En.Trading 017 Seminar

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Hilary Bryan
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1 Independent Bulgarian Energy Exchange En.Trading 017 Seminar Market Coupling and further developments on the Bulgarian PX

Regional markets status Readiness for market integration, set-up and

IBEX Status, environment and integration possibilities Компенсиране

integrational organizations NEMO committee, EUROPEX, MRC, XBID, PCR, WB6.

2 Regional markets status Readiness for market integration, set-up and perspectives. Legal bases of the integration process. IBEX Status, environment and integration possibilities Компенсиране Стратегическо на партньорство изоставането за БЕХ ЕАД IBEX in the integrational organizations NEMO committee, EUROPEX, MRC, XBID, PCR, WB6. DAM coupling initiatives and planning Benefits, effects, perspectives and issues. IDM coupling perspectives Benefits and effects, XBID local projects, technical readiness of all the stakeholders and issues. Conclusions and general perspectives Expected developments and general long term perspectives.

IBEX and the neighboring markets Bulgarian PX is operating in isolated mode, but is already part of MRC as from the Go-live day 19.01.2016. Why not take part in 4MMC?

coupling potentials? Serbia have already a DAM (since 17.02.2016), but since it is not an EU member, and although the 3 rd Energy Package is adopted, the relevant regulatory framework (e.g. CACM) not adopted.

3 IBEX and the neighboring markets Bulgarian PX is operating in isolated mode, but is already part of MRC as from the Go-live day Why not take part in 4MMC? 4MMC (Romania, Hungary, Czech, Slovakia) is running a local market coupling that have formally started the process of becoming part of MRC (where Bulgaria is already a part) at latest 2019; Other coupling potentials? Serbia have already a DAM (since ), but since it is not an EU member, and although the 3 rd Energy Package is adopted, the relevant regulatory framework (e.g. CACM) not adopted. WB6 signatory. Turkey have a DAM being operational since Not EU member, but synchronised through ENTSO-e. A market coupling to Turkey could be investigated, but similarly to Serbia, the perspective is rather medium to long term. Greece EU member, no PX market, part of the IBWT (Italian borders working table) coupling project with deadline 2020; Macedonia non EU member, the coupling potential is only a subject to medium term investigation process with a prerequisites: functioning Macedonian PX, in line with the PCR procedures and MRC timing. WB6 signatory.

Legal and organizational bases for the integration process The MCO plan has been proposed and finally approved by all NRAs of MS, on the 20.06.2017.

4 Legal and organizational bases for the integration process The MCO plan has been proposed and finally approved by all NRAs of MS, on the The required methodologies and all NEMOS proposals has been produced and submitted to all the NRAs Algorithm proposal, Products proposal, Back-up Methodology Proposal and Harmonized Max-Min Price Proposal In the INC there are 7 TF (task forces) established with the scope to produce the MCO plan proposal and the respective methodologies in coordination between the NEMOs (Cost sharing, Legal, Algorithm DA and ID, etc.). As a result of CACM entry into force the INC (Interim NEMO Committee) has been establish to coordinate and make possible the all NEMO tasks execution. The 1222/2015 EC Regulation established terms, goals and procedures for SDAC and SIDC. Компенсиране на изоставането The European Union's Third Energy Package is a legislative package for an internal gas and electricity market in the European Union. Стратегическо партньорство за БЕХ ЕАД

NEMO committee, EUROPEX, MRC, XBID, PCR, WB6 MRC full membership as from January 2016.

associate membership as from December 2015.

5 NEMO committee, EUROPEX, MRC, XBID, PCR, WB6 MRC full membership as from January MRC (Multi-regional coupling project) is a project aiming at the coupling of the national electricity day ahead markets based on the European target model (Single Price Market Coupling for DAM); PCR associate membership as from December PCR (Price coupling of regions) is a initiative of the 7 biggest European power exchanges (organized in consortium), owning the EUPHEMIA algorithm; EUROPEX membership as from February EUROPEX is the association of all the European power exchanges; XBID associated membership as from March XBID (Cross Border Intraday) has been initiated from the biggest 7 European power exchanges, together with the transmission system operators (TSOs) of 12 of the member states, aiming at the creation and the implementation of the integrated technical solution, ensuring SIDC; NEMO in compliance with the EC Regulation 2015/1222. As from January 2016 IBEX was officially appointed as a Nominated Electricity Market Operator (NEMO) by the Bulgarian national regulatory authority (EWRC). INC The Committee, organized by all the NEMOs aiming at the execution of all the tasks related with the coupling of the day ahead and the intraday markets in Europe in compliance with the provisions of the EC Regulation 1222/2015 (CACM). WB6 initiative The initiative supported by the European Community, aiming the inclusion of the west Balkan s countries that are not EU members to the European target model for SDAC and SIDC, by adopting the respective legislative framework. Full MRC members 4MMC members Others

Benefits of the coupling concept For the market participants For the OMP and TSO Instead of buying first the capacity and then trading via the exchange, parties are able to trade in one step.

