European Power Exchange: Pan-European Intraday Target Model Confines Exchanges’ Development Capacity - Exchange Council Backs Flexibility Products

Performing power markets need flexibility: This is the result of discussions amongst the members of the Exchange Council of the European Power Exchange EPEX SPOT at its latest meeting. Concerning this matter, the Exchange Council deliberated on the tender for the pan-European Intraday system and supported the development of new flexible products.

Since 2012, a tender for choosing the optimal Intraday system for the operation of the pan-European Intraday Target Model is being held. This tender is led by Power Exchanges. Development and implementation of the system are foreseen during the next months, subject to backing of the Transmission System Operators’ (TSOs) approvals by regulatory authorities. “ACER’s support of the tender procedure is a clear signal that it was the best road we could have taken considering the circumstances. The tender will bring facts and transparency”, said Peter Heydecker, the Chairman of EPEX SPOT’s Exchange Council. Doubting that a single system would be efficient for a market in need of diversified products, he underlined that “the Intraday Target Model has to be robust in its capacity of letting Power Exchanges choose and develop flexible instruments that respond best to the needs of the market”. Jean-François Conil-Lacoste, Chairman of the Management Board of EPEX SPOT, concluded that “continuous intraday markets become tangibly more important to answer the need for short-term flexibility, in particular by integrating the increasing amount of renewable power sources. As 2014 is imminent, a clear cost-benefit analysis needs to be presented to decision-makers in order to find ways to timely converge towards more integration of Europe’s Intraday markets.”

Intermittent production from renewables challenges the electricity system, grid stability issues arise and the market evolves closer to real-time. That is why EPEX SPOT is investigating solutions to increase flexibility of its intraday and day-ahead markets, as announced in September 2012. These ongoing studies are being actively shared with stakeholders. The Exchange Council supported especially the following improvements:
·   Opening of 15-minute contracts on the German Intraday market one day in advance at 4 p.m. instead of 2 hours before delivery. After the assessment of trading activity and regarding the fact that liquidity of hourly products was not impacted during the test period since November 2012, the Exchange Council decided to maintain the earlier opening.
·   The Intraday market could run up to 30 minutes before delivery including cross-TSO trades instead of the 45 minutes gate closure time of today. This could become possible by reducing the nomination lead time of EPEX SPOT’s clearing house European Commodity Clearing, needed for the nomination of transactions at the TSOs to assure the physical delivery of electricity. Market participants showed strong interest in this topic. This proposal will be further investigated. There is not yet a timeframe for the implementation.
Based on the market’s feedback, the European Power Exchange will further study the potential for optimizing its markets’ flexibility.

The first Exchange Council in 2013 was held in London on 13 March 2013 and chaired by Peter Heydecker, Head of Origination Gas & Power at Vitol.

* * *

The Exchange Council of EPEX SPOT is an official body of the Exchange. 16 members and 5 permanent guests represent adequately the diversity of economic and corporate profiles that exists among the Exchange Members from various sectors: power trading companies, transmission system operators, regional suppliers, brokers and financial service providers, as well as commercial consumers and academics. Its missions include in particular the adoption of the Exchange Rules and the Code of Conduct of EPEX SPOT and their amendments. The Exchange Council approves new trading systems as well as new Contracts or Market Areas and approves the appointment of the Head of the Market Surveillance Office. It meets up quarterly.