q2 2015 notes on energy and environmental markets...source: terna - monthly report on the...
TRANSCRIPT
Milan, July 2015
Notes on energy andenvironmental marketsat 30 06 2015
Overview of Italy and bordering
countries
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
1. Italian Market
• Demand and Supply
• Spot markets
2. Foreign Markets
• Spot markets
3. Environmental Markets: Green and White Certificates, EUA
Contents
2
DISCLAIMER - This document has been prepared by A2A for convenience purposes only and for the benefit of investors and analysts solely and is based on public information. However this documentshall not give rise to any liability of A2A or any of its subsidiaries, directors, officers, employees or consultants as per the truthfulness, accuracy, completeness and updating of such information. Thisdocument does not constitute an offer or invitation to purchase or subscribe any shares or other securities and neither it nor any part of it shall form the basis of or be relied upon in connection withany contract or commitment whatsoever.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Summary – H1 2015
3
In H1 2015 prices increased slightly: the PUN Baseload closed at 49.83 €/MWh (+0.37 €/MWh compared to H1 2014) and
the PUN Peakload closed at 54.62 €/MWh (- 1.64 €/MWh compared to H1 2014).
Consequently, the Peakload/Baseload ratio decreased to 1.10.
The electricity demand was 153.2 TWh: down by 0.3 % compared to H1 of last year.
The supply side recorded an increase of 4.1% in thermoelectric production (+3.3 TWh). There was also an increase in
photovoltaic production (+10%) and a strong decrease in hydroelectric production (which has lost 7 TWh of production
compared to H1 2014 due to the exceptional hydraulicity of last year).
The Clean Spark Spread (CSS) reference of H1 2015 slightly improved compared to the same period of 2014. It is positive on
Peakload (+2.08 €/MWh) – although not by much – but still negative on the Baseload (-2.71 €/MWh), confirming the plight of gas-
fired thermoelectric producers.
The coal-fired plants are still profitable: the Clean Dark Spread (CDS) is 12.83 €/MWh, a bit better than H1 2014.
Green Certificates average market price as of 30th June is 98,63 €/MWh
The White Certificates average market price in H1 2015 is around 103 €/Tep.
The EUA average price in H1 2015 is 7,22 €/Ton, confirming the positive expectation by the market on the current discussion
about the Market Stability Reserve.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
The electricity productionFurther drop in hydroelectric production
Source: Terna - Monthly Report on the Electricity System.
4
• In the first half of 2015 the reduction in electricity demand is only -0.3%.
• Hydroelectric production decreased strongly by 23%, due to a strong reduction in precipitations compared to the last year.
• For the first time over the last 3 years, thermoelectric production increased by 4.1%, partially due to the above mentionedreduction in hydro production. Also photovoltaic production continued to increase (+10.1%).
• There was also a little increase in the import-export balance (+3.1%).
GWh H1 2015 H1 2014Var. %
2015/2014
Net Production
Hydro 23,289 30,262 -23
Thermo 83,184 79,881 4.1
Geothermo 2,874 2,722 5.6
Wind 8,932 8,146 9.6
Solar 12,965 11,777 10.1
Total net production 131,244 132,788 -1.2
Import 25,386 23,193 9.5
Export 2,447 942 159.8
Foreign balance 22,939 22,251 3.1
Pump storage 944 1,359 -30.5
Demand 153,239 153,680 -0.3
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Load factor of thermo plants on day-ahead marketHuge increase in CCGTs load factor in the South Zone
• In the first half of 2015 the CCGT’s load factor increased in both the North and the South Zone. In the South Zone itdoubled, thanks to a 1.2 TWh increase in the export to Greece and 0.8 TWh increase in demand, almost entirely covered byCCGTs’ production.
• Coal load factors increased slightly in the first half of 2015 in the North Zone, and were substantially stable in the South.
