modelling european electricity markets · verbund holding i dr. sharma i 2009 electric market...

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


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


Overview of European Electricity Markets

Import

GRIDSUPPLYDEMAND

POWER WHOLESALE MARKET

SPREADGAS CLIMATE

FUTURE CHALLENGES

DEMANDModelling European Electricity Markets


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


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


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


2005 EU 27 Dependency on Thermal Generation by Fuel [%] 2006 EU 27 Electricity Production per Type [TWh]


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


2005 EU 27 Renewable Generation by Technology [TWh] 2005 EU 27 Renewable Generation as Share of Electricity Consumption [%]

GRIDModelling European Electricity Markets


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


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


European Wholesale Electricity Exchanges

Schematic Overview of European Wholesale Electricity Markets


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


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 [%]


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


Gas - Decoupling from Oil Market

Source: Frontier Economics

AURORA

Modelling the possibility of oil-gas price decoupling:


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


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?


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


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]

modelling european electricity markets · verbund holding i dr. sharma i 2009 electric market...

Documents