Notes on energy and environmental markets at Overview of Italy and bordering countries

Transcription

1 Notes on energy and environmental markets at 3 9 Overview of Italy and bordering countries Milan, 6 11

2 Contents 1. Italian Market Demand and Supply Spot markets 2. Foreign Markets Spot markets 3. Environmental Markets: Green and White Certificates, EUA 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 shall not 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 document does 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 or commitment whatsoever. 2

3 Summary January/September In the first nine months of a collapse of the spot prices occurred once again: the PUN Baseload closed at (12.46 compared to the same period of ) and the PUN Peakload closed at ( compared to ). The Peakload/Baseload ratio remained unchanged (1.11). The electricity demand reached 232 TWh, down by 3% compared to the same period of : it is at the same level of demand as 22. September is +.4% vs September but Terna interim data show October -3% down vs October. The supply side recorded a new reduction of.2% in thermoelectric production (-13.8 TWh). There was an increase in photovoltaic production (+8.9%), as well as in hydroelectric production which rose % compared to thanks to the strong hydraulicity of the half year. In hydro production already rose by 21% compared to 212. The Clean Spark Spread (CSS) reference of the first nine months of slightly improved compared to the same period of, but remaining negative on the Baseload (-2.4 ). It is positive on Peakload (+3.5 ) although not by much confirming the plight of gas-fired thermoelectricity producers. The coal-fired plants continue to be profitable, favoured by falling prices of coal and CO2, even if in the first three quarters the Clean Dark Spread suffered strong compression reaching 11.27, a reduction of over compared to. The GSE price of the Green Certificates produced in is around 97.5, much higher than that of (89.28 ) due to the collapse in the PUN to which the price formula is inversely linked. The White Certificates market price is now at 9.13 /ton. The first three quarters of were characterized by a sharp drop in the price of CO2 below 4.5 /ton in April and by a slow but constant recovery from May to September. The average for the first three quarters was 5.8 /ton. 3

4 The electricity production Further drop in thermoelectric production, greater hydraulicity GWh 1 Jan- 3 Sept 1 Jan- 3 Sept Var. % / Net Production Hydro Thermo Geothermo Wind Solar 46,2 121,391 4,132 11,316 19,645 42,12 135,251 3,975 11,433 18, Total net production 22,694 2, ,936 2,149 3,787 31,853 1,761 3, ,684 1, , ,4-3 Import Export Foreign balance Surges Demand The electricity demand recorded a further reduction of 3% (-2.8% on a seasonally adjusted basis). The net total production reduced by 3.8%; there was a significant drop in thermoelectric production (-.2%) while photovoltaic production continued to increase (+8.9%). Due to the greater hydraulicity with respect to, hydroelectric production increased by %. There was an increase in the import-export balance (+2.3%). Source: Terna - Monthly Report on the Electricity System 4

5 Load factor of thermo plants on day-ahead market Further reduction in the CCGTs load factor CCGT* 45% Approx. 1, hours/year 4% COAL Approx. 4,5 hours/year 8,% 7,% 35% 29 6,% 29 3% 2 5,% ,% 212 3,% 2,%,% 25% 2% 15% % 38% 38% 37% 36% 27% 17% 13% 5% 32% 24% 22% 17% 14% % 67% 6% 49% 49% 57% 55% % 58% 58% 55% 56% 48,5% 212,% North South North South The reduction in the load factor of the CCGTs in the North Zone and in the South Zone continued as a result of the ongoing reduction in the electricity demand, especially in the residual demand fulfilled by CCGT, due to the effect of the increase in renewable production and in distributed generation, which according to AEEGSI, accounts for over 3 GW. In the first 9 months of the CCGTs operated for around 13% equivalent-hours (on an annual basis around 1, equivalent hours, a level almost comparable with that of the wind and photovoltaic power plants). For the coal-fired plants in the North Zone the reduction in the load factor was the result of the drop of the production of the Enel plants and the halt of Vado Ligure plant; a countertrend was seen in the South Zone, where the load factor increased by almost 13% due to the increase in the net flow to Greece (+ 2.4 TWh in the first three quarters of ). (*) Load factor calculated on the combined cycle plants not subject to dispatching restrictions (thermal load, CIP6, ) Source: A2A Trading calculations based on GME data 5

