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Getting ready for Secondary Trading
Guidance for Capacity Market Participants
5 April 2017
Electricity Market Reform
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Electricity Market Reform
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Your presenters today are…
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Ian Nicholas Vikas Garg Tim Dart
Legal Disclaimer and Copyright
Disclaimer
This guidance document has been prepared by National Grid Electricity Transmission plc (NGET) and is provided voluntarily and
without charge. Whilst NGET has taken all reasonable care in preparing this document, no representation or warranty either expressed
or implied is made as to the accuracy or completeness of the information that it contains and parties using information within the
document should make their own enquiries as to its accuracy and suitability for the purpose for which they use it. Neither NGET nor
any other companies in the National Grid plc group, nor any directors or employees of any such company shall be liable for any error or
misstatement or opinion on which the recipient of this document relies or seeks to rely other than fraudulent misstatement or fraudulent
misrepresentation and does not accept any responsibility for any use which is made of the information or the document or (to the extent
permitted by law) for any damages or losses incurred.
In the event of any conflict or inconsistency between this document and the Capacity Market Rules, the Electricity Capacity Regulations
or the Auction Guidelines, the latter documents take precedence. Capitalised terms used in this document shall have the same
meanings given in the Capacity Market Rules.
Confidentiality
This guidance document, and its contents should be considered as confidential in nature, and document is supplied on this basis. No
part of this document may be reproduced in in any material form (including photocopying and restoring in any medium or electronic
means and whether or not transiently or incidentally) without the written permission of National Grid.
Copyright National Grid 2017, all rights reserved.
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All questions are important!
IN 4
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Who is this for?
16/17 TA 17/18 EA 17/18 TA 18/19 T-4 19/20 T-4 20/21 T-4
Existing CMU
New Build CMU
Existing
Interconnector
Unproven /
Proven DSR
Refurb
New Build
Interconnector
Yes No Not Applicable IN 5
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Agenda
Overview of Secondary Trading / Volume Reallocation / Financial
Hedging
Why Secondary Trade?
Who can Secondary Trade?
Volume Reallocation
How is Secondary Trading carried out?
When can I trade?
REMIT
Frequently Asked Questions
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Auction and Delivery year timeline
Dec14
Jan 15
Dec 15
Jan 16
Oct 16
Dec 16
Jan 17
May 17
Oct 17
Dec 17
Jan 18
Oct 18
Dec 18
Jan 19
Oct 19
Dec 19
Jan 20
Oct 20
Dec 20
Jan 21
Oct 21
Dec 21
Jan
22
CM delivery year1 18/19
CM delivery year 1 19/20
TA delivery year 16/17
TA delivery year 17/18 TA Auction
CM delivery years 2-15
CM delivery years 2-15
(18/19) T-1 Auction
(19/20) T-1 Auction
EA delivery year 17/18 EA Auction
SCA Secondary Trading window 17/18 delivery
(May 17-Sep 18)
Secondary Trading window for 18/19 delivery
year (Jan 18- Sep 19) 18/19
17/18 Secondary Trading (ST)
TA/EA
T-4 2018/19
19/20 Secondary Trading window for 19/20 delivery year (Jan
19- Sep 20)
T-4 2019/20
CM delivery year 1 20/21
CM delivery years 2-15
T-4 2020/21
(19/20) T-1 Auction
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Secondary Trading summary
Auction participants with a
Capacity Agreement may be
unable to deliver (planned or
forced outages) have the
following options to hedge
position;
IN 8
1. Physical secondary
trading (ex ante)
2. Volume Reallocation (ex
post)
3. Parties are free to
procure a financial
product outside of the
Capacity Market
mechanism.
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Secondary Trading summary
Obligation transfer/secondary trade
Transfer of the Capacity obligation from Party A to Party B
Min time period 1 day/ min volume 2MW
The receiving party must have successfully prequalified and
have capacity available (cannot trade above De-rated
capacity).
Transfer requests can commence from end May for Oct 17
delivery year
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Secondary Trading summary
Can carry out multiple transfers - within de-rating
CMU Transferee satisfies the acceptable transferee
requirements (such as satisfactory performance prior to
trading request).
