4th April 2016

1

I-SEM NEMO BLG

NEMO BLG Terms of Reference

CACM Obligations

NEMO Solution Overview

Day-Ahead Solution Overview

PCR/MRC Workstream

Euphemia Trial Overview

Lunch

Cross-Border Intraday Project (XBID)

Interim Intraday Design Proposal

I-SEM NEMO Technical Engagement

Discussion/Queries

Agenda & Terms of Reference

CACM Obligations

3

NEMO BLG, 4th April 2016

CACM Entry into Force on 14 July 2015

CACM is relevant Regulation for NEMOs

Relevant for DA/ID timeframes

Background

NEMO & MCO

2015/1222 CACM Regulation provides for transitional arrangements for I-SEM until 31 December 2017

Except for the following, where the deadlines still apply:

– Articles 4, 5 & 6 on NEMO Designation

– Participation in the development of terms, conditions & methodologies, namely:

• Determination of NEMO voting rights per Member State

• MCO plan

• NEMO requirements for DA/ID algorithm

• Back-up methodology

• Products for DA/ID coupling

• Maximum & Minimum prices

I-SEM CACM Derogation

Sets out individual and common NEMO responsibilities

Choice for MS of adopting single (monopoly) or competitive NEMO(s) – designated by MS or using “passport”

Formal consultation and regulatory approval of “methodologies” covering such areas as algorithms, products, procedures, price limits

Requirement on TSOs and NEMOs to establish day-to-day management

Framework for cost sharing and cost recovery

QMV representing:

– At least 55% of the Member states/ At least 65% of EU population

– One vote per Member State/ shared if more than one NEMO

– NEMO decisions at regional level decided by consensus

NEMO Governance under CACM

NEMO Voting under CACM

ACER List of Designated NEMOs

EIRGRID

SONI

EPEX/ EXAA/ NORD POOL

BELPEX/ NORD POOL

IBEX

CROPEX

OTE

NORD POOL

NORD POOL

NORD POOL

EPEX/ NORD POOL

EPEX/ NORD POOL

LAGIE

HUPX

GME

NORD POOL

NORD POOL

EPEX

APX/ NORD POOL

TGE

OMIE

OPCOM

OKTE

BSP

OMIE

NORD POOL

APX/ NORD POOL

Competitive

Monopoly

CACM Timeline for NEMO Tasks 2016 2017

CACM EIF Aug 15

NEMO Designation

CER/UR designation Oct 15

Prepare MCO Plan

NRA approval

Apr 16 Oct 16

Implement MCO Plan (max 12 mths)

Prepare DA/ID Methodologies • Algorithms* • Products • Backup procedures* • Max/Min prices* St

akeh

old

er

Co

nsu

ltat

ion

NRA approval

Feb 17 Aug 17

MCO Plan implementation

deadline

Oct 17

I-SEM Go-Live Oct 17

* In cooperation with TSOs

Complementary Regional Auctions Stakeholder Consultation

NRA approval

Multiple NEMOs in Bidding Zone NRA approval

European tasks

Regional tasks

Local tasks

Market European Stakeholder Committee

contribute to monitoring progress in the NCs implementation process

serve as a platform to share general views on the NC implementation

enable stakeholders to express their views and receive feedback

contribute to more informed decision-making process for the methodologies and rules still to be developed for the implementation of the NCs

Includes ENTSO-E, ACER, NEMOs and other stakeholder associations

Link @ https://www.entsoe.eu/major-projects/network-code-implementation/stakeholder-committees/Pages/default.aspx#overview

CACM Coordination Group

Involving TSOs (ENTSO-E) / Regulators (ACER) / NEMOs

CACM: European Coordination & NEMOs

2016 2017

Questions

NEMO BLG, 4th April 2016

NEMO Solution Overview

11

Financial Transmission

Rights between zones

and Financial Forwards

within zone

Capacity Remuneration

Mechanism

EU price coupled day-

ahead auction supplier

& generator bidding

Continuous local

trading and regional

auctions with supplier

& generator bidding

Mandatory continuous

balancing market with

INC & DEC pricing

Cash out of differences

between actual and

traded positions

Imbalance

Settlement

Balancing &

Dispatch

Intraday

Market

Day-Ahead

Market

CRM

Market

FTR &

Forwards

Market

Time

1 Year

Real Time

NEMO

NEMO

• Traders operate across all of these timeframes

• EirGrid Group has responsibility for market operations in all timeframes

• NEMO’s operate the DA and ID markets across Europe mostly through PX’s

• EPEX Spot has been selected to provide the service of the PX systems

• For ID market, XBID will be unavailable for I-SEM go-live. An interim solution is proposed

I-SEM NEMO

NEMO – What is it?

