Session 2 (w/out law slides) Flashcards
Three principles of electricity sector restructuring
- Unbundle the supply chain (split competitive from monopolistic functions)
- Provide a level playing field for competitors (especially new entrants)
- Regulate the natural monopolies (concerns networks)
Concrete policies of electricity sector restructuring (5)
- Seperating grids from generation
- Splitting up generation and retailing in competing firms
- Liberalizing power generation
- Install independent regulatory agencies
- Introducing competive markets
Which are competitive, which are monopolies…?
Generation, transmission, distribution, retail supply
Generation: Competition
Transmission: Monopoly
Distribution: Monopoly
Retail supply: Competition
What does it mean to have “regulated networks”?
- No entry, no competition (you cannot open another distribution or transmission network operator)
- profits are regulated
4 steps of how the el. market liberalizes (not a blueprint but works often that way)
- Vertically integrated utility (all in one hand)
- Integrated utility with single buyer (indep. producers, one transmission, distribution & retail supply operator)
- Wholesale competition (wholesale& retail in one hand)
- Wholesale & retail competition
What is state aid (5), what do MS have to do before implementing it?
State aid, five criteria:
1. Use state resources
2. Enable an advantage
3. Advantage must be selective
4. Distors competition
5. Affect cross-border trade
MS must notify state aid before becoming effective.
What characterizes the European “target model”? (7)
- Unbundling (seperation of TSO from generators and retail suppliers)
- competitive markets (wholesale, retail)
- bilateral trading between market parties (no central dispatch)
- balancing responsibility (market actors are financially responsible for deviations from schedules)
- pool-based scheduling
- bidding zones (often countries)
- facilitate cross-border trade
What are the European electricity institutions (3)?
- National regulatory authorities (NRA)
- Agency for the Cooperation of Energy Regulators (ACER)
- European Network of Transmission System Operators for Electricity (ENTSO-E)
Who sells what to whom? (Wholesale m., retail m., system services)
Wholesale: Generators electricity to retailers
Retail: Retail suppliers electricity to commercial and residential customers
System services: Generators sell services to system operators
Power Exchange (PX) vs Over-the-counter (OTC): Difference of trading platforms
PX: PX is between seller A and buyer B, there legally are two independent transactions –> no counterparty risk (PX cannot go bankrupt)
OTC: Transaction between seller A and buyer B. The broker is no party to the deal, only information dealer/ match maker. Counterparty (credit) risk
Advantage & disadvantage of PX
Advantage: anonymous, prevents collusion between actors, no counterparty credit risk
Disadvantage: standardized products, higher costs
Maturity: Spot markets vs forward markets
Maturity:
Spot markets: Short, 12-36h (day-ahead), down to 5 min (intraday)
Forward market: Long, 2d-many years. Most liquid: front year
Settlement: Spot markets vs forward market
Spot markets: Physical (right to draw electricity from the grid in return for money)
Forward market: Financial (payments in either direction depending on the spot price)
Day-ahead market: What is it, how does it work?
In Europe, it’s the biggest market for electricity with a much higher volume than the intraday market.
Supply bids and demand bids are collected and matched at once (12am)
24 items are traded: One price for each hour of the next day
What are aggregated bid curves?
The sum of offer/ask bids at EPEX SPOT. All offers above the intersection (in the graph on the left of the intersection) are being delivered at the price of the intersection.
They’re not demand/ supply curves, they include updated plans & speculations
