Modelling European Electricity Markets · VERBUND Holding I Dr. Sharma I 2009 Electric Market...
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Modelling European Electricity Markets 2009 Electric Market Forecasting Conference
Verbund Company Presentation 2009 Electric Market Forecasting Conference
19.10.2009 PAGE 3VERBUND Holding I Dr. Sharma I 2009 Electric Market Forecasting Conference
VERBUND 2009
Austria‘s leading electricity company. Foremost Verbund is among Europe‘stop electricity utilities.
one of the most environment-friendly power producers in Europe, covering app. 40 per cent of Austria‘s requirements, 90 per cent of which is generated from renewable hydropower.
a company that is socially responsible and values sustainability, customer orientation and fair competition.
Verbund is
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we are the leading electricity company in Austria and are growing in theEuropean market.
we generate electricity in environment-friendly plants, primarily from hydropower.
with the Austrian transmission grid we guarantee the quality of power supply.
we offer all customers optimal services through our electricity trade and distribution activities.
we practice sustainability, communicate openly and are committed to our social responsibility.
Our key advantages
VERBUND 2009
OVERVIEW Modelling European Electricity Markets
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Overview of European Electricity Markets
Import
GRIDSUPPLYDEMAND
POWER WHOLESALE MARKET
SPREADGAS CLIMATE
FUTURE CHALLENGES
DEMANDModelling European Electricity Markets
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Electricity Consumption - Global
USA with electricity consumption of almost 4,000 TWh (2005) biggest global electricity market followed by Europe with approx. 2,750 TWh
China with the strongest growth in electricity demand: From 2000 to 2005 consumption increased by 83% → will become in the near term the second biggest electricity market
2000-2005 Global Electricity Consumption [TWh]
Source: Eurostat,Prospex
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Electricity Consumption - Europe
2006 EU 271 Electricity Consumption [TWh] 2000-2005 EU 27 Electricity Consumption Growth [%]
Source: Eurostat,Prospex1 EU 27 always includes Norway and Switzerland unless otherwise stated.
Within Europe the big five electricity markets (Germany, France, UK, Italy and Spain) amount for 2/3 of the European electricity consumption
Baltic states and South Eastern Europe show strongest growth in electricity demand; But the absolute increase compared with the big five lower
SUPPLYModelling European Electricity Markets
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European Electricity Generation - Thermal
Europe total electricity generation around 3.100 TWh (2006) with Germany and France on the top
Conventional thermal power plants (coal, gas and oil) backbone of the European electricity market → account for 56% of total generation
Source: Eurostat,Prospex
2005 EU 27 Dependency on Thermal Generation by Fuel [%] 2006 EU 27 Electricity Production per Type [TWh]
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European Electricity Generation - Renewables
Hydro biggest renewable source accounted for 66% (2005) of total renewable generationLargest renewable production in Norway meeting almost whole domestic demand with hydro generationIn share of consumption Austria leads the European ranking by covering 57% of its electricity demand by hydro generation
Source: Eurostat,Prospex
2005 EU 27 Renewable Generation by Technology [TWh] 2005 EU 27 Renewable Generation as Share of Electricity Consumption [%]
GRIDModelling European Electricity Markets
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European Interconnectors - Flows
Source: UCTE
2006 European Cross-Border Pysical Flows [GWh]
European electricity markets strongly interconnected
But:
• actual available interconnectorcapacity is limited
• European transmission system not fully synchronized
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European Interconnectors - Utilization
Source: VERBUND
2010 European Interconnector Utilization Ratio Forecast [%]
0… 0% Utilization Ratio (white); 1… 100% Utilization Ratio (red)
Using Aurora to forecast utilization of interconnectors:
Bottlenecks of European transmission system especially at borders of German and South Eastern Europe
EXCHANGESModelling European Electricity Markets
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European Wholesale Electricity Exchanges
Schematic Overview of European Wholesale Electricity Markets
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European Wholesale Electricity Exchanges
Total traded spot volumes in Western Europe 947 TWh in 2007 → 34% of electricity consumption in the relevant markets
Nord Pool biggest spot market covering 78% of Nordic consumption followed by IPEX (UK), Omel and EEX
4 main electricity wholesale exchanges account for 80% of the traded volume
Initiatives exist to establish a single Central Western European power exchange
2007 European Spot Power Market Trading Volumes [TWh] 2007 European Spot Market Trading Volumes as Share of Consumption [%]
Source: Prospex
FUTURE CHALLENGES Modelling European Electricity Markets
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Gas - Security of Supply
21% of European total power generation being gas-fired
European gas market highly dependent from Russia and Norway
Supply uncertainties from Russia increased during last years and put European power generation under pressure
Modelling effect of gas supply shortages with Aurora through Gas forced outages scenarios in Winter months
Source: ECORYS
Libya
Algeria
Nigeria
Domestic
Norway
Russia
Other
25%
4
3
10%
39%
17%
4
2007 European Gas Import Dependency [%]
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Gas - Decoupling from Oil Market
Source: Frontier Economics
Structure of sales prices does not reflect low marginal costs of gas production
Nearly all European gas import contracts relate to oil or oil products (exemption UK)
Some new negotiated contracts have higher shares of gas prices in the formula
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Gas - Decoupling from Oil Market
Source: Frontier Economics
AURORA
Modelling the possibility of oil-gas price decoupling:
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Climate - CO2-Regimes
Not all European countries participate at the Emission Trading Scheme
Most of the countries do have free allocated CO2-certificates
Incorrect modelling of the real CO2-costs for electricity generation has a
distortionary impact on the electricity price
Using Aurora to model different CO2-regimes
• calculating CO2-emissions of the electricity sector from Aurora
• derive different CO2-passthrough assumptions based on the free allocated
CO2-certificates and
• define country-specific CO2-prices
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Climate – EU Climate and Energy Package
Not all European countries participate at the Emission Trading Scheme
Most of the countries do have free allocated CO2-certificates
Incorrect modelling of the real CO2-costs for electricity generation has a distortionary impact on the electricity price
Using Aurora to model different CO2-regimes
• calculating CO2-emissions of the electricity sector from Aurora
• derive different CO2-passthrough assumptions based on the free allocated CO2-certificates and
• define country-specific CO2-prices
Climate Energy Package agreed in December 2008• 20% reduction in GHG emissions from
2005 to 2020
• 20% Renewable Energy Target
• 20% Savings from Energy Efficiency
GHG and renewable target evaluated by using Aurora• What electricity demand reduction
would be necessary to reach the target?
• What would be the effect on GHG target if the generation mix changes in favour of more renewables?
• Which countries have to take the most efforts?
• What do the targets mean for the future electricity prices?
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Spread - Future Base/Peak
Electricity Price
BASE/PEAK
Intermittent
Conventional
SUPPLYDEMAND
Smart Metering
E-Mobility
0
5000
10000
15000
20000
25000
30000
35000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Actual Hourly DemandFuture Hourly Demand?
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
1 1001 2001 3001 4001 5001 6001 7001 8001
Future Generation?Actual Generation
0
20
40
60
80
100
120
140
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Base-Actual
Peak-Actual
Base-Future?
Peak-Future?
FURTHER INFORMATIONModelling European Electricity Markets
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Further Information
Import
Export
GRIDDEMANDDr. Stephan Sharma
Business Management and MarketingVerbund Holding / Österreichische Elektrizitätswirtschafts-AGAm Hof 6A, A-1010 Vienna, Austria/Europe
Tel: (+43) (0) 50313 - [email protected]