5
(*) Load factor calculated for CCGTs not subject to dispatching restrictions (thermal load, CIP6, …)
Source: A2A Trading/Bidding & Dispatching calculations based on GME data
approx.2,000 hours/year
approx.4,800 hours/year
*
34% 33%
38%
32%
38%
21%
26%
18%17%
14%12% 12%
14%
27%
0%
5%
10%
15%
20%
25%
30%
35%
40%
North South
CCGT
1H 2009
1H 2010
1H 2011
1H 2012
1H 2013
1H 2014
1H 2015
64%
73%
59%56%
43%
55%
71%
57%
65%
44%
51%56%57% 55%
0%
10%
20%
30%
40%
50%
60%
70%
80%
North South
COAL
1H 2009
1H 2010
1H 2011
1H 2012
1H 2013
1H 2014
1H 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
The electricity demandDemand decreased by 0.3% seasonally adjusted
Source: Terna - Monthly Report on the Electricity System, Ref-E
6
• In the first half of 2015 the electricity demand amounted to 153 TWh, with a small reduction of -0.3% (- 441 GWh)compared to Q1 2014 (the seasonally adjusted reduction is still -0.3%).
• According with Terna communication about the actual load of July, if the level of consumption would be maintained until the endof the month, demand will rise by 1.8% compared to the same month of 2014.
• The reduction in consumption is particularly significant in North East (-3.2%) and in Sicily (-5.4%), while there is an increase inSouth (+4.7%).
xx% Increase/reduction 2015 vs 2014
GWh Period Demand
2014 Q1 78,193
Q2 75,487
H1 153,680
Q3 78,117
Q4 77,209
YEAR 309,006
2015 Q1 78,112
Q2 75,127
H1 153,239
H1 2015 vs H1 2014 -0.3%
20.000
22.000
24.000
26.000
28.000
30.000
32.000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
GW
h
Italian electricity demand
2012
2013
2014
2015
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Diff [%] -2.0% +0.7% +1.1% +0.0% -1.3% -0.1%
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
0
5
10
15
20
25
Distribution Thermo Industrial
bcm
Gas consumption H1
1H 2012
1H 2013
1H 2014
1H 2015
0
1
2
3
4
5
6
Distribution Thermo Industrial
bcm
Gas consumption Q2
Q2 2012
Q2 2013
Q2 2014
Q1 2015
Gas consumption in ItalyThermoelectric and distribution uses increased by 9% in H1 2015
Source: Snam Rete Gas.
7
+9%
11,2 bcmTotal Consumption
in Q2 2015
• In H1 2015 there was an increase in the gas consumption in the thermoelectric sector by 9%, due to the lower
hydraulicity that contributed to the increase in CCGT production.
+2%
34.3 bcmTotal Consumption
in H1 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Italian market: PB-GAS prices analysisWidening PBGAS/TTF spread
Source: GME data and internal analysis, Ref-E
8
• The gas price decrease of Q1 has been compensated by an increase in Q2.
• In the first half 2015, the PB GAS prices slightly reduced by 0,16 €/MWh and TTF prices by 0,49 €/MWh; thus, the spread
between the two markets has widened.
0
5
10
15
20
25
30
35
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
gas
PB GAS
2012 2013 2014 2015
€/MWh gas PB GAS TTF spread
2014 Q1 25.49 24.32 1.17
Q2 21.18 18.96 2.22
1H 23.33 21.62 1.70
Q3 21.79 18.10 3.69
Q4 25.87 22.02 3.85
Year 23.58 20.84 2.74
2015 Q1 23.59 21.23 2.36
Q2 22.75 21.05 1.70
1H 23.17 21.14 2.03
1H 2015 Vs 1H 2014 -0.16 -0.49 0.33
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
€/MWh PUN BL PUN PL PL/BL
2014 Q1 52,49 62,80 1,20
Q2 46,48 49,80 1,07
1H 49,47 56,25 1,14
Q3 50,44 53,48 1,06
Q4 58,85 69,77 1,19
anno 52,08 58,97 1,13
2015 Q1 51,78 59,04 1,14
Q2 47,91 50,26 1,05
1H 49,83 54,62 1,10
1H 2015 Vs 1H 2014 0,37 -1,64 -0,04
Italian Market: spot prices analysisPUN Baseload stable at around 50 €/MWh, Peakload decreased by over 1.6 €/MWh
Source: Gestore Mercato Elettrico (GME)
9
• In the first half of 2015 the PUN increased with respect to the
same period in 2014 by 0.37 €/MWh, due to colder temperatures,
less hydraulicity and the effect of market coupling.
