GREECE-ITALY MARKET COUPLING: IMPACTS AND OPPORTUNITIES FOR POWER TRADERS

Transcription

1 GREECE-ITALY MARKET COUPLING: IMPACTS AND OPPORTUNITIES FOR POWER TRADERS 10th of May 2018 PHINERGY SRLS

2 WHO S PHINERGY WHAT WE DO Phinergy was born in 2014 from the experience of its founders Stefano Fiorenzani and Enrico Edoli in order to combine skills and offer a more structured service to its customers. Phinergy's mission is to offer its customers services and consultancy specializing in the areas of energy trading and risk management using exclusively technical skills of the highest international level. Phinergy cooperates closely with the University, especially that of Padua, in order to keep the relationships and collaborations alive. Phinergy is an innovative start-up incubated by StartCube, the incubator of companies of the University of Padua. Phinergy has its operational headquarters in Padua (Italy). Consulting services: Strategic Decisions Processes Design Business Development Support Portfolio Management Support Training: Organization of in house training courses on specialized energy risk and trading issues. Organization of open training session at Italian and European level. Software Development: Decision support tools for automatic trading Market analysis tools Forecasting tools (price, production, consumption) ETRM Solution PHINERGY SRLS 2

3 EULER ETRM SOLUTION EULER ETRM is a modular SaaS solution covering multiple aspects of Energy Trading and Risk Management operational issues. With a flexible and accessible underlying dataset. EULER has been specifically developed to meet the needs of South East Europe energy trading companies. AUTOMATIC CONNECTION (with external data providers) DATA MINING DEAL CAPTURE PORTFOLIO SETTING WEB INPUT INTERFACES DATA WAREHOUSE (hosted) MASSISVE DATA LOAD (file or API) RISK MGNT SCHEDULING COMPLIANCE WEB DASHBOARDS API (for easy data extraction) PHINERGY SRLS 3

4 PCR AND CACM PCR (Price Coupling of Regions) has the scope of: creating a coordinated European electricity market, guarantee competition among operators, achieve environmental targets. PCR (Price Coupling of Regions) has three main legislative references. 3 legislative package (2009): ownership unbundling, NRA, ACER. European Network Codes ( codes among concerning all the relevant areas of electricity markets and system operations). CACM ( capacity allocation and congestion management) methods for allocating capacity in day-ahead and intra-day timescales and outlines the way in which capacity will be calculated across the different zones. PHINERGY SRLS 4

5 PCR AND CACM CACM contents DA markets ID markets Capacity calculation Bidding Zones configuration Rules for congestion income sharing Cost recovery arrangements CWE - FB NEE - FB ATC PHINERGY SRLS 5

6 TARGET MODEL FOR DA AND IDM DA TARGET MODEL Single DA auction based market (SMP) taking place same time in all countries Unique clearing algorithm (EUPHEMIA) Single calculation agent Broad range of different order types (hours, blocks, PUN etc) Unit based or portfolio based models co-existing Implicit cross border (cross bidding zones) capacity allocation FB mechanism (unless proved that ATC works better) IDM TARGET MODEL - XBID Target Model for Intraday, based on continuous energy trading. Cross-zonal transmission capacity is allocated trough implicit continuous allocation (FCFS). Target model has been laid down into the Framework Guidelines for CACM. Intraday cross-zonal market solution will be based on a common IT system forming the backbone of the European solution, linking the local trading systems operated by the Power Exchanges, as well as the available cross-zonal transmission capacity provided by the TSOs. IDM TARGET MODEL COMPLIMENTARY AUCTIONS Complementary regional intraday auctions may be implemented within or between bidding zones in addition to XBID. Continuous trading within and between the relevant bidding zones will be stopped for a limited period of time before the intraday crosszonal gate closure time, which shall not exceed the minimum time required to hold the auction and in any case 10 minutes. Two ID complimentary auctions on Greece-Italy border. PHINERGY SRLS 6

7 WHAT WILL CHANGE FOR GREECE- ITALY CORRIDOR TRADERS CHANGES For Yearly Transmission capacity contracts nothing will change (explicit allocation mechanism and physical products). Monthly products should become financial products (one way cfd DA spread option with automatic exercise). Daily products will disappear. Italian MGP and Greek DAS will be coupled under Euphemia Algorithm (ATC model). XBID continuous trading and at least two complementary auctions will be jointly implemented. CONSEQUENCES More difficult to understand direction and size of interconnection flow (within ATC or FB transmission limits). More volatility in DA price of coupled bidding zones (especially in those periods when price levels are similar). Reduction in the price spreads between coupled bidding zones? PHINERGY SRLS 7