6 Benefits of the coupling concept For the market participants For the OMP and TSO Instead of buying first the capacity and then trading via the exchange, parties are able to trade in one step. Market players are not required to buy transmission capacity without knowing its subsequent market value. Lowering the barriers and makes it easier for smaller participants to benefit from cross-border access; Capacity is optimally used, particularly for periods when the price direction is uncertain at the time of nomination of capacity. Coupled markets The market value of the transmission connection is exactly identical to the price difference between the areas. This ensures that congestion income will arise always when constraints exist. The uncertainty regarding the eventual use of explicit interconnection capacity options obliges the TSO to put certain safety margins into place. Market coupling results in firm obligations, reducing this uncertainty and enabling the netting of flows. Transmission capacity is automatically used to the maximum possible extend.

7 Effects of the coupling concept (1) 120,00 Regional PXs Base prices comparison 100,00 80,00 IBEX LAGIE OPCOM OKTE OTE HUPX EPIAS BSP SEEPEX CROPEX 60,00 40,00 20,00 0,00

Effects of the coupling concept (2) 92,00 82,00 72,00 62,00 52,00 42,00 32,00 22,00 12,00 2,00 IBEX - OPCOM simplified

2017 IBEX daily average - 38,54 OPCOM daily average - 49,15 Simplified coupling scenario - 43,84 60,00 55,00 50,00 45,00

2017 IBEX daily average - 44,83 OPCOM daily average - 42,08 Simplified coupling scenario - 43,46 60,00 55,00 50,00 45,00

8 Effects of the coupling concept (2) 92,00 82,00 72,00 62,00 52,00 42,00 32,00 22,00 12,00 2,00 IBEX - OPCOM simplified coupling model IBEX OPCOM Coupled price Delivery day IBEX daily average - 38,54 OPCOM daily average - 49,15 Simplified coupling scenario - 43,84 60,00 55,00 50,00 45,00 40,00 35,00 30,00 25,00 20,00 Delivery day IBEX daily average - 44,83 OPCOM daily average - 42,08 Simplified coupling scenario - 43,46 60,00 55,00 50,00 45,00 40,00 35,00 30,00 25,00 20,00 IBEX - OPCOM simplified coupling model IBEX OPCOM Coupled price IBEX - OPCOM simplified coupling model IBEX OPCOM Coupled price Delivery day IBEX daily average - 31,33 OPCOM daily average - 33,13 Simplified coupling scenario - 32,30

9 Perspectives and issues related to the integration process Perspectives Issues DAM coupling is possible with Romania The transmission and access tariffs, and Serbia in a short term perspective (1 applied on the export is an obstacle to year period), with Macedonia and Greece the coupling process. in medium terms perspective (2 years The process is already a part of the period) and with Turkey in long term global European integration process perspective; and could not be local. IBEX set-up will not be changed; The integration initiative must be The liquidity will be increased; supported by all the stakeholders The zone prices won t be very affected; the TSOs, NRAs, PXs. The competition on the market will increase, especially in the supply side;

10 XBID local projects, planned Go-live and principles Based on the technical solution of DB (different set-up than the PCR) Already 15 LIPs (local implementation projects); Planned Go-live Q1 2018; Cross zonal trading in continuous;

Technical readiness of all the stakeholders and potential issues Technical readiness XBID compatible ID platform planned to be in operations 01.

11 Technical readiness of all the stakeholders and potential issues Technical readiness XBID compatible ID platform planned to be in operations ; Modern Clearing and settlement system to be implemented in October 2017; TSO Nomination system to be ready for ID scheduling end Q4 2017; Potential issues Delay in the Market Rules amendments approval by EWRC; No TSO TSO cross border arrangements for ID trading; No available capacity allocated ID; No relation between the balancing and DAM prices; No introduction of the CfDs and consequently no RES producers on the market; Transmission and access tariffs applied on the export will block the market coupling

12 Expected developments and general long term perspectives DAM market coupling project in development. IDM market in operations. DAM coupling on one or two borders. Project for IDM coupling in implementation. DAM coupling on four borders and ID coupling through XBID on BG-RO border. Potential for GAS market introduction. IBEX as a part of the single EU market competition between PXs, no legal monopoly for NEMO designation, primarily price competition. IBEX regional benchmark for power prices and leader in innovations!

13 Independent Bulgarian Energy Exchange Thank you for your attention! IBEX EAD

All NEMOs proposal for the price coupling algorithm and for the continuous trading matching algorithm, also incorporating TSO and NEMO proposals for

All NEMOs proposal for the price coupling algorithm and for the continuous trading matching algorithm, also incorporating TSO and NEMO proposals for a common set of requirements, in accordance with Article