emcc: News

The market coupling on the Kontek DC link between Germany and Eastern Denmark and on the AC link between Germany and Western Denmark experienced some challenges yesterday, aligning flow results and price calculations in some hours between DK1-GER and DK2-GER for delivery date 30th September 2008.

EMCC has with support from their IT vendor and the involved power exchanges analysed the planned day ahead flow result for delivery date September 30th on the links Denmark West-Germany and Denmark East-Germany and both short term and long term measures are taken to avoid these incidents in the future.

Summary of incident:

Especially hour 19-20 and hour 20-21 were affected where the EMCC and the Nord Pool Spot price calculation diverged. Also other hours were affected, but to a less extent. During hour 19-20 and hour 20-21 there were restrictions in capacities within Sweden (Cut 2 South) affecting the available capacity towards Denmark and zero capacity from Norway to Sweden (NO1-SE).

Following could be seen:

     There were extensive vertical overlaps in DK1 and in DK2
     There were limited capacity available from Northern Scandinavie towards DK1 and DK2

Measures to be taken:

The analysis has detected that the results are caused by a small, but different set up in the price calculation algorithm for the EMCC and Nord Pool Spot price calculation application. The Nord Pool Spot calculation system chooses a common price for two neighboring areas when capacity is not fully utilized whereas EMCC strictly applies the social welfare optimization principle. This will be aligned as soon as possible and tested thoroughly before put into operation. However, in order to secure short term and long term predictability for the market, the following actions will be taken.

Short term solution:

The short term solution will be to implement the day-ahead plans for energy flow in emergency situations as described in exchange information 61/2008.

In order to avoid this incident in today’s price calculation, following will take place:

1. EMCC will determine the scheduled flow and bids on the two connections
2. EEX and Nord Pool Spot will then calculate Spot prices for respective market areas.
3. The flow and prices will be checked by the respective power exchanges in order to confirm correct flow between areas
4. If there are adverse flows and the price difference exceeds 10 EUR, the capacity used by EMCC between Denmark and Germany will be set to zero
5. If this affects the majority of the hours, the whole day ahead planned Capacity used by EMCC will be set to zero.
6. If not, the bids will be put into effect as planned.

Long term solution:

The parties are agreeing that EMCC and the adjacent exchange market areas coupling shall have the same principles regarding algorithms and this will be put in to effect as soon as possible.

On Monday 29 September, market coupling will be introduced on the Kontek DC link between Germany and Eastern Denmark and on the AC link between Germany and Western Denmark.
This implies that the day-ahead plans for the energy flow on these two links between Denmark and Germany will be calculated by EMCC. 29 September will be the first day, where these day-ahead plans are produced by EMCC.
The daily market coupling procedure EMCC will have two daily tasks:

1. For each of the two links and for every hour of the next day, EMCC will determine the scheduled flow based on the bids in the two spot markets of Nord Pool Spot and the European Energy Exchange (EEX) including the available capacity.
In order to calculate the scheduled flow, the day-ahead capacities for the links West Denmark-Germany and Eastern Denmark-Germany are submitted by Energinet.dk, Vattenfall Europe Transmission GmbH and E.ON Netz GmbH. EMCC will shortly after 12.00 CET receive anonymous order books from EEX and Nord Pool Spot.
2. After having calculated the scheduled flow for each hour of the next day on the two links, EMCC will submit a purchase bid to one power exchange’s bidding area(s) and a sales bid to the other power exchange’s bidding area(s) which reflects the scheduled direction of the flow on the two links. Thereby, EMCC will be the cross-border trader responsible for the EMCC flow between the two spot markets of EEX and Nord Pool Spot.
After having received the EMCC bids for Western-Denmark and Eastern-Denmark, Nord Pool Spot will calculate the Elspot prices, the traded Elspot volume per participant and the day-ahead plans for the energy flows between the Nordic bidding areas. For the EEX area, EEX will carry out the similar day-ahead auction calculation (Phelix).

Day-ahead plans for the energy flow in emergency situations

In case of technical failure in the EMCC calculation system, the default EMCC bids to EEX and to Nord Pool Spot will be set to zero (ie. no EMCC trading). This means that if the market coupling fails, the day-ahead plan for the Kontek flow will be zero flow. For the link West-Denmark-Germany, the day-ahead nominations from players with cross-border capacity from the explicit auctions will constitute the day-ahead plans for the energy flow.

Dead band introduced on the Kontek link

The involved capacity holders have decided to take grid losses into account by introducing a so called “dead band” on the Kontek link between Germany and Eastern Denmark. As decided by the capacity holders, this means the market coupling and EMCC’s calculation system will only use the Kontek capacity to the extent that the Kontek congestion revenue can finance the grid loss on the Kontek link. The consequence of this new “dead band” constraint is that it may result in zero or little capacity used although a price difference exists between the EEX Phelix and NPS Elspot prices in the relevant price areas (Germany and Eastern Denmark).

