental MarketsGreen Certificates (GC)
22
GSE informed that the RES-E Counter, updated to March 31st 2015, has reached the “yearly indicative cumulative cost of incentives” of 5.7Billion € granted to non-photovoltaic RES-E plants. According to Ministerial Decree of 6 July 2012 the expenditure limit is 5.8 Billion €.
The types of incentives taken into account in the yearly indicative cumulative cost are as follows:
• CIP 6 (renewable quota);• Green Certificates (as per Ministerial Decree of 18 Dec. 2008);• all-inclusive feed-in tariffs (as per Ministerial Decree of 18 Dec. 2008);• solar thermodynamic feed-in scheme;• incentives introduced by the Ministerial Decree of 6 July 2012.
A new Ministerial Decree is in process to be published; it will set new incentives/standards for non-photovoltaic RES-E plants for2015-2016 respecting the expenditure limit of 5.8 Billion €.
Starting from 2016 the Green Certificates system will disappear leaving room to feed-in tariff.
GME
Market
Year
GSE
w ithdraw al
price
GSE selling
price
Yearly
average
price
(*)
€/MWh €/MWh €/MWh
2008 98.00 88.66 79.92
2009 88.91 112.82 86.30
2010 87.38 113.10 82.14
2011 82.12 105.28 80.32
2012 80.34 103 74.12
2013 89.28 114.46 86.11
2014 97.42 124.9 96.00
(*) GCs year X exchanged during year X
GSE Prices
Source: GSE and GME
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
AEEG Tariff
Contribution on
each compliance
GME Market - Yearly
average price (*)
€/Toe €/Toe
2008 100 77.10
2009 88.92 87.19
2010 92.22 97.34
2011 93.68 103.22
2012 86.98 104.21
2013 110.27 112.27
2014 106.23 104.11
Environmental MarketsWhite Certificates (or TEE)
.
23
By 31st May 2015, Italian distributors have to surrender
6.75 MIO TEE in order to comply the 2014 Italian
efficiency target.
The obligated companies are 64 in total: 13 electric
distributors with a target of 3.71 MIO TEE and 51 gas
distributors with a target of 3.04 MIO TEE.
The binding target for 2013 was reached for 79.9% and the
remaining target (1 MIO TEE) has to be surrendered by 31st
May 2015.
In 2014 GSE has delivered 7.5 MIO TEE equivalent to an
energy saving of 2.7 Mtep in addition to 0.7 Mtep of TEE by
CAR.
- TEEs on the market are sufficient to comply with the
national target for year 2014.
106.23
Source: GSE
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Environmental MarketsEUA – ETS PHASE III
24
The EUA price in Q1 2015 had an upward trend closing at around 7 €/ton,
confirming the positive expectation by the market on the current discussion
about the Market Stability Reserve mechanism (MSR – adding/ withdrawing
allowances in order to avoid shortage/surplus according to a predefined
range).
The main issues concern:
• the start date of MSR: 2019 vs 2021
• backloaded allowances
EUA trend Q1 2015: average 7.07 €/Ton
EUA CER EUA/CER spread
€/Tonn €/Tonn €/Tonn
2008 22.66 17.95 4.71
2009 13.37 11.81 1.56
2010 14.47 12.45 2.02
2011 13.42 10 3.42
2012 7.5 2.96 4.54
Fase II 14.28 11.03 3.25
2013 4.5 0.45 4.05
2014 5.96 0.17 5.79
Q1 2015 7,07 0,43 6,64
Yearly price
Futures
December
Futures
DecemberFutures December