6 The electricity demand Reduction of 3% in the first 9 months but September +.4% Period Q1 Q2 Q3 Q4 YEAR Q1 Q2 Q3 Demand 81,237 76,844 84, ,4 79, ,475 78,193 75,487 78, ,797 Italy demand GWh GWh Jan gen Feb feb Mar mar Apr apr mag May giu Jun lug Jul ago set Aug ott Sep nov Oct dic Nov Dec Diff [%] -3,7% -4,% -3,6% -2,7% -2,6% -,1% -4,8% -5,9% +,4% vs - 3.% xx% Increase/reduction vs In the first nine months of the electricity demand amounted to 232 TWh, with a reduction of 3% (- 7.2 TWh) compared to. On a seasonally adjusted basis, the reduction was more limited (-2.9%). September registered an increase of.4% vs September (-,2% seasonally adjusted) for the first time after 2 months of continuous decline. The forecast for October is roughly 26 TWh, with a reduction of about 3% compared to October. Looking at the Italian territory, the reduction in consumption is particularly significant in Lombardy (-6,1%) and in the North West (-4.3%). Source: Terna - Monthly Report on the Electricity System 6

7 Gas consumption in Italy Thermoelectric uses dropped by 14% in the first 9 months Gas consumption Q3 8 Gas consumption 7 6 Total consumption in : 43.2 bcm 2-16% -14% Q Q3 3 Q B m3 5 B m3 25 Total Consumption in Q3 :.8 bcm Distribution Thermo Industrial In Q3 there was a decrease in consumption in the thermoelectric sector, by over 16%, due to the summer temperature that reduced electricity demand during the past three months. Distribution Thermo Industrial The gas consumption trend in the first nine months continued to drop, primarily in the thermoelectric sector, recording a drop of 14% compared to the same period of. The Italian gas consumption is below the level of 22. Source: Snam Rete Gas 7

8 Italian market: PB-GAS prices analysis Widening TTF/PB GAS spread TTF Q Q Q Q Q Q Q gas PB GAS gas PB GAS SPREAD PB GAS/TTF Q3 Vs Q Vs In the first three quarters of the price of the PB-GAS was significantly lower compared to the same period of (-4.63 gas) because of the drop in consumption due to the mild temperatures that prevented the complete emptying of the storage units (the storage space was filled at 95.2% on 13 October). The reduction was even greater for the TTF ( gas compared to the same period ): therefore there was a reexpansion of the spread between TTF/PSV (to more than 3 ), due to the Ukraine crisis: starting from July, Russia cut gas supply to Ukraine, which in turn cut the export to the other European countries, above all to Italy, that has seen its spot prices increase. Source: GME data and internal analysis 8

9 Italian Market: spot prices analysis PUN down by over 12 compared to PUN PL Q Q Q Q Q Q Q Q3 Vs Q Vs In the first nine months of the PUN collapse with respect to continued due to the reduction in PSV prices and the record levels of hydraulicity: the average Baseload closed at 49.79, down by over 12 compared to the same period of the. Only in the last week of September, prices increased over 6 due to the lack of 2, MW of imports from Switzerland. Even the average Peakload prices, which closed at 55.31, suffered a substantial reduction with respect to ( ). PUN Baseload Italy PUN BL PUN Peakload Italy Source: Gestore Mercato Elettrico (GME) 9

10 Analysis of spot prices: marginal technology on MGP Huge drop in the CCGTs relative importance % 9% 8% 14% 7% 14% 6% 5% 6% 12% 14% 12% 3% % 2% % 13% 14% 12% 11% 13% 2.42% 3% 12% 2.36% 3% % 12% 21% % 11% 16% 4% 3% 2% 55% 45% 63% 62% 61% % % % 29 2 Gas Hydro Coal Import Oil & Other Fer In the first three quarters of the number of hours in which the CCGT technology set the marginal price on the energy markets reduced further: the CCGTs represent the marginal technology in 53% of the hours. The contribution of non-hydroelectric renewable sources was stable, and their impact was confirmed at around 2.5% of the hours. The relative significance of the imports decreased in favour of coal, which set the marginal price in 21% of the hours. Restricting the analysis to Q3 alone, note the strong reduction in the importance of the CCGTs from 77% in Q3 to 57% this year in favour of coal (+17%), thanks to the restart of Enel Brindisi plant. Source: Gestore Mercato Elettrico (GME)