• The average Peakload prices, closing at 54.62 €/MWh, suffered a
substantial reduction with respect to 2014 (- 1.64 €/MWh).
0
10
20
30
40
50
60
70
80
90
100
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
PUN Baseload Italia
2012 2013 2014 2015
0
20
40
60
80
100
120
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
PUN Peakload Italia
2012 213 2014 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
0
50
100
150
200
250
300
350
North C North C South South Sicily Sardinia North C North C South South Sicily Sardinia
H1 2014 H1 2015
n.h
ou
rs
Marginal Technology in hours where Price < 10 €/MWh
RES
Oil
Hydro
Import
CCGT
Coal
Others
Analysis of spot prices: marginal technology on MGPFurther drop in the CCGTs’ relative share to cover the demand
Source: Gestore Mercato Elettrico (GME)
10
• In the first half of 2015 the number of hourswhere CCGT technology set the marginalprice on the energy markets reducedfurther: the CCGTs represents themarginal technology in 47% of thehours.
• The contribution of non-hydroelectricrenewable sources increased, and theirimpact was confirmed at around 4% of thehours.
• The relative significance of coal increasedat 21%.
• In the hours with very low prices (<10
€/MWh), the marginal technologies are
CCGT and coal in the North and Cnorth
zones (probably because of the strategies
on MGP and on MSD) and renewables in
Sicily.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Impact of renewable sourcesZonal hours at zero price in the first half of 2015
• In H1 2015 the number of hours in whichthe zonal spot price was zero decreasedcompared to the same period of 2014.
• Only Sicily had few hours equal to zero(29 hours), mainly during a peak in eolicproduction.
Note that the launch of Market Couplingmay require Italian market to adopt negativeprices. It is therefore likely that, in the newscenario with negative prices allowed, thezero prices seen until now will becomenegative values, further depressing theaverage Italian price.
Source: internal analysis
11
The greater the latitude the lower the impact ofphotovoltaic production
-25
15
55
95
135
Sicily South Sardinia C South C North North PUN
Number of hours at 0 price
1H 2013 1H 2014 1H 2015
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
12
Italian Market: clean spark/dark spread analysisCSS still under pressure, but slightly improving
• CSS on BL increased 1.8 €/MWh, more than the CSS on Peakload, which remains stable (-0.19 €/MWh), because Baseloadprices increased while Peakload ones decreased, as seen in the previous slides.
• CDS increased by 1.55 €/MWh, thanks to the weakness of coal prices in this first 6 months of the year.
(*) Clean spark spread: difference between the PUN and the sum of: gas cost (PSV), CO2, CV cost (2014) and variable transport costs. The efficiency used for the CCGT technology isconventionally set at 53%. The CCT component is excluded because the spreads are measured with respect to PUN.
(**) Clean dark spread: difference between PUN and the sum of: coal cost including logistics, CV cost (2014), CO2 cost (CCT not included). The efficiency used for the COAL technology is 35%.
Source: internal analysis
-10
-5
0
5
10
15
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
Clean Spark spread on Peakload
2014 2015
0
5
10
15
20
25
1 2 3 4 5 6 7 8 9 10 11 12
€/M
Wh
Clean Dark spread on Baseload
2014 2015
€/MWh
clean spark
spread on BL*
clean spark
spread on PL*
clean dark
spread on BL**
2014 Q1 -6.35 3.96 13.55
Q2 -2.72 0.60 9.04
H1 -4.53 2.27 11.28
Q3 1.75 4.79 11.23
Q4 -0.89 10.03 18.42
Year -2.03 4.86 13.07
2015 Q1 -2.27 4.99 14.84
Q2 -3.14 -0.80 10.85
H1 -2.71 2.08 12.83
H1 2015 Vs H1 2014 1.82 -0.19 1.55
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Liquidity of the wholesale forward marketMore interest in medium-short term products
Volumes in thelast 12 months
~720 TWh
Source: internal analysis
13
• In H1 2015 the forward market volumes surpassed theunderlying physical market by 2.3x (353 TWh vs 153 TWh).
