Wholesale Electricity Markets – Hurdles to Overcome / Mercados Atacadistas de Energia – Obstáculos a superar

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Workshop apresentado pelo presidente da CCEE, Luiz Eduardo Barata, à escola de negócios da Universidade Northwestern - Kellogg School of Management. Em inglês.

Workshop apresentado pelo presidente da CCEE, Luiz Eduardo Barata, à escola de negócios da Universidade Northwestern - Kellogg School of Management. Em inglês.

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Wholesale Electricity Markets – Hurdles to Overcome / Mercados Atacadistas de Energia – Obstáculos a superar Wholesale Electricity Markets – Hurdles to Overcome / Mercados Atacadistas de Energia – Obstáculos a superar Presentation Transcript

  • Brazilian Electricity MarketWorkshop: Wholesale Electricity Markets Hurdles to Overcome Kellogg School of Management Northwestern University Luiz Eduardo Barata Ferreira Chairman CCEE - Electric Energy Commercialization Chamber January 30, 2013
  • Agenda Main Facts and Figures about Brazil Update on Brazilian Electricity Market DesignUpdate on Brazilian Electricity Market Operation Technical Exchange CCEE – EPEXSPOT – ECC
  • Main Facts and Figures about Brazil
  • Main Figures and Facts about BrazilBRAZIL Territorial Extension 8,514,876 km² Population (Aug 2012) 193.9 million GDP 2011* US$ 2.221 trillionELECTRICITY SECTOR Installed capacity (Dec 2012) 121 GW Hydro 66% Thermal 27% Transmission lines 103,362 km Consumption (Nov 2012) 59,187 average GW Captive Market: 73.8 % Free Market: 26.2 %NUMBER OF MARKET PARTICIPANTSGenerators: 514 Distributors: 47 Source: ONSTraders: 149 Free Consumers: 1,654 Total (Jan 2013): 2,364 (*) US$ = R$1.865 on 12/31/2011 4
  • Update on Brazilian Electricity Market Design1) Regulation of Retail Trading2) Balance Responsible Entity Proposal3) Ex-ante Nomination and Price Transparency4) Federal Government Tariff Reduction Initiative 5
  • Update on Brazilian Electricity Market Design1) Regulation of Retail Trading (Public hearing by the regulator [ANEEL] closed on July 13, 2012) Objective: to simplify the operation of NCRE* consumers and small generators at CCEE that don’t have insufficient know-how and infrastructure for managing contracts and operations at CCEE The retailer will be responsible for portfolio management and operations at CCEE on behalf of the small agents Accounting and settlement will be consolidated by the retailer (*) NCRE: Non-Conventional Renewable Energy 6
  • Update on Brazilian Electricity Market Design2) Balance Responsible Entity Proposal Objective: to improve the collateralization methodology ​for settlement of the spot market 1st phase: concluded in January, 2013 Long contract position that exceeds the operational limit will automatically not be accepted, avoiding an uncollateralized short position in the spot market 2nd phase: 2nd semester 2013 (estimate) The credit risk of the agents will be assessed by financial institutions Financial institutions will guarantee the agents’ debts up to their operational limits regarding the spot market The operational limit will be predetermined by CCEE and approved by ANEEL 7
  • Update on Brazilian Electricity Market Design3) Ex-ante Nomination and Price Transparency Objective: the new regulation, by order from Ministry of Mines and Energy in August 2012, to be in force in July 2013, was designed to improve default risk management and enhance information symmetry Obligation to nominate the free market bilateral contracts before the energy delivery (ex-ante), in a weekly basis Obligation of reporting price information to CCEE, allowing the creation of price references in the free market (price indexes and forward curve) 8
  • Update on Brazilian Electricity Market Design4) Federal Government Tariff Reduction Initiative – Bylaw 12,783 (January, 2013) Objective: reduction in end-user tariffs expected to be around 20% I. Renewal of concessions in the electricity industry – Generation, Transmission and Distribution  Conditions for renewal of generation concessions:  Regulated prices (reduction estimation from US$ 44.36 to US$ 14.79)  All the energy will be allocated to distributors in long term contracts (regulated market)  Representation of Renewals  Generation: 13% of the current installed capacity (15,279 MW)  Transmission: 67% of the national interconnected system  Distribution: 35% of the regulated market II. End or reduction of some charges of the electricity industry 9
  • Update on Brazilian Electricity Market Operation1) New approach for Market Surveillance2) New Accounting and Settlement System3) Liquidity in the Brazilian Electricity Market 10
  • Update on Brazilian Electricity Market Operation1) New approach for Market Surveillance  CCEE is restructuring its market surveillance area and processes, reinforcing that this activity is essential for a smooth functioning of the wholesale market  Monitoring the market trading/participants behavior and stress-testing analyses  Perceived atypical transactions are placed under deeper scrutiny for appropriate actions 11
  • Update on Brazilian Electricity Market Operation2) New Accounting and Settlement System  Replacement of an obsolete system (+ 10 years) Accounting and Settlement System  Innovative solution for managing the commercial operations of the electricity market  Architecture focuses on security of information treatment, speed in the accounting processes and flexibility to address regulatory changes and growth of the electricity sector3) Liquidity in the Brazilian Electricity Market  CCEE launched the 1st Monthly Liquidity Report in August 2012, using the churn ratio as a measure of overall levels of liquidity Monthly volume traded Churn rate Monthly electricity consumption 12
  • Comparison of Electricity Markets’ Churn Rates Electricity Markets’ Churn Rates 10 Germany 8 Nord Pool 6 GB 4 Netherlands Brazil 2 France Colombia 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: OFGEM/CCEELiquidity of the Brazilian and Colombian Electricity Markets: Far from the Germany and Nord Pool benchmark markets Actions to improve the liquidity are recommended 13
  • Technical Exchange CCEE – EPEXSPOT – ECC 14
  • Technical Exchange CCEE – EPEXSPOT – ECCCCEE has partnered with the European Power Exchange (EPEXSPOT) and theEuropean Commodity Clearing AG (ECC) for technical exchange formalized by aMemorandum of Understanding (MoU) signed in February 2012Objectives Improving the collateralization methodology of the spot market Studying trading platform design and clearing solutions Enhancing quality in price formationDeliverable Documents Feasibility study developed by CCEE – EPEXSPOT – ECC White Paper with a prospective vision to be presented to the Brazilian authorities and stakeholders – launched in November 2012, in Salvador, Brazil Conceptual roadmap containing an indicative timeline to improve the Brazilian electricity market (under construction) 15
  • Technical Exchange CCEE – EPEXSPOT – ECCWhite Paper – Building a Smart Brazilian Electricity Market Financial security Competitiveness Transparency Sustainability Organized market Symmetry of Neutrality Liquidity information • Find out complete version of the White Paper: www.ccee.org.br 16
  • Thank you! www.ccee.org.br