I-SEM Capacity Market FTR Market Day Ahead / Intraday Balancing & Dispatch

Aggregator of Last Resort

Common Grid Model Operations

DAM/IDM Operational Scheduling

Publish System Information

Balancing & Dispatch

Operational Planning & Forecasting

CRM Registration

CRM Customer Care

CRM Settlement Calculation

CRM Auction FTR Auction DAM/IDM Trading

EU Market Coupling

Balancing & Imbalance Settlement Calculation

FTR Customer Care

FTR Settlement Calculation

DAM/IDM Customer Care

DAM/IDM Settlement Calculation

Balancing & Imbalance Customer Care

FTR Registration DAM/IDM RegistrationBalancing Market

Registration

CRM Clearing FTR Clearing DAM/IDM ClearingBalancing & Imbalance

Clearing

Advise Capacity Quantity Advise FTR Quantity

DAM/IDM Market Surveillance

CRM Market Surveillance FTR Market SurveillanceBalancing & Imbalance

Market Surveillance

Balancing Market Operations

Key

Wider Market Functions

System Functions

NEMO Functions

NEMO – Provides

access to European

Electricity Market and

acts as counter party to

trades

DAM/IDM – How it works?

Market Participant

DAM/IDM Trading Platform

DAM Bids/Offers

by Gate Closure 11am D-1

DAM Market Coupling Operator

(MCO)

Anonymised Bids/Offers

DAM Results

by 12:00 D-1

Central Counter Party (CCP)

Clearing Member

Continuous IDM

Bids/Offers up to 1 hour

prior to delivery

hour

Continuous IDM

Cleared Trades

as soon as matched

TSOs

Trading Results (DAM/IDM) as available

PNs after DAM by

13:30 D-1

Updates to PNs based on IDM cleared

trades up to 1 hour prior to delivery hour

Invoices/ Self Billing

Invoices 17:00

on D -1

Collateral

IDM Shared Order Book

Anonymised DAM Auction

Results

Anonymised Bids/Offers

Anonymised Individual

Match Trades

Collateral/ Criteria for Providing

Service

Payments in/

Payments out

on D

Funds In/Out

Systems and Services Programme

15

EPEX and European Commodity Clearing (ECC) selected as the service provider to EirGrid and SONI NEMO …… contract negotiation ongoing

Early cooperation agreement signed to commence implementation

Interim Intraday market design proposal nearing completion

Progress to-date

Activity Q3 2015 Q4 2015 2016 2017

NEMO Application

PX PQQ

PX RFP

RA Roles Designation

PX Contracting

Design – Build – Test

Market Trial

Go-Live

Relationships between parties

EirGrid & SONI NEMO

Sending of trades

Clearing House

Scheduling

TSO

Clearing Member

(Bank with ECC Agreement)

Settlement

Exchange Members Balance

Responsible Agreement

Settlement

Trading Settlement

ICs IDM solution to be designed

Direct Clearing Under Review

Technical Solution

• System Design, Specs

• Development, Config

• Testing

ECC Clearing

• Shipping

• Dual Currency

• Clearing Members

Market Participant Readiness

• On-boarding

• Testing

Coupling

• European

• Regional

• Local

Legal & Regulation

• Market Rules

• Contracts

• Licence

Operational Support Services

• Publications

• On-call support

NEMO Branding

Business Modelling and Pricing

• Liquidity, products

• List of prices

CACM Implementation

• MCO Plan

• CACM Obligations

European Transparency and

REMIT

Workstreams

Different requirements for Day-Ahead Market, Interim Intraday Market, and Enduring Intraday (‘XBID’) Market

Market Rules Development

ToRs, Timeline and Development

Process

Draft DAM Rules

Interface Rules

Clearing Rules

Draft Local Continuous IDM

Rules

Draft CB IDM Auction Rules

Legal draft of NEMO Rules

Final RA and Market Participant

Engagement

Market Participant and RAs engagement throughout

Questions

When will the Ex-Ante (EA) trading functionality contract be awarded by EirGrid/SONI (NEMO)?

Request that further consideration be given to single collateralisation across DA, ID, BM whereby SEMO and NEMO interactions could be aligned to minimise collateral cover exposure insofar as possible

When will the collateral arrangements for EA markets be known?

Will the NEMO clearing house support collateral netting across multiple DAM and IDM markets e.g. I-SEM and GB?