• ¾ of the transactions have physical delivery (through a
broker or on MTE), in reduction in the last months, while theremaining part are financially settled.
• The volumes traded through brokers are still predominantwith respect to those traded on IDEX or MTE.
• From June 2014 the German market EEX lists Italianfutures, thereby making the Italian market more liquid andmore accessible to foreign traders (reaching 35% of themarket share in one year).
No. deals in thelast 12 months
~ 41900
N.B: Data related to EEX, IDEX, MTE include OTC cleared deals.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
The cost of financing for renewable and assimilated sources
14
The «5th Conto Energia» ceased toapply on 6 07 2013 upon reaching theaccumulated annual cost of 6.7 billion€.
In 2013, 221 MW without incentivescame into operation and theinstallation of 500 MW and 1 GW isexpected for 2014 and 2015 (*)
Source: GSE – AEEG data - (*) Source: Deutsche Bank
EnergyComponent at44% of the bill
total cost(18.4 c€/kWh)
In recent years the impact of the electricity component of the price to the end-customer has dropped from 60% to 46%. Conversely, theimpact of the system charges has significantly increased (from 9% to 23%), mainly due to the increase in the A3 component.
This cumulativecost may not
exceed 5.8 billion €per year.
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Contents
15
1. Italian Market
• Demand and Supply
• Spot markets
2. Foreign Markets
• Spot markets
3. Environmental Markets: Green and White Certificates, EUA
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
European spot electricity marketsdecrease in German prices
Source: internal analysis
16
• The first half of 2015 was characterized by a decrease in prices in Germany (-7%)
• In the other countries prices were higher than H1 2014 due to the colder winter compared to the very mild
season of 2014 and a lower hydraulicity in the Alpin region, that supported prices. In Italy the big reduction was
concentrated in January (more than 8 €/MWh), while starting from February prices in 2015 have been higher than
those of 2014.
• The highest increase is on the French market, where the Baseload prices increased by 12%.
32,36
34,6137,23
49,47
30,22
38,75 38,71
49,83
0
10
20
30
40
50
60
GERMANY FRANCE SWITZERLAND ITALY
€/M
Wh
BASELOAD
1H 2014 1H 2015
VAR % -7% 12% 4% 1%
40,23 43,92 45,26
56,25
37,05
46,46 46,00
54,62
0
10
20
30
40
50
60
GERMANY FRANCE SWITZERLAND ITALY
€/M
Wh
PEAKLOAD
1H 2014 1H 2015
VAR % -8% 6% 2% -3%
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Spreads PzNORD - FR PzNORD - DE/AU PzNORD - CH
€/MWh €/MWh €/MWh
Spreads Q2 2014 14.63 14.87 14.21
Spreads Q2 2015 12.39 19.45 14.81
Spreads Jan-June 2014 14.38 16.62 11.76
Spreads Jan-June 2015 9.04 19.65 10.94
Yearly Capacity Cost PzNORD - FR ** PzNORD - DE/AU ** PzNORD - CH **
€/MWh €/MWh €/MWh
Capacity 2014 17.73 22.61 13.07
Capacity 2015 9.09 16.29 8.36
Delta 2015-2014 PzNORD - FR PzNORD - DE PzNORD - CH
€/MWh €/MWh €/MWh
Spreads Q2 2015- Q2 2014 -2.23 4.58 0.60
Spreads 15 vs 14 without CV (2€/MWh) -0.23 6.58 2.60
Spreads H1 2015-H1 2014 -5.33 3.03 -0.81
Spreads H1 2015-H1 2014 without CV (2€/MWh) -3.33 5.03 1.19
Spot price spreads between bordersSpreads reduction with France
• The spreads decrease between the spot
prices of France on one side and the Italian
North Zone on the other side could be
explained by means of:
• Italian wholesale price reduction for
the end of Green Certificate
mechanism (from 2 to 0 €/MWh);
• higher prices in France and
Switzerland due to the lower
temperature compared to those of
2014;
• the start of Market Coupling withFrance and Austria on February 24th
reduced (but almost never reverted)the energy flow towards the NorthZone which increases its price withthe consequence of reducing theprice spread.
