© Copyright 2006 EFET The importance of common intra-day markets and balance settlement methods Hartmuth Fenn 2nd Northern Europe Electricity Miniforum Copenhagen 27th June 2006 European Federation of Energy Traders

2 Overview  WHO ARE WE?  Status Quo  Reason for a intraday market  The Intraday Market - How it should be structured  Steps to achieve the ideal Intraday Market structure  Balance Settlement Methods

3  The European Federation of Energy Traders (EFET) is an industry association which represents over 80 trading companies operating in about 20 countries  EFET promotes pan-European energy trading in open, transparent and liquid wholesale markets  EFET main activities include :  Advocacy  Promote energy trading in Europe  Standardisation of contracts WHO ARE WE? “We foresee energy markets throughout Europe, in which traders efficiently intermediate in the value chain on the basis of clear wholesale price signals, thereby optimising supply and demand and enhancing security of supply, to the overall long term benefit of the economy and of society”

4 Status Quo  Today the energy trading ends at the day-a- head-market in many European countries. This was a suitable way to start in the beginning of the energy trading business. But to give market participants the possibility to handle their portfolios (with the full responsibility) and to relieve the grid operator it is necessary to open the intraday trading across Europe  Another very important part to build a reliable Energy market is the balance settlement method. It is important that high fees and inflexible systems don’t scare off participants

5 Reason for a intraday market Grid operator  More grid security out of more production choice  Less balance problems due to the self-correcting effect of many market participants Advantages for the market participants  Generation Outages  Wind power  other renewable  CHP  Supply  Optimization

6 The Intraday Market - How it should be structured  Schedule nomination should be as short as possible (e.g. ¼ hour before the delivery)  All borders open for trading  1 to n (cross) nomination should be possible  The possibility of having both multiple automatic trading platforms and OTC trading

7 Steps to achieve the ideal Intraday market structure  Intraday trading has to be possible in every country  those countries which have a capacity auction with each other and have established internal intraday markets should immediately begin with intraday cross border trading  to “start from scratch” use the 1 to n (cross) nominations method

8 Steps to achieve the ideal Intraday Market structure  Harmonized IT structure in every country  Market requirements for all participants must be the same in Europe  Closer TSO cooperation to maximize the capacities

9 Balance Settlement Methods  Symmetric balance system e.g. Germany  Asymmetric balance system e.g. France The favored system for the market participants is the symmetric balance system

10 Requirements for Balance Settlement Methods  Internal schedules should be changeable on the day(s) after delivery e.g. Germany, Austria  In case of an asymmetric balance system e.g. France The grid operator should refund its balancing income to the market participants according to a pre-determined key (e.g. based on scheduling volume)

11 Settlement periods  First settlement information published ¼ hour after the delivered hour  Second settlement published 3 days later  Fix settlement made after 1 month