8 A SIMULATION EXERCISE WITH EUPHEMIA ALGORITHM MARKET RESULTS WITH NO COUPLING reference flow date 10/04/2018 Bidding Zone Nord hour 12 all Buy/Sell Offers Bidding Zone Greece reconstructed BidStack PHINERGY SRLS 8

9 A SIMULATION EXERCISE WITH EUPHEMIA ALGORITHM MARKET RESULTS WITH NO COUPLING reference flow date 10/04/2018 Assumptions Gas MPC 52 /MW Lignite MPC 55 /MWh Hydro Average MCP 34 /MWh Results Daily Real /MWh Daily Reconstructed /MWh. PHINERGY SRLS 9

10 A SIMULATION EXERCISE WITH EUPHEMIA ALGORITHM MARKET RESULTS WITH PCR (ATC MODEL) reference flow date 10/04/2018 Results Daily Reconstructed /MWh. Daily MGP Brindisi /MWh PHINERGY SRLS 10

11 A SIMULATION EXERCISE WITH EUPHEMIA ALGORITHM MARKET RESULTS DELTA PCR (ATC MODEL) VS REAL (RECONSTRUCTED) reference flow date 10/04/2018 Evidences Significant change in the interconnection flow (commercial schedule). No more irrational flow direction vs spread direction combinations. Significant changes in SMP formation mechanism. More difficult predictability of flow direction and price spreads. Price spread reduction??? PHINERGY SRLS 11

12 GREECE ITALY COUPLING AND COMPLIMENTARY ID AUCTIONS Italian Intraday Auctions Liquidity MI1 Nord MI2 Sud 15/04/2018 hour 12 MI2 Sud PHINERGY SRLS 12

13 GREECE ITALY COUPLING AND COMPLIMENTARY ID AUCTIONS Italian Intraday Auctions Price Spreads MI5-MI6 Nord MI5-MI6 Sud PHINERGY SRLS 13

14 CONCLUSIONS Target European power market model according to CACM is very close to be totally implemented. DAM and IDM coupling will imply significant operational changes for all non-epex markets. DAM coupling (ATC or FB) will induce more unpredictability on price realizations and interconnection flow, and hopefully price spreads convergence. Cross border intraday activity (xbid or complimentary auctions) will become an extremely important tool for portfolio optimization or proprietary trading activity. Advanced trading and data analysis tools could help significantly performance optimization (market and fundamental data real time availability, decision support analytics, market access automation etc ). PHINERGY SRLS 14

15 MAKE A LEAP IN THE FUTURE!!! ASK FOR MORE INFO OR A DEMO AT INFO@PHINERGY.BIZ DO IT NOW!!! PHINERGY SRLS 15

16 ABOUT PHINERGY Phinergy was born in June 2014 from the experience of its founders. Phinergy's mission is to offer its customers specialized services and consultancy in the areas of energy trading and risk management, employing only the finest international technical skills. Phinergy is an innovative startup incubated by StartCube, the incubator of companies at the University of Padua. Enrico Edoli CEO Mobile: Web: Enrico Edoli is founder and CEO of Phinergy. During his career, he worked as an external quantitative analyst for trading and risk management support in various energy companies in Italy. He has published several technical articles and a book related to quantitative energy finance and he is also lecturer of a course in Mathematical Finance at the University of Padova. Enrico has a degree in Mathematics and a PhD in Applied Mathematics achieved both at the University of Padua. Stefano Fiorenzani Chairman stefanofiorenzani@phinergy.biz Mobile: Web: Stefano Fiorenzani is founder and Chairman of Phinergy. He is a recognized expert in Energy Trading and Risk Management, with a career spanning numerous top European energy companies and financial institutions. He has published several scientific and business articles and three books on advanced methods in the Energy Finance area. He holds a degree in Economic Science, a Master of Science in Financial Economics and a PhD in Mathematical Finance. 16 PHINERGY SRLS 16

17 SOME OF OUR BUSINESS PARTNERS. PHINERGY SRLS 17

18 CONTACTS MAIL PHONE ADDRESS Via della Croce Rossa Padova PHINERGY SRLS 18