• Spread with Germany increased due to the
consistent price reduction in Germany for
higher renewable production.
Source: internal analysis
17
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Peak/Base ratio trendItaly and France Peak/Base ratio decreased further
In the first half of 2015 the Italian ratio fell to 1.10, due to a further reduction in Peakload prices.
Also France shows a peak/base ratio reduction probably due to the Market Coupling effect and low prices in May and June.
Taking into consideration the current price level, in the next quarter we expect a partial recovery of the ratios.
Source: internal analysis
18
1,0
1,2
1,4
1,6
1,8
2,0
1H 2006 1H 2007 1H 2008 1H 2009 1H 2010 1H 2011 1H 2012 1H 2013 1H 2014 1H 2015
Peak/Base ratio
GERMANY FRANCE SWITZERLAND ITALY
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Correlation between Brent and Power in ItalyHigh level of correlation ONLY when oil moves strongly
• The 2014 confirmed the «disconnection»between the Brent prices and the electricityprices in Italy, more closely tied to gas which isfollowing different dynamics from those of oil.
• This correlation became more significantonly in the last months of 2014 and in a shortperiod of Q2 during the price recovery.
• Currently the two commodities are totallyuncorrelated.
19
Source: internal analysis
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Correlation between forward Power and TTF in ItalyGas: not always a key driver for power
• Correlation between gas and power is at a veryhigh level and in some weeks the movementsmirrored each other.
• This sign confirms the importance of gas as a keydriver for electricity prices.
• Nevertheless during Q2 2015 a price reduction onTTF did not affected Italian power reducing thecorrelation under 50%.
• One explanation could be the very low spark spreadpriced by the market at the beginning of the year:infact CSS increased by almost 3 €/MWh fromJanuary.
Source: internal analysis
20
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Contents
21
1. Italian Market
• Demand and Supply
• Spot markets
2. Foreign Markets
• Spot markets
3. Environmental Markets: Green and White Certificates, EUA
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Environmental MarketsGreen Certificates (GC)
22
• For 2015 the percentage of obligation to put renewable energy into the national power system is 0%.
• From April operators begun to exchange on the market Green Certificates related to the production of the first quarter 2015,with a weighted average price (until 30th June) of 98,63 €/MWh.
• Starting from 2016 the Green Certificates system will disappear leaving room to feed-in tariff.
• A new Ministerial Decree is in process to be published; it will set new incentives/standards for non-photovoltaicRES-E plants for 2015-2016 respecting the expenditure limit of 5.8 Billion €
Source: GSE and GME
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Environmental MarketsWhite Certificates (or TEE)
.
23
* Updated on 30th June 2015
On May 31 the 2014 compliance period ended and the Italian distributors proceeded to comply their efficiencytargets.
AEEG fixed the tariff contribution of 2014 compliance (105,83 €/Tee) and the forecast tariff contribution of 2015(108,13 €/Tee).
On 1st of June 2015 the new compliance year started.
Weighted Average PriceApr-Jun:
103,43 €/TEE
Source: GSE
This information was prepared by A2A and it is not to be relied on by any 3rd party without A2A’s prior written consent.
Power Trading & Portfolio Management
Environmental MarketsEUA – ETS PHASE III
24
By 30th April operators under ETS system complied their targets.
Based on data published by the Commission on 4 May, 2014 verified
emissions decreased by 4,8% compared to 2013.
The European Commission also communicated that about 256 million
credits exchanged against 2014 emissions.
The process for the MSR (Market Stability Reserve Mechanism) approval
continued during Q2 and on 7th July the European Parliament approved it,
sending the proposal to EU ministers for a final nod in September.
EUA trend Q2 2015: average 7.37 €/Ton
April May June