model Rogner hotel, Tirana 21 April 2016 Nord Pool Consulting- - PowerPoint PPT Presentation

Albanian market model Rogner hotel, Tirana 21 April 2016 ’ Nord Pool Consulting- 2016. Confidential

Profile Hans-Arild Bredesen Hans-Arild has more than 20 years of experience from international projects in the energy sector based on his work with the Nord Pool model • Implementation of the Southern African Power Pool Hans-Arild Bredesen Consultant • Start of service power exchanges in Croatia and Bulgaria CEO, Nord Pool Consulting • Setting up a national power exchange in India Mobile: + 47 90 70 43 80 • Implementing a Wholesale Market Opening for SEE (South East E-mail hans-arild.bredesen@npspot.com Europe) • High level design for the Albanian Power Exchange Selected Project References  BSc in Computer Science from Høgskolen I Østfold , Norway • Author of “Power to the People”  Involved in the electricity deregulation process since 1992.  Technical project manager for the market systems at Nord Pool Education and Experience  Product manager for wholesale energy market participant systems for the Nordic market.  Wide international experience from key roles in the development of strategies for trading, scheduling and settlement systems for PXs and TSOs in California, Ireland, India, Romania, Turkey, Ukraine, Southern Africa and South-east Europe. 2 2 Nord Pool Consulting- 2016. Confidential

Nord Pool's role in the market nordpoolspot.com/academy 3

Our role  To provide liquid, efficient and secure power markets to our customers  To provide accurate information to the whole market, ensuring transparency  To provide equal access to market for everyone wanting to trade power  To be the counterparty for all trades; guaranteeing settlement and delivery nordpoolspot.com/academy 4

Stakeholders  Owned by Nordic and Baltic transmission system operators  Regulated by Norwegian Water Statnett – Norway – 28.2% Elering – Estonia – 2% Resources and Energy Directorate (NVE) Svenska Kraftnät – Sweden – Litgrid – Lithuania – 2% 28.2% Energinet – Denmark – 18.8% AST – Latvia – 2% Fingrid – Finland – 18.8% nordpoolspot.com/academy 5

Membership statistics  Nord Pool has altogether approximately 380 members  Majority of the members are Clients: – Participants: 40% (149) – Client representatives: 2% (6) FINLAND 61 – Client: 59% (222) SWEDEN 84  Currently 19 different countries represented through 123 NORWAY 14 members ESTONIA  12 High level of versatility in terms of the type of market LATVIA participants: DENMARK LITHUANIA 17 15 – End consumers, producers, retailers, brokers UK 25 – Starts ups and very large utilities 13 – GERMANY Industrial companies, municipalities, service providers, etc. members from other countries 15 Source: Nord Pool 14 th March 2016 nordpoolspot.com/academy 6

Our history 1991 1993 1996 1998 1999 2000 2002 2008 2010 2010 2012 2013 2014 2014 2014 2015 2016 nordpoolspot.com/academy 7

Europe’s leading power market Nordic/Baltic and UK – day-ahead and intraday German market – intraday Serviced markets Nominated NEMO in Austria, France, Germany and the Netherlands. nordpoolspot.com/academy 8

Roles of different parties in Nordic Producers Balancing market Imbalance Physical sales Financial settlement hedging Generation schedules Bilateral sales Reference price ATC TSO* TSO* Results Balancing market Imbalance Physical Financial Generation settlement purchases hedging schedules Consumers * Svenska kraftnät , Statnett, Fingrid, Energinet, Elering, Litgrid, AST nordpoolspot.com/academy 9

The Nord Pool model for trading power 10 years 24 hours Intraday Intrahour 1,5 months Physical delivery Time Financial market Financial market Hedging of sell/buy price in advance Reference price (system price) Day Ahead market (Elspot) Hourly price formation for the following day Elspot Intraday market (Elbas) Continuous trading 24/7, new transmission capacity opens after the publication Day-ahead prices Elbas Balancing markets Intra-hour market for maintaining the power balance Balancing market Imbalance settlement Post-hour settlement of deliveries between market participants Imb. settl. Physical delivery Financial settlement Financial settlement Physical delivery Nasdaq Nord Pool AS TSOs nordpoolspot.com/ac1010ademy 10