When will the details of the clearing house rules be available to participants? Time needed to put in place arrangements.

Day-Ahead Solution Overview

21

NEMO BLG 4th April 2016

Financial Transmission

Rights between zones

and Financial Forwards

within zone

Capacity Remuneration

Mechanism

EU price coupled day-

ahead auction supplier

& generator bidding

Continuous local

trading and regional

auctions with supplier

& generator bidding

Mandatory continuous

balancing market with

INC & DEC pricing

Cash out of differences

between actual and

traded positions

Imbalance

Settlement

Balancing &

Dispatch

Intraday

Market

Day-Ahead

Market

CRM

Market

FTR &

Forwards

Market

Time

1 Year

Real Time

NEMO

NEMO

• Traders operate across all of these timeframes

• EirGrid Group has responsibility for market operations in all timeframes

• NEMO’s operate the DA and ID markets across Europe mostly through PX’s

• EPEX Spot has been selected to provide the service of the PX systems

• For ID market, XBID will be unavailable for I-SEM go-live. An interim solution is proposed

I-SEM NEMO

Current Cross-Border Arrangements

Participants will submit orders into the Day-Ahead Market via their NEMO trading platform

– Utilising existing EPEX platform configured to I-SEM requirements

– Output of Euphemia trial will inform products offered

Orders will be anonymised and submitted by NEMOs to the Market Coupling Operator (MCO) of the Price Coupled Region (PCR)

Prices will be set based on matched orders in the Euphemia algorithm run by the MCO

– Fully price coupled across Europe as required by CACM

The MCO will send results back to the NEMO

– Participants will be informed of their traded volumes and prices

ECC will carry out the clearing and settlement function

– Addressing dual currency requirement

I-SEM DAM Arrangements

DA Implementation Programme

Specifications

Implementation

Testing

Deploy to members

Member test

Prep. Go-live

Algorithm simulation PCR/MRC other process

Design

DA regional project (including procedures/shipping)

Ops Contracts

Clearing On-boarding

XBID start with access stream, LIPs (decision to join made)

CR

Procedures Training

Implementation

PCR/MRC/ISEM tests

Necessary agreements (1/2)

Balance Responsable Agreement

Trading Agreement

Exchange member’s responsibility

EirGrid & SONI NEMO

TSO

Exchange Members

Clearing Member

Non-Clearing Agreement

Central Bank Agreement Central Bank

Necessary agreements (2/2)

• Between exchange member (“Market Participant”) and EirGrid/SONI NEMO

• Pertains to the relationship in terms of responsibility (trading, behaviour in the market), requirements (technical, training of traders organization) and property (license)

Trading Agreement

• Between ECC, the clearing member and the exchange member

• Corresponding NCM agreement with the cooperating clearing member and ECC

• Each product has to be included in this agreement

Non-Clearing Agreement

• Between the exchange member and EirGrid/SONI TSO

• At least one for each market area

• Includes all contractual agreements between the TSO and the grid user regarding the settlement of power imbalances recorded on balance perimeters

Balance Responsible Agreement

Non-Clearing Members (NCM)

• are trading participants of the exchange

• sign a trilateral agreement between the Non-Clearing Member, Clearing member and ECC to provide for the necessary infrastructure

General Clearing Members (CM)

• are financial institutions in an EU member state or Switzerland

• hold either a general clearing license or a direct clearing license

• provide clearing services to NCM

• can be trading participants of the exchange

Access to ECC Overview Membership Types

28

Currently ECC offers two different types of membership in ECC representing two levels of access:

ECC plans to introduce a new membership category for clearing at ECC Spot markets for power to comply with requests for an easy access option for SME’s.

Access to ECC Trilateral Relationship between CM – NCM – ECC

29

Access to ECC Trilateral Relationship between CM – NCM – ECC

Non-Clearing Members (NCM)

– are trading participants of the exchange that only need to fulfill basic clearing requirements.

– sign a trilateral agreement between the NCM, Clearing Member (CM) and ECC to provide for the necessary infrastructure.

Trilateral Non-Clearing Member Agreement

Clearing Member

• Payment Agent

• Guarantor

NCM

• Conclude a balance group agreement

• Find a CM and conclude NCM Agreement

• Become a trading participant

ECC

• Responsible for contracted quantity submission

• Performs margining, financial settlement and accounting transactions

ECC plans to introduce a new membership category for clearing at ECC Spot markets

with adequate limit systems to comply with regulatory requests to introduce an easy

access option for SME’s.