11 Impact of renewable sources Zonal hours at zero price in first 9 months In the first three quarters of the number of hours in which the spot price was zero increased compared to the same period of. Hours at price 16 It is observed that: 14 - the further the shift to the north the lesser the impact of the hours at ; 12 - compared to the same period of, there has been a strong increase of the hours at zero mainly in the South Zone, where the renewable sources set the price in 3.82% of the hours Sicily South Sardinia C South C North The greater the latitude the lower the impact of photovoltaic production North PUN Note that the launch of Market Coupling is expected in 215, which will also require Italian market to adopt negative prices. It is therefore likely that the zero prices recorded until now may become negative values, further depressing the average Italian price. Source: internal analysis 11

12 Italian Market: clean spark/dark spread analysis CSS on Baseload still negative, but slightly improved Vs Q1 Q2 Q3 Q4 Year Q1 Q2 Q3 Clean Spark Spread on PL Clean Dark Spread - Baseload 3 clean spark clean spark clean dark spread on BL* spread on PL* spread on BL** Starting from the second quarter of a light increase in CSS on Baseload was recordered, due to the strong reduction of gas prices (even if it is still negative). Even the CSS measured on the Peakload hours increased in the last two quarters. There was a strong contraction in the clean dark spread (-.43 ), due to the drop in the power price exceeding the reduction of the CO2 and Coal prices. (*) Clean spark spread: difference between the PUN and the sum of: gas cost (PSV), CO2, CV and variable transport costs. The efficiency used for the CCGT technology is 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, CO2 cost (CCT not included). The efficiency used for the COAL technology is 35%. Source: internal analysis 12

13 Reserve market managed by Terna (MSD): volumes and prices Stable volumes in the first nine months but prices decreased Prices MSD EX ANTE+ MB Italy TWh Ascending/Descending Volumes MSD EX ANTE + MB Italy MB ASCENDING 212 MSD MB DESCENDING MSD 3 MSD MSD MB DESCENDING ASCENDING 212 MB The rapid increase in installed capacity of intermitting renewable sources and the concurrent reduction in demand have resulted, from 211, in a significant change to Terna's reserve procurement methods on MSD. In there was an increase in both the quantities sold and those purchased in the planning phase (ex ante MSD), while in this three quarters of volumes are stable. The constant decline in the average price for ascending services indicates that the competition in this market is increasingly fierce. The costant decline in descending prices is due to the huge drop in MGP prices. In around 6% of total MSD volumes are intermediated by CCGTs. Source: A2A Trading calculations based on GME data 13

14 The financing cost for renewable and assimilated sources Energy component dropped to 49% of the bill This cumulative cost may not exceed 5.8 billion per year. The «5th Conto Energia» ceased to apply on 6 7 upon reaching the accumulated annual cost of 6.7 billion. In, 35 MW without incentives came into operation and the installation of 1 GW is expected for. Total incentive more than 12 b In recent years the impact of the electricity component of the price to the end-customer has dropped from 6% to 53%. Conversely, the impact of the system charges has significantly increased (from 9% to 19%), mainly due to the increase in the A3 component. Energy Component at 49% of the total cost Source: GSE AEEGSI data 14

15 Contents 1. Italian Market Demand and Supply Spot markets 2. Foreign Markets Spot markets 3. Environmental Markets: Green and White Certificates, EUA 15

16 European spot electricity markets Drop in price everywhere (mainly in France) BASELOAD PEAKLOAD GERMANY FRANCE VAR % -15% SWITZERLAND ITALY GERMANY -22% FRANCE -18% -2% VAR % -18% SWITZERLAND ITALY -23% -2% -19% is being characterized by a marked drop in prices in all European countries, to the same extent for the Baseload and the Peakload prices. The highest drop is on the French market, where the Baseload prices have dropped by 22%, mainly due to a very mild winter and rainy summer which contained the electricity demand. Source: internal analysis 16

17 Peak/Base ratio trend Italy has a PL/BL ratio 2% lower than other European countries ITALY GERMANY FRANCE 212 SWITZERLAND In the last three years, in Italy, the Peakload/Baseload ratio has fallen below European levels due to the lack of the winter heating contribution seen in the countries of Central Europe, and to the summer contribution for photovoltaic production. We do not expect this trend to be disregarded even in the next few years due to both the lack of recovery of the electricity demand and the increase, albeit limited, of the photovoltaic source. Source: internal analysis 17