Nordic consumption vs. Elspot volumes traded nordpoolspot.com/academy 11

European Day-ahead market nordpoolspot.com/academy 12

European target model ​ The European target model shall ensure the completion of the EU Internal Energy Market for electricity . Guidance and standards for each timeframe: Day Ahead (DA), Intra- Day (ID), Balancing and Forward Market. ​ A fair and transparent day-ahead power price is an key factor FINLAND for the models success. SWEDEN RUSSIA NORWAY ​ Price Coupling of Regions (PCR) • ESTONIA The initiative of 7 Power Exchanges to develop a single price coupling solution, launched Feb 2014 LATVIA • EUPHEMIA algorithm DENMARK LITHUANIA NORTHERN IRELAND BELARUS IRELAND ​ Multi-Regional Coupling (MRC) UK • POLAND Coupling of regions and efficient management of available NETHER- LAND UKRAINE GERMANY transmission capacities between areas and countries BELGIUM • CZECH REPUBLIC Implicit capacity allocation LUXEMBOURG SLOVAKIA MOLDOVA AUSTRIA HUNGARY FRANCE ​ Cross Border Intraday Trading (XBID) ROMANIA SWITZERLAND SLOVENIA CROATIA SERBIA BOSNIEN & ​ The integrated European electricity market is expected to HERZEGOVINA BULGARIA MONTE- ITALY NEGRO KOSOVO increase liquidity, efficiency, social welfare and transparency MAKEDONIA of prices and flows. ALBANIA TURKEY SPAIN PORTUGAL GREECE 13 nordpoolspot.com/academy 13

Day Ahead price formation in practice Factors affecting the supply for Factors affecting the demand electricity: for electricity: • Fixed costs of production • Retail volumes and delivery Price obligations: • Variable costs of production [EUR/MWh] S D • Plant startup and shutdown costs - Weather U E - Open deliveries, etc. • CO2 allowance prices P M • Industrial consumers: • Weather P A - Fixed costs • Hydro situation Market - Variable costs L price N - Startup and shutdown costs Y D - Flexibility of processes Turnover Volume [MWh] TRANSMISSION CAPACITY Available Transmission Capacity (ATC): • Existing interconnectors • Unavailability of interconnectors (faults, etc.) nordpoolspot.com/academy 14

Supply side and marginal cost Marginal cost Demand curve Oil condensing power Coal condensing Gas turbines Supply curve power CHP Nuclear power Hydro power New RES Volume nordpoolspot.com/academy 15

Settlement and clearing is an important part of a market Bilateral trading without Bilateral trading with Trading with several netting netting counterparties A A A Nord B B C B C C Pool D E D E D E Several counterparties One transaction for Always only one and transactions each counterparty counterparty! 16 nordpoolspot.com/academy

Establishment of the APE – a Project update 17

Albania is at a Crossroad – Strongly Interconnected Region with Many Emerging Day-Ahead Markets  Albanian power sector will be increasingly exposed to spot markets surrounding Albania : SEE countries with SEE countries taking active established Day- steps to establish Day- - Italy, Hungary, Slovenia, Bulgaria, Greece and Romania has Ahead Markets Ahead Markets: Markets will be already established power exchanges (Day-Ahead Markets)   interconnected Hungary Kosovo   through Market Italy Montenegro - Croatia and Serbia have also launched power in February.   Coupling Romania (Macedonia) - Montenegro has expressed interest in the Albanian market,  Greece  Bulgaria even though the link to the Serbian power exchange might be  Slovenia their most likely route  Serbia - Macedonia has just released a pre-feasibility study on regional market integration - Strong interconnections in the region. The subsea cable from Montenegro to Italy will change the power flows in the region – the value of flexible hydro power will increase.  Albania can take advantage of its location and unique hydro power assets and should use opportunity to take lead position in development of the regional power market Serbia PX  By developing a Day-Ahead market, the Albanian power sector will unlock the value of its flexible hydro plants and ensure an appropriate market design 18 Nord Pool Consulting- 2016. Confidential