Small Spot only members find it increasingly difficult/expensive to be accepted by CMs.

Access to ECC New Direct Clearing Participant Model

General

Clearing Member

Direct

Clearing Member

Direct Clearing Participant

Clearing Member

Clearing Member

Access to ECC New Direct Clearing Participant Model - Summary

A settlement bank has to provide TARGET2 access and acts as payment agent

The introduction of the DCP model is currently scheduled for Q2 / 2016. Most functionalities will also be made available for Clearing Members

Direct Clearing Access is only allowed for markets with a sufficient pre-trade limit system in place. Trading restricted such that exposures will always be below the available collaterals

An important component to offer a Direct Clearing solution is to accept Guarantees as Collateral in addition to cash

Direct clearing access is required to become provider for specific markets such as the permanent EUA auction platform for the European Union or selected power spot markets, e.g. in Belgium

Allow small and medium sized entities to gain direct access to the Spot markets cleared by ECC

Questions

Uncertainty on the influence of REFIT decisions on participation of wind in the Day-Ahead versus Intraday timeframes

– Implications on prices and liquidity

Concern that the disjoin between the activities of the NEMO is collateralised in the DAM/IDM and SEM is collateralised in the BM which will result in over collateralisation

Is the NEMO going to require price taking demand to post full volume times price cap? This would result in a large over collateralisation of the DAM. NEMO provisions should use a realistic average price and not prevent trading of clearly collateralised participants.

PRC/MRC Workstream

33

NEMO BLG 4th April 2016

Implementation of PCR

Interim NEMO Cooperation Agreement (INCA) – 3 March 2016

Developing MCO Plan

– Explanation of necessary draft agreements between NEMOs and with third parties

– Proposed timescale for implementation (not longer than 12 mth)

– Governance structure

• All NEMO Cooperation Agreement (to supersede INCA)

• Day-Ahead Operational Agreement

• Intraday Operational Agreement

– Servicing and serviced NEMOs requirements addressed

– Clarity on roles and responsibilities

All NEMO Committee

Contractual Landscape

Multi-Regional Coupling (MRC) (Set of TSO/NEMO Agreements)

All NEMO Committee (PXs Only)

Price Coupling of Regions (PCR)

Day-Ahead Market Coupling Operator (MCO)

Function

Intraday Arrangements

XBID

Third Party Services

Co-Owner Agreement

Co-Oper Agreement

NEMO

Regional Framework • TSOs • Interconnectors • NEMOs

The Day-Ahead Market will be coupled with the Multi-Regional Coupling (MRC) solution known as Price Coupling of Regions (PCR)

This involves parties across Europe who are CACM compliant in the DAM

I-SEM parties must sign-up to and adhere to the Day-Ahead Operating Agreement and its associated procedures and obligations

– E.g. in the case of fall-back decoupling, we will have the ability to run a second Euphemia session to handle matching of CWE-GB-I-SEM areas

We will need to submit a Change Request to the PCR to incorporate the needs of the I-SEM

– We will need to work together with the PCR Committee to test and approve the solution for I-SEM (i.e. we can not dictate the solution)

Implications for I-SEM NEMOs

Questions

NEMO BLG, 4th April 2016

EUPHEMIA Trial Overview

39

EUPHEMIA is the European day-ahead market (DAM) algorithm:

In use by power exchanges (PXs) throughout Europe

Performs daily market auctions for the DAM

Provides daily prices, schedules and interconnector results

Has evolved from previous market algorithms:

Previously, PXs each had individual market algorithms

Functionality was combined to form a single solution

Functionality based on markets of founding PXs

Background- EUPHEMIA Algorithm

I/C Values

Offers Bids

11:00* DAM gate

closure

11:42 Results made available**

11:55 Final results confirmed**

*Times in GMT **Assuming de-coupling is not required

Takes inputs from all markets:

Bid and offer data (orders)

Interconnector values

Participants submit data locally:

PXs submit full set of orders centrally

MCO runs EUPHEMIA for all markets

Background- EUPHEMIA Process

Background- EUPHEMIA Bids/Offers

Hourly orders submitted by generators and suppliers

Orders are anonymised before being sent to EUPHEMIA

No link in algorithm between order and unit

Orders do not need to be asset-backed

Numerous implementations throughout Europe:

The bid and offer products (order types) offered differ for each PX

Order types available determine how participants can use the market

Order types affect risks and mitigation measures available

Moyle Flowing

Both Flowing

Neither Flowing

EWIC Not Flowing

Price Sp

read

Moyle Loss %

EWIC Loss %

EUPHEMIA - Interconnectors

Values as in the SEM:

Individual ATC, Ramping and Losses

Interconnector scheduled based on price spread

Differing losses result in bands of activity as price spread increases

EUP

HEM

IA

• Portfolio/Unit based

• Limited products

• Physical forwards used

• Commercial risks

• Supplementary market context

SEM

MSP

• Unit based

• Specific products

• No physical forwards

• Cost guarantees

• Single market

EUPHEMIA Markets .vs. SEM

Background - EUPHEMIA Trial

Goal is to assess the possible implementations:

Can SEM characteristics be represented in EUPHEMIA?