18 Correlation between forward Power and TTF Drop in correlation in September due to the widening of TTF/PSV spread Cal Y+1 and TTF Y+1 IT Y+1 (MM5) TTF Y+1 (MM5) gas 26 From the start of the correlation between gas and power returned to very high levels and in some weeks the movements practically mirrored each other: this sign confirms the importance of gas as a key driver for electricity prices Only in the last weeks of the quarters, the correlation lost significance, due to the widening spread between TTF and PSV. % 5% Note that in recent months both the forward contracts suffered significant price reductions; both, in fact, reached their minimum levels in : the TTF reached while the Italy power fell below % -5% -% 1/1/13 1/4/13 1/7/13 1//13 1/1/14 1/4/14 1/7/14 1//14 Power/TTF Correlation Source: internal analysis 18

19 Contents 1. Italian Market Demand and Supply Spot markets 2. Foreign Markets Spot markets 3. Environmental Markets: Green and White Certificates, EUA 19

20 Environmental Markets Green Certificates Year 28 GSE Prices GSE withdrawal GSE selling price price GME Market Yearly average price (*) ** n.d ** forecast (*) GCs year X exchanged during year X The GSE withdrawal price of the GCs produced in is estimated in The value decreased compared to the forecast on first half of, due to an increase in PUN in Q3. In August, the «Competitività Decree» was approved. It contains new rules said «spalma-incentivi» aimed at cutting the energy cost for end-consumers, in particular the medium and small company (PMI). The new rules include: 1. possibility to extend the amount of time of incentive for renewable production (voluntary mechanism). If the power plant joins this option, it will take the old incentive value (green certs or feed in tariff) reduced by a percentage for the residual period of incentive, which is increased of other 7 years. This option applies to renewable power plants, except solar power plants. If the power plant exercises this option, it can access to other incentive scheme for repowering; 2. new GSE process to pay incentive to solar power plants. For each year, the power plant will receive a 9% advance payment calculated on real production of previous year and the final payment by June in following year; 3. possibility to extend the amount of time of incentive for solar power plants (up 2 kw) from 2 to 24 years, applying a percentage of reduction for the residual period of incentive. If the power plant doesn t subscribe to this rule, it will take an incentive reduced by 8% for the residual period of incentive starting from 1 January 215. Source: GSE and GME 2

21 Environmental Markets White Certificates Prices ( /Toe) GME market sessions from June to May AEEGSI Contribution on each compliance year (*) /Toe ** ** from 1st June to 3th September GME Market - Yearly average price (*) /Toe ** 9.32 /Toe *from june year n to may year n+1 The compliance for each year is by May, 31 Production of White Certificates GSE has published an update of the approval projects (29,467 projects) and White. Certificates, issued from February to September, are in total 11,125,822. UTILIZATION OF WHITE CERTIFICATES Results on Italian Compliance for year : - National target (Decree 28 December 212): 5.51 Mio of White Certificates - Surrender: 4,4 Mio - Compliance fulfillment: 8% White Certificates National Target for : 6.75 Mio. Available Whites Certifcates for Compliance (Forecast): 5% Source: GSE and GME 21

22 Environmental Markets EUA ETS PHASE III EUA trend Yearly price EUA trend EUA Futures December CER Futures December EUA/CER spread Futures December /Tonn /Tonn /Tonn Q1 +Q2+Q Phase II Average price Q1+Q2 + Q3 : 5.8 /tonn The EUA price in Q3 had a stable trend wavering between 5.9 and 6.4 /ton, waiting for European Council meeting on October, where the EU s framework for Climate and Energy Policies post-22 will be discussed (see the last slide). 22

23 Environmental Markets European Council Conclusions on October The European Council Conclusions on 23 Energy and Climate Framework are the following: GHG TARGET: a binding EU target of an at least 4% domestic reduction in greenhouse gas emissions by 23 compared to 199. The ETS would be the main European instrument to achieve this target. The reductions in the ETS and non-ets sectors amounting to 43% and 3% by 23 compared to 25, respectively; RES TARGET: an EU target of at least 27% is set for the share of renewable energy consumed in the EU in 23. This target will be binding at EU level; ENERGY EFFICIENCY TARGET: an indicative target at the EU level of at least 27% is set for improving energy efficiency in 23 compared to projections of future energy consumption based on the current criteria. The Council also stated that this target would be reviewed by 22, having in mind an EU level of 3%. 23