The holder of an obligation across winter (even 1 day) will
need to prove Satisfactory Performance Days
If traded out then SPD not required
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Secondary Trading summary
not also a Bidder or Capacity Provider of a Defaulting CMU
Interconnector not able to ST before 2019. However ability
allowed to trade in EA so 2017/18 not 2018/19 then 2019/20
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Volume Reallocation
Ability to cover obligation post stress event with registered
participant.
Meet the acceptable transferee requirements
Register to be CMVRP in advance of delivery period
Capacity volume register updated WD10
Allocate volume to Submit a CMVRN WD 11-19
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Why Trade?
Value of obligation trading;
1MW in 2017 Early Auction £6.95 clearing price. Annual obligation
payment £6,950
For every HH non-delivered for a stress event = 1x 24th payment
£6,950/12= £289
In any month max is capped at 2 months payments
£6,950/6 = £1,158
In a delivery year max loss = 100% capacity payment
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Who can Secondary Trade?
An Acceptable Transferee is any of the following:
CMU Opted-out at the T-4 Auction and has since Prequalified in
the T-1
Prospective CMU that has achieved the Substantial Completion
Milestone prior to the Delivery Year
A Capacity Provider of a CMU that Prequalified but does have a
Capacity Agreement
An Eligible Secondary Trading Entrant
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Secondary Trading Entrant
Secondary Trading Entrant means the Applicant for:
Existing Generating CMU comprising biomass plant which is
exiting the Low Carbon Exclusion
Existing Interconnector CMU
Proven DSR CMU
CMU which is an Existing CMU;
Terminated new build unit subsequently been built
For the T-1 Auction the unit was not Existing CM
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Tim Dart
How is Secondary Trading carried out in the EMR Portal?
VG 16
Vikas Garg
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Secondary Trading Process Map
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Agree terms of trade Party A
(Transferor)
Party B (Transferee)
Review by Delivery
Body
Submit trade application in EMR Portal
Party B review the application
Update to Register, CAN
and EMRS (depending upon
outcome)
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Secondary Trading Process Map
Secondary Trading Steps
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Party A (Transferor), the obligation holder, and Party B an Acceptable Transferee for obligation transfers, agree the terms of the trade between themselves.
Party A submits the trade request via the EMR Portal and Party B approves the request with at least 5WD notice before the obligation to be transferred starts. This will detail the transferor, transferee, length of the trade and the volume to be transferred.
The DB will then process the request and the transferor and transferee will be notified of the result.
If the trade is approved the details are added to the register and the obligation changes are sent to EMRS for the settlements to be amended.
Step 1
Step 2
Step 3
Step 4
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Secondary Trading Steps
Step 2 -
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Transferor submit the trade application in EMR Portal
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Step 2
Step 2 Continues…
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Select Delivery Year
Select Transferee Company and CMU
Select Trade schedule and Volume
Step 2 -
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Step 2 Continued
Step 2 Continues…
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Transferor to see the list of trades initiated
Step 2 Continues… Step 2 -
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Step 2 Continued
Step 2 Continues…
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Once submitted by Transferor, Transferee receives a notification of the trade
Step 2 Continues… Step 2 Continues… Step 2 -
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Step 2 Continued
Step 2 Continues…
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Transferee to review trade and process
Step 2 Continues… Step 2 Continues… Step 2 -
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Step 2 Continued
Step 2 Continues…
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Step 2 Continues… Step 2 Continues… Step 2 -
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Step 2 Continued
Step 3 and 4
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Step 2 Continues… Step 2 Continues… Step 2 -
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Step 3 and 4
Step 3 and 4
Once processed by Transferee, Transferor and Delivery
Body (DB) receive notification
DB review and trade detail and process it within 5WD
If trade is approved the details are added to the register and
the obligation changes are sent to EMRS for the settlements
to be amended
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Step 2 Continues… Step 2 Continues… Step 2 -
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Step 3 and 4 continued
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Tim Dart
When can I trade - trading timeline
REMIT
Frequently asked Questions
TD 27
Tim Dart
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Early Auction delivery year
April May June July Aug Sep Nov Dec Sep 18
Oct 17
2017
Webinar & training material will be available.
Contact details
requested by DB.
Secondary Trading Entrant - apply to prequalify for ST
(not during auction prequalification)
Secondary Trading Contact details
published
Secondary Trade Registration to DB
Auction PQ Assessment
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Volume reallocation
Trading Timeline
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REMIT1 obligations
REMIT is Regulation (EU) No 1227/2011 of the European Parliament and of the
Council of 25 October 2011 on wholesale energy market integrity and transparency.
