Market access: The Electricity Perspective BERN, OCTOBER 26TH 2018 - PowerPoint PPT Presentation

Market access: The Electricity Perspective BERN, OCTOBER 26TH 2018

ELECTRICITY | BKW | 26.10.2018 2 Agenda  Electricity cross-border trade  Price as a result of market integration – today and outlook  Regulation and externalities  Final remarks

ELECTRICITY | BKW | 26.10.2018 3 Electricity cross-border trade – Europe Commercial Exchanges 1 2017 [TWh] 2 2 Gains from trade 1 4  Commercial advantages : Economies of Scale, 5 1 Location economies 3 14 3 8  Energy security : Trade as a back up 32 9 1 5 11 6 2  Switzerland as a special case: import, 18 2 export and transit 18 Net Exporter 13 Net Importer 3 [1] Exchanges may differ significantly from to actual physical flow

ELECTRICITY | BKW | 26.10.2018 4 Electricity cross-border trade – Switzerland (I) Commercial Exchanges 1 2017 [TWh] 8.5 9.5 1.0 Electricity hub 5 5  France and Germany: net exporter Net 3 10.9 5.7 5.7 5.7  Italy: net importer Generation 2  Switzerland: transit 61.5 Import 12.5 5.7  Almost one-third of domestic generation as transit Export 1.6 <0.1 17.8 0.2 18 [1] Exchanges may differ significantly from to actual physical flow [2] Total generation incl. pump storage hydro [3] Arrow sizes are indicative and not linear to actual exchanges

ELECTRICITY | BKW | 26.10.2018 5 Electricity cross-border trade – Switzerland (II) Monthly Balance [TWh] 3 Effect of hydro seasonality 2 Export  Higher demand during winter 1  Lower hydro generation (run of river) during winter 0  Net importer during winter  Net exporter during summer -1 Import -2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020 [1] Simulation for 2020

ELECTRICITY | BKW | 26.10.2018 6 Price as a result of market integration Power Prices [€/MWh] 100 80 60 40 20 0 Italy Switzerland Germany

ELECTRICITY | BKW | 26.10.2018 7 Outlook: Change in power plant structure Net-change of power plants - Switzerland and neighboring countries until 2040 [GW]* 120 90 Need for back-up 60 power plants Germany: Accelerated 30 Caol exit? 0 -30 -60 Hydro Nuclear Coal Solar Wind Gas Wasser Kern Kohle *Based on TSO's and Regulators projections

ELECTRICITY | BKW | 26.10.2018 8 Outlook: More stochastic generation Generation and Demand: CH & Neighbors [TWh/year]* 1600 1400 1200 1000 Stochastic 800 600 Flexibel 400 200 Base 0 2017 2030 2040 Nuclear & Coal Gas Hydro Wind & Solar Consumption *Based on TSO's and Regulators and own projections

ELECTRICITY | BKW | 26.10.2018 9 Outlook: Increased price volatility Frequency of extrem prices [proportion of hours]* 10% 2040 8% More price spikes 2040 6%  Very low / very high prices  Flexibility value 4%  Relevance of short run markets  Advantages for (pumped) storage 2% today today 0% <=0 €/MWh >100 €/MWh *Own price projections

ELECTRICITY | BKW | 26.10.2018 10 Regulation and externalities: Market coupling More efficient cross-border trade  Energy and (scarce) cross-border transmission capacities are traded simultaneously  More efficient use of transmission capacities 1  Opportunities for flexible hydro power, but…  Switzerland in the market coupling?  Loop flow issues without market coupling Coupled under MRC 4M MC Coupled under MRC (without capacities) Progressing toward market coupling [1] Lower transaction costs; higher use of existing capacities; more liquidity in short run markets

ELECTRICITY | BKW | 26.10.2018 11 Regulation and externalities: Capacity markets Market design for energy security  Capacity mechanisms as a complementary instrument – beside spot market earnings  Incentives to (re-) invest into power plants  Mechanisms limit spot prices – also in Switzerland Capacity payment Strategic reserve Capacity market

ELECTRICITY | BKW | 26.10.2018 12 Final remarks More renewable energy in Europe  Location economies makes trade even more relevant  Security of supply needs to be addressed in a more regional context  Flexible power plant capacity as an asset – for trade and security of supply Swiss specificities  Historical role as an electricity hub  Trade as a pillar for business and security of supply – today and in the future  Trade as an instrument to market the (growing) value of flexible hydro power

Questions? urs.meister@bkw.ch www.bkw.ch