International businessThe electricity industry Silvester van Koten PAHX CERGE-EI Florence School of Regulation
Transmission Principles of Transmission, applied to the EU transmission network1. Line limits2. Principles of dispatch3. Role of frequency in ac lines and stability requirements4. Transmission shortage, the internal market and the 2050 carbon targets
Well-developed financial electricity market- Exchanges and OTC- risk management
Financial market manipulation• US hedge fund, Amaranth Advisors LLC held 1. gas derivates at ICE and OTC markets 2. Gas futures on NYMEX• Then sold the gas futures on NYMEX to affect the settlement price at ICE and OTC markets• Profit: $60m-$170m
REMIT• Regulation on Energy Market Integrity and Transparency• Forbids: – Market abuse – Insider trading• Monitoring task for National Regulaturs and “EU regulator” ACER
2003 and 2009 Electricity laws (2003/54/EC and 2009/72/EC)• Separation from networks and generator activities• Non-discriminatory access of generators to networks• “EU regulator”: ACER• 2020 goals: 20% renewable energy in 2020 – Feed-in tariffs – Emission Trading Scheme
Greenhouse gasses heat up the earth Abate CO2
EMISSION PERMIT MARKETCompetition for permitsDecisions on abatement A B C
• United Power System (UPS): 4-th largest electricity market in the World.• 700 generating plants Installed generating capacity 220 GW
Reform of the system 1992-2015• 1992 United Energy Systems of Russia (RAO- UES) replaces soviet ministerial units• 1998 Anatoly Chubais president of RAO-UES.• 2003–2011 – restructuring and private ownership – Partial price deregulation• 2011 full competition in generation• 2015 price deregulation for retail conconsumers
Need for new investment• Most power stations built in 1960-1970 – Low efficiency ratio of 33-35% instead of 40-52%• Ministry of Energy: modernization program for generators of 10 trillion rubles up till 2030 – Increase in demand for equipment• Russian technology behind western standards – heavy duty gas turbines – ultra supercritical steam turbines – gasification – process control systems
Competition problems• No working retail markets yet• Fair access to gas for fair and equal prices – Gas fired generators 40% of production – Newcomers often CCGT – Gazprom (75% share) seems to favor its own subsidiary generators• Financial energy market not developed – Risk management
Regulation• regulatory authority: the Market Council• But not independent, government: – control over most pricing issues – Veto over Market Council decisions
Industrial consumers Transmission Other countries DistributorsPower Plants Residential consumers: Households
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