It entered into force on 28 December 2011.
REMIT introduced a consistent EU-wide framework:
Defining market abuse, in the form of market manipulation, attempted market
manipulation and insider trading, in wholesale energy markets.
Explicitly prohibiting market manipulation, attempted market manipulation and
insider trading in wholesale energy markets.
Establishing a new framework for monitoring wholesale energy markets to detect
and deter market manipulation and insider trading.
Enforcing these prohibitions and sanctions breaches of market abuse rules at
national level.
Ofgem https://www.ofgem.gov.uk/publications-and-updates/remit-registration-faq
ACER http://www.acer.europa.eu/en/the_eu_energy_market/Legislation/Pages/default.aspx
1 Regulation (EU) No 1227/2011 of 25 October 2011 on wholesale energy market integrity and transparency TD 29
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REMIT obligations – Secondary Trading
‘Market Participants’, as defined in REMIT, should ensure that they
understand and comply with the requirements of REMIT and associated
Regulations and guidance.
In accordance with Article 8 of REMIT, Market Participants are required to
report contracts for the transportation of electricity concluded between
Market Participants on secondary markets specifying physical or financial
capacity obligations. This includes resale and transfer of capacity
obligations and therefore Market Participants should ensure that they
comply with the reporting requirements of REMIT in carrying out this
activity.
Please seek your own legal advice to ensure that understand your
REMIT requirements.
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Frequently Asked Questions
Q: I am a new build generator but won’t be built for the
delivery year; can I Secondary Trade out my obligation?
A: You will need to meet the SCM to be able to trade.
Please refer to Rule 9.2.5 (a)
Q: I didn’t prequalify for the early Auction but wish to
secondary trade, how do I do this?
A: If you are eligible to qualify as a Secondary Trading
Entrant then it is possible to take on obligations through
Secondary Trading. If you don’t fit into this category then
you cannot receive an obligation through Secondary
Trading.
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Frequently Asked Questions
Q: How do I register to become a Secondary Trading
Entrant?
A: Carry out the prequalification process the same way
as if you were to enter the auction for the same delivery
year but apply for secondary trading (as opposed to
applying to enter an auction)
You will be able to submit a prequalification application
outside the normal prequalification window and the DB
has 3 months to give the decision.
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Frequently Asked Questions
Q: If I take on an obligation through secondary trade, what
performance monitoring is involved?
A: If you hold an obligation (even for 1 day) in the winter
(Oct-April) then you will need to meet the satisfactory
performance days (Rule 13.4).
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Frequently Asked Questions
Q: What options do I have if I have an outage to all or part
of my CMU?
A: If you have a planned outage you can trade all or part
of your obligation away to another an acceptable
transferee ahead of the date or even before the delivery
begins .
If the outage occurs during a stress event period a
participant still has the option to participate in volume
reallocation if they can agree to reallocate their capacity
to another acceptable transferee.
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Frequently Asked Questions
Q: I can generate above my Auction Acquired Capacity
Obligation (AACO) – am I able to secondary trade this
additional capacity?
A: For a generating CMU you are not able to secondary
trade capacity above your AACO. However if you over-
generate in a stress event it is possible for you to
participate in Volume Reallocation after the event.
For a Proven DSR CMU, if the AACO is below their de-
rated capacity then it is possible to secondary trade up
to the proven de-rated capacity level. Again, DSR units
can participate in Volume Reallocation after the event. TD 35
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Ian Nicholas, Vikas Garg, Tim Dart – CM Auction Team
Key Messages
Delivery starts Oct for Secondary Trading
End October deadline for volume reallocation
Finalising system readiness for end May
You will need to provide your contact detail so we can
publish for each CMU (on EA register) a contact detail (with
and without agreements)
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Key Messages
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ACTION: You will need to provide your contact detail so we can publish for each
CMU (on EA register) a contact detail (with and without agreements)
Guidance Documents
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Guidance
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Tell us what you think ….
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Tell us what you think…
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Metering Assessments
If you have any questions about the content of this guidance document, please
contact the EMR team at:
+44 (0) 1926 655 300
Contact
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