If so, what order types should be used to do this?

Trial of EUPHEMIA using SEM data:

SEM data converted to EUPHEMIA orders

EUPHEMIA schedules analysed

Trial will feed into the decision making process:

Inform decisions during detailed design and implementation

Provide insight into decision implications

Define Assumptions

Create Data

Execute Data

Analyse Results

Review Assumptions

SEMO SEMO & Industry APX

Background - EUPHEMIA Trial Process

• PQ pairs with no conditions attached

• Orders aggregated into hourly curve Simple Orders

• Price-quantity pairs with conditions

• Explicit representation of TOD and COD Complex

• Interdependent blocks of energy

• Block price implicitly accounts for costs Linked Block

• Group of mutually exclusive profiles

• Block price implicitly accounts for costs

Exclusive Group

EUPHEMIA - Order Types Trialed to date

Emerging Results & Conclusions

No current preferred implementation option:

Recommendation will be produced at the end of trial

Will include order types to be used

May be a combination of order types

Implications must be understood before recommendation

Areas for focus identified:

Preference for linked block and complex order for thermals

Simple orders used for a wide range of participants

Final trials will provide additional clarity on the order types

Emerging Results & Conclusions

Risk vital element of design of I-SEM DAM:

SEM style guaranteed costs not possible in EUPHEMIA

Risks can be managed through informed use of orders

Risk mitigations are based on order types available

Unclear on liquidity in DAM and other timeframes:

Not clear on how wind and load will be incentivised

Demand bid prices have significant effect on DAM clearing

DAM liquidity has knock-on effects to other timeframes

The information contained herein including without limitation any data in relation to Euphemia test results (the “Information”) is provided ‘as is’ and no representation or warranty of any kind, express or implied, is made in relation to the Information and all such representations or warranties, express or implied, in relation to the Information are hereby excluded to the fullest extent permitted by law. No responsibility, liability or duty of care to you or to any other person in respect of the Information is accepted, and any reliance you or any other person places on the Information is therefore strictly at your own or their own risk. In no event will liability be accepted for any loss or damage including, without limitation, indirect or consequential loss or damage, arising out of or in connection with the use of the Information. By using or relying on the Information, you automatically consent to the terms and conditions of this disclaimer. In the event that the Information is provided by you, in whole or in part, to a third party for whatever reason you shall ensure that this disclaimer is included with the Information and brought to the attention of the third party.

Copyright © 2015. All rights reserved. APX Power B.V., EirGrid plc and SONI Ltd.

Disclaimer

Questions & Lunch

Cross Border Intraday (XBID) Enduring Solution

52

NEMO BLG, 4th April 2016

CACM: a common cross border implicit continuous Intraday trading solution across Europe, where all the cross border capacities are allocated

Task description (55.3)

– by 24M after the entry into force all TSOs shall develop a proposal for

a single methodology for pricing intraday cross-zonal capacity

Specific Intraday Capacity Pricing Requirements (55.1 & 55.4)

– shall reflect market congestion and shall be based on actual orders

– No charges, such as imbalance fees or additional fees, shall be applied

Other ID requirements:

– the CT algorithm shall (a) aim to maximise economic surplus; (e) be

repeatable and scalable.

– discrimination shall be avoided when simultaneously allocating

capacity implicitly and explicitly

CACM Guideline

Other general requirements:

– ID capacity to be allocated implicitly

– Non discriminatory access to capacity

– Promotion of fair and orderly market and price formation

– Promoting effective competition in generation, trading, and supply of electricity

– Ensuring optimal use of the transmission infrastructure

Additional relevant provisions:

– Complementary regional auctions (where deemed necessary)

– Explicit access to Intraday capacity (where allowed as an interim option)

CACM Guideline

XBID APX/

Belpex

EPEX SPOT

GME

Nord Pool

OMIE

What is XBID?