Explicit auctions for the link Germany-Western Denmark

On the link Germany-Western Denmark, the explicit monthly and annual auctions will remain. On the Kontek link, there will not be explicit auctions.

Daily auctions of capacity on the Danish-German border is terminated:Due to the launch of market coupling between Denmark and Germany the 29th of September 2008, E.ON Netz and Energinet.dk will shut down the daily auctions of transmission capacity on the border Denmark West and Germany. The last day of daily auction will be the 28th of September, and the day of operation Monday 29 September 2008.

Daily auctions of transmission capacity on the Danish-German border to be terminated 29 September 2008

Due to the launch of market coupling between Denmark and Germany 29 September 2008, E.ON Netz and Energinet.dk will close down the daily auctions of transmission capacity on the border between Denmark West and Germany. The last day of daily auction will be Sunday 28 September for the day of delivery Monday 29 September 2008.

Start Market Coupling on September 29, 2008 and Launch of 7-Day-Trading on the EEX Power Spot Market

KONTEK bidding area shut down and CBO service terminated 29 September 2008

Due to the launch of market coupling between Denmark and Germany on the 29 September 2008, Nord Pool Spot will close down the German Elspot bidding area “KONTEK” on the same date. The last date the German Elspot bidding area “KONTEK” will be open for bidding is Sunday 28 September 2008, for delivery on Monday 29 September 2008.

As a consequence of market coupling, the CBO service on the connection Denmark West (DK1) - Germany will no longer be required or possible, and will be shut down on the 29 September. All CBO agreements with participants will be terminated effective as of the same date. Participants having entered into a CBO agreement with Nord Pool Spot will be reimbursed any fixed fees paid for the period following shut down.

These changes will not affect Nord Pool Spot’s Elbas market in Germany.

EU Commission approves Danish-German market coupling

The EU commission has now approved the formation of the European Market Coupling Company, commonly referred to as the EMCC, in accordance with the EU merger rules. The EMCC is an enterprise jointly owned by Energinet.dk, Vat-tenfall Europe Transmission, E.On Netz, Nord Pool Spot and the EEX, the Ger-man power exchange.
The enterprise is to handle the coupling of the Elspot markets in the Nordic countries and Germany from Monday, 29 September 2008 with effect from the following day. The daily capacity on the German border will thus be included in the market in the same way as is the case internally in the Nordic countries, ie by means of implicit auctions where capacity and energy are traded together. At the same time, the daily explicit auctions on the Jutland-German border will therefore be discontinued, and Nord Pool Spot's price area in Germany, KONTEK, will be closed.
Negotiations are being carried out with Baltic Cable to include the capacity from the interconnection between Sweden and Germany in the market coupling from December onwards. This would result in all capacity between the Nordic coun-tries and Germany being included in the market. At the same time, negotiations are underway with Statnett, the Norwegian TSO, and TenneT, the Dutch TSO, about using the EMCC to introduce implicit auction on the NorNed cable between Norway and the Netherlands from January 2009.

Mergers: Commission approves proposed joint venture between Energinet, E.ON Netz, Vattenfall Transmission, Nord Pool and EEX on management of cross-border power transmission

The European Commission has approved under the EU Merger Regulation the creation of a joint venture, to be named European Market Coupling Company (EMCC) by three transmission system operators - Energinet.dk of Denmark, E.ON Netz GmbH of Germany and Vattenfall Europe Transmission GmbH of Germany - and two energy exchanges - Nord Pool Spot AS of Norway and European Energy Exchange AG (EEX) of Germany. After examining the operation, the Commission concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

EMCC would provide congestion management services for cross border electricity transmission systems through market coupling between Germany and the Nordic Countries and a platform for secondary trading of transmission rights. The creation of EMCC aims at implementing EC Regulation 1228/2003 of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity. EMCC would optimise the cross-border flows of electricity by enabling buyers and sellers on a power exchange to get automatic access to cross-border energy trade without having to acquire the corresponding transmission capacity.

The Commission’s investigation showed that there were no horizontal overlaps between the transmission networks of the participating electricity transmission system operators. Given the limited size and scope of the joint venture's activities, its creation would not enhance the risk of any coordinated behaviour between the vertically integrated energy groups to which most of the parties to the joint venture belong. The Commission therefore concluded that the proposed transaction would not raise any competition concerns.

More information on the case will be available at:

http://ec.europa.eu/comm/competition/mergers/cases/index/m98.html#m_4922