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Nektaria Karakatsani, Member of the Board, Regulatory Authority for Energy

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Athens Energy Forum 2019 | Panel Discussion 5 - The Domestic and Regional Power & Electricity Market Dynamics

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Nektaria Karakatsani, Member of the Board, Regulatory Authority for Energy

  1. 1. Transition to Target Model: Milestones and Challenges Nektaria Karakatsani, Regulatory Authority for Energy (RAE), Member of the Board Athens Energy Forum, 28-29 January 2019
  2. 2. The Energy Mix is Being Redefined. Fuel Market Shares in Electricity Generation, 2014 - 2018
  3. 3. Transformation of the Greek Energy Sector (I) ❑ More competitive markets, shifting away from monopolistic structures. ❑ Antitrust measures on incumbents (PPC and DEPA). ✓ Electricity auctions (NOME). Gas release program. ❑ New investors in System Operators. ➢ ADMIE: State Grid China: 24%. DESFA: Snam, Fluxys, Enagas: 66%. ❑ Divestment of lignite assets. Final Expression of Interest. ❑ New shareholders in gas distribution and supply companies. ❑ New market actors: e.g. Aggregators in electricity / paper traders in gas balancing. ❑ Bundled electricity and gas retail products -> Savings and options for consumers.
  4. 4. Transformation of the Greek Energy Sector (II) ❑ More integrated with other European markets. ❑ Better connected, with new cross-border infrastructure. ▪ Several PCI projects. Major investment interest. ▪ Gas pipelines (TAP, IGB, East Med). Electricity cables (Euroasian, Maritsa East). ❑ More harmonized in terms of market rules. ▪ Electricity Target Model: 6th June 2019. ▪ GR-BG Gas Interconnection Point: Full compliance with EU framework. ▪ Gas balancing platform: since 1st July 2018. ❑ More diversified and resilient, regarding Security of Supply. ▪ LNG Terminal extension, FSRU Alexandroupolis, Underground Storage (Kavala). ▪ Reverse flow from Greece to Bulgaria. ▪ Preventive Action Plan: Several cost-effective measures were adopted.
  5. 5. Transformation of the Greek Energy Sector (III) ❑ More focused on the clean energy transition. • More than 20% RES market share in electricity production. • 2600 MW of RES to be auctioned during 2018-2020. • Transition from Feed-in-Tariffs to Feed-in-Premium. ❑ Gas network is expanded across Greece. ❑ CNG / LNG framework for remote areas and customers. ❑ Islands interconnections and small-scale LNG to reduce oil-based production. ❑ On-going developments on “Smart Transition”: • Electrical vehicles: Framework for charging stations (RAE’s opinion). • Smart meters: Roll-out scheme (under discussion). • Smart islands: Tenders for hybrid stations (RAE’s opinion). • Energy communities: Attractive incentives introduced in Jan 2018. 2.5 bil € RES investments 250 mil € 2.5 bil €
  6. 6. Electricity Market: Transition to Target Model ❑ New markets: Forward, Day-ahead, intra-day and balancing. ❑ Market Coupling with Italy, then Bulgaria, later Energy Community countries. ❑ Market is expanded: Market power potential is reduced. ❑ Efficiency gains from cross-border flows. ❑ Generators: Contract production with locked-in prices -> Facilitates financing. ❑ Value of flexibility better reflected. Both for plants and demand-response. ❑ Suppliers: Hedging allows for more competitive retail products. ❑ RES: Balancing responsibilities. When sufficient liquidity in intra-day markets. ❑ Derivatives expected to multiply the market value.
  7. 7. 2018 2019 Q1 Q2 Q3 Q4 Q1 Q2 M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12 M1 M6 Corporate Regulation ITCs Roadmap on Corporate - Regulation - ITC 7 Energy Exchange Establishment Energy Exchange Establishment Clearing House Establishment Energy Clear Establishment ITC Infrastructure SPOT Trading & Clearing RULEBOOKs DERIVATIVES Trading & Clearing RULEBOOKs Submission PCR Ownership
  8. 8. Milestones and Roadmap ❑ New Entities and Regulatory Framework ✓ HenEx: Established on 16.6.2018. ✓ EnEx Clear: Established on 2.11.2018. ✓ Rulebooks for Spot Trading and Balancing: Approved by RAE on 13.11.2018. ✓ Spot Clearing Rulebook: Advanced. 2nd Consultation. ✓ 20 methodologies and regulatory parameters: To be approved by RAE. ✓ Power Derivatives: Trading and Clearing Rulebooks (drafting). ❑ IT Systems ✓ PCR Full Membership: 30.11.2018. Regional Issues: ✓ Systems Implementation: May 2019. Common Testing after local results. ✓ Users Training, Dry-Run. Price limits. Export Fees in Bulgaria. ❑ Go-Live: Availability of Interconnections. ✓ Isolated Mode: Local Day-ahead market and Intra-day Auctions. ✓ Market Coupling with Italy.
  9. 9. Key Principles and Changes ❑ Transparency in Price Formation and Market power mitigation: Unit-based bidding in all markets apart from the forward market, where portfolios are allowed. ❑ Robust and Smooth Transition: Central dispatch instead of self-dispatch. ❑ Security of Supply: Mandatory participation of generators in day-ahead and balancing markets. ❑ Bids format: Flexibility vs. complexity trade-off (hybrid, blocks, linked). ❑ Market Liquidity: Cap on hedging ratio. Compatibility: Min variable cost rule abolished. ❑ Various changes arise, including: • Operational profile of plants and all costs (ramping, desynchronization) to be incorporated into orders. • Expensive plants may perceive bilateral contracts as a way to “hide” costs and get dispatched. • Credit limits and processes avert arrears. ❑ Ex-post market monitoring is enhanced. Variable cost data will continue to be submitted and assessed. Several indicators will be published (e.g. orders’ curve and volume). Strong incentives for operational efficiency.
  10. 10. Clean Energy Transition: Challenges for Energy Regulation ❑ Adaptive, open to innovation. ❑ Reliable and predictable, avoiding abrupt changes. ❑ Independent, reflecting technical capability and accountability. ❑ “3D” Transition: At least cost for consumers. Huge costs involved in connectivity and smart networks. For a smooth impact on consumers (prosumers): Competition, demand-response, storage, revised grid tariffs, synergies across sectors. ❑ Relevant quotes ➢ “Politicians are often driven by short-term interests, while good regulation may deliver outcomes in longer horizons.” ➢ “Postponing changes is similar to using credit cards. Enjoyable as it lasts but frustrating when you get the bill”.

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