TSOs from 12

countries

Austria Great Britain

Belgium Luxembourg

Denmark Norway

Finland Sweden

France Switzerland

Germany The Netherlands

Terms Used in XBID

Market Area

Delivery Area 1

Delivery Area 2

Delivery Area n

Product

Contract 1 Contract 2 Contract n

Trading Schedule

Contract

Product

Interconnector A connection between 2 Delivery Areas

Border A connection between 2 Market Areas

XBID System Components

Enriched dataset

SOB SM

CMM

SOB SM

SOB SM

SOB SM

SOB: Shared Order Book CMM: Capacity Management Module SM: Shipping Module

Market Participants’ position within the XBID and TS solution

PX local order book

Area A

PX local order book

Area B

Shared Order Book (SOB)

Capacity Management Module (CMM)

TSO A TSO B TSO n

Member X

Member Y

XBID Order Types

Order type Execution Restrictions

Validity Restrictions Predefined User-Defined

Regular predefined

NON (None) IOC (Immediate-or-Cancel) FOK (Fill-or-Kill)

GTD (Good Till Date) GFS (Good For Session)

Yes No

Regular user-defined block

AON (All-or-Nothing)

GTD (Good Till Date) GFS (Good For Session)

No Yes

Iceberg NON (None) GTD (Good Till Date) GFS (Good For Session)

Yes No

Linked Basket FOK (Fill-or-Kill) -- Yes No

XBID Project Approach

Current position of project = Completed

Alignment XBID/LIP planning (Testing and

Go-live Phase)

Coordinate Design and Development of Interim Solution (monitoring and directing)

Project under ESA

Adjustment local systems, interface / test environment

implementation

Follow-up/coordinate implementation of Interim Solution

Governance and reporting structure

XBID Interim Solution delivered

and accepted

Project under contract (Development)

D&D contract Business Blueprint

Common framework

for pre- and post-coupling

Set-up of LIPs (appoint PM, project

structure, budget, PID)

Progress Reporting

LIP

s*

XB

ID C

om

mo

n

Pro

ject

X

BID

So

luti

on

Project under contract (Testing)

Roadmap

Testing and Go-live preparations

Testing Reporting Go-Live readiness

Local Implementation Projects (LIPs) TSOs & PXs participating for developing and implementing the XBID solution

PXs participating; REE observer

PXs participating, adherence to joint project ongoing

Generic LIP Plan

Timelines

Q1 2017 Q2 2017 Q3 2017 Q4 2017

Capacity Pricing Proposal – Aug 17

NRA Approval Implementation - TBD

Q1 2018 Q2 2018 Q3 2018

I-SEM Go-Live

ID Interim Solution

XBID Accession Stream – end date unknown

XBID Go-Live

ENTSO-e Proposed Hybrid Model

* Currently known mechanism to price capacity during CT sessions depend on time, remaining capacity within a certain

trading period, or probability of congestions (see reports from PMI and Baringa for Ofgem study )

Neither continuous trading nor implicit auctions can fulfil alone all CACM requirements.

Recommendation is to develop Hybrid Models which includes both Implicit Auctions and Continuous Trading sessions

Hybrid model 1: DRAFT Overview

D-1

18.00h

(ID)A1D-1

(PCR)

* Timings, number of auctions, and GCTs are indicative.

To be reviewed based on PXs and market parties’ feedback, possible regional specificities

24:00h

A1 Tradeable hours

00:00- 24:00 D

A3 Tradeable hours

16:00 – 24:00 D

18.00h

(ID)A1D+1

(PCR)

16:00 - 24:00h D

CT session 3

(XBID)

00:00 - 08:00h D

CT session 1

(XBID) 16:00 - 24:00h D

CT session 3D-1

(XBID)

08:00 - 16:00h D

CT session 2

(XBID)

Hybrid model 2: DRAFT Overview

D-1

18:00h

(ID)A1

(PCR)

24:00h 00:00h

A1 Tradeable hours

00.00– 24:00

* Timings, number of auctions, and GCTs are indicative.

To be reviewed based on PXs and market parties’ feedback, possible regional specificities

18.00h

(ID)A1D+1

(PCR)

16:00 - 24:00h D

CT session 3

(XBID)

00:00 - 08:00h D

CT session 1

(XBID) 16:00 - 24:00h D

CT session 3D-1

(XBID)

08:00 - 16:00h D

CT session 2

(XBID)

XBID not available for I-SEM Go-Live

– Interim solution required

– Local Implementation Plan to commence in parallel with I-SEM Project

Regional and cross-border auctions

– Influenced by hybrid options

Working to align as much as possible

Engaging with XBID to appropriate level

Implications for I-SEM

Previous questions from stakeholders:

I-SEM project milestone 55 XBID Go/No Go decision in Dec 2015. What was the decision.

What is the status of XBID in general?

What is the status of a local implementation project for I-SEM?

Questions?

Interim Intraday Design Proposal

69

NEMO BLG, 4th April 2016

Financial Transmission

Rights between zones

and Financial Forwards

within zone

Capacity Remuneration

Mechanism

EU price coupled day-

ahead auction supplier

& generator bidding

Continuous local

trading and regional

auctions with supplier

& generator bidding

Mandatory continuous

balancing market with

INC & DEC pricing

Cash out of differences

between actual and

traded positions

Imbalance

Settlement

Balancing &

Dispatch

Intraday

Market

Day-Ahead

Market

CRM

Market

FTR &

Forwards

Market

Time

1 Year

Real Time

NEMO

NEMO

• Traders operate across all of these timeframes

• EirGrid Group has responsibility for market operations in all timeframes

• NEMO’s operate the DA and ID markets across Europe mostly through PX’s

• EPEX Spot has been selected to provide the service of the PX systems

• For ID market, XBID will be unavailable for I-SEM go-live. An interim solution is proposed

I-SEM Interim Intraday Proposal

XBID project is not available for I-SEM go-live

A programme of work is required to deliver CACM compliance

An interim intraday solution must provide sufficient liquidity for market participants to establish balance responsible positions

EMIP programme is challenging and quick action is necessary

Proposal to Regulatory Authorities for the interim intraday solution to be developed by EirGrid/SONI

Driver for Interim Intraday Solution

72

Market Participants

EirGrid / SONI NEMOs

EPEX/ECC as service provider

GB PX and GB Clearing House

EirGrid / SONI / NGET as TSOs

EirGrid Interconnector Limited

– Owned by EirGrid, connected in Britain & Ireland

Moyle Interconnector Limited

– Owned by Mutual Energy, connected in Britain & Northern Ireland

Regulatory Authorities (UREGNI, CER, Ofgem)

Stakeholders Engagement

Fulfilment of MPs’ needs

XBID Objectives and Evaluation Criteria

• Implicit Continuous

• Pricing based on orders

• Prices reflecting market congestion

• Maximisation of economic surplus

CACM Compliance

• Simplicity

• Practical and feasible

• Cost-efficiency

• Reasonable time to market

Ease of Implementation

• Fair and transparent price formation, no distortions

• Liquidity

• Assigns capacity to whom values the most

• Optimises use of available ID capacity

Efficient Capacity Pricing

• High performance and reliability

• Scalable

• Durability / forward looking / consistent with XBID evolution

• Consistency with all market timeframes and NC/GLs

• Efficient governance

Robust and future-proof

• Accessibility for ALL market participants (small generators, RES, demand side, conventional, etc.)

• Prevention of gaming and market power

• Fairness

Level playing field

• Capacity not priced if not scarce

• Possibility to adjust positions close to real time

• Pricing known at the time of matching

• Ease of use

• Transparency and Predictability

4 responses requested cross-border continuous trading ASAP

All responses agreed with the use of local continuous trading

– Some noted that it may not provide sufficient liquidity in I-SEM

All responses were in favour of cross-border implicit auctions not explicit

– Minimum of two

– 3 suggested the auction timing be linked to wind and demand forecasts

– 1 concerned both auctions and continuous may dilute liquidity

Most responses in favour of additional local auctions

– 3 noted that more auctions (3 or 4) would be beneficial

All requested trading granularity at ½hr to match the Balancing Market

Continuous products – similar to current arrangements in GB

Market Participant Feedback (Summary)

Main concern given I-SEM ETA (balance responsibility and administered scarcity pricing) & CRM (ROs) is provision of a liquid ID market for I-SEM.

– Arrangements should be designed to support liquidity

The ID solution should allow participants the opportunity to trade at the settlement period granularity to facilitate shape management and therefore their imbalance exposure.

– Intra-day solution is being designed for 30 mins settlement periods

– Facilitation of a 15 mins settlement granularity would be a challenge for the balancing and settlement solution and is not part of baseline

Combined with liquidity concerns, a higher frequency of auctions would augment market access provided through the continuous trading.

Market Participant Feedback (1)

Treatment of interconnectors must promote trading in the ID market, and ensure no barriers to trade in the ID market.

– Traders will be indifferent to what IC they are trading across and physical scheduling of flows will occur in the background.

– Careful consideration to be given to treatment of losses, etc.

ID cross-border implicit auctions are widely supported as they will help pool liquidity

…….but considered insufficient on their own to support participant trading needs in the intraday timeframe.

Development of a continuous trading solution is therefore required to ensure adequate market access under I-SEM arrangements.

Market Participant Feedback (2)

Participants will need to manage potentially large variations in imbalance positions:

– due to variations in wind generation; or

– to manage forced outages; or

– to manage potential scarcity events (close retail positions / get generators scheduled); or

– following ID auctions generators may need to trade themselves into a technically feasible position; or

– following ID auctions suppliers may want to trade out their residual shape via continuous trading.

Participants need a screen where they can post bids and offers similar to the OTC format or APX ID market in GB.

Market Participant Feedback (3)

Implementation of continuous trading will help make the market transition to LIP and XBID more straightforward.

– Concerned at possibility that continuous intraday trading could be de-scoped for I-SEM go live.

– Implementation of continuous trading should be achievable given that the I-SEM NEMO service provider has implemented similar local continuous intraday functionality in other EU markets – i.e. may have an “off-the-shelf” solution.

• Issues for dual currency does represent a challenge here but this can be overcome

Recommend higher frequency of ID auctions aligned with publication of updated TSO forecast information.

– Up to 4 depending on TSO information availability and updates

Market Participant Feedback (4)

It would be useful if publication of demand and wind forecast could be co-ordinated and participants could be given sufficient time (up to an hour) to re-assess positions prior to the auction.

Appreciate constraint in relation to GB PXs and market participants to support a higher frequency of regional auctions, but it would be worthwhile considering a greater number of auctions even if some of them are restricted to the I-SEM region only.

– Splitting of liquidity is a concern for the GB PXs

Note, variability on SEM imbalance positions due to wind forecast changes will be proportionally substantially greater than in GB and therefore we require more flexibility on IDM trading set up.

Market Participant Feedback (5)

Information on products for continuous ID and auctions requested

– Assume continuous ID to support similar products to GB, at settlement period granularity but also longer duration blocks, e.g. 1, 2, 4 hr blocks

– For auctions, what is being considered? Will it be based on the current GB auction approach?

As market participants are required to be balance responsible, the IDM must be liquid

– For wind, expect 10% imbalance exposure between DAM and IDM

– Regulatory intervention to facilitate this…..as per Ofgem Secure and Promote initiative in 2011 to handle liquidity issues for GB market

– Concerned about risk of volatile imbalance prices

Market Participant Feedback (6)

Are order formats for continuous trading and ID auctions (which needs to also consider clearing and price formation approaches) being considered in conjunction with current imbalance pricing arrangements?

– Careful not to introduce a systemic difference in pricing between intra-day markets and the balancing market as could distort incentives to trade in IDM

– In relation to recovery of fixed costs, participants will want to recover start costs in the imbalance pricing

Could participants in NI see all prices on the continuous IDM platform in Sterling and all participants in ROI see all prices of same in Euro?

– With the FX Rate set daily?

Market Participant Feedback (7)

06:00

Trading Day-1 Trading Day

Ex Ante Gate Closure 1: 09:30

06:00 06:00

SEM Intraday Market Gates

Ex Ante Gate Closure 2: 11:30

Within Day Gate Closure 3: 08:00

18:00

MW Schedule to EirGrid NCC

Current SEM Arrangements

Current Cross-Border Arrangements

Two implicit cross-border intraday auctions with local continuous

More than two cross-border intraday auctions with local continuous

Local auctions (in addition to one cross-border implicit intraday)

Local auctions with local continuous – if no GB acceptance of CB soln.

Auctions only – i.e. postpone or exclude continuous intraday local trading

Note: Continuous cross-border trading is not feasible for go-live

– To be developed as part of the XBID LIP

Interim Approaches Considered

Go-Live CB Auctions Local Continuous Regional Continuous Notes

I-SEM 2017 Yes Yes No If no local continuous available, consideration of number of auctions and the need for a larger PAR* is required.

LIP for XBID 2018/2019

Yes Fall Back Yes

To join XBID we must first couple through a Local Implementation Project (LIP). Parallel work is required during I-SEM delivery in the XBID Accession Stream to achieve go-live.

XBID+ 2020? Yes Fall Back XBID+ Consideration of auctions as a long term solution in addition to continuous trading within Europe currently ongoing

Cross-border intraday

– At least two Implicit Auctions based on half hourly products • IDM Auction 1 – 48 ½hr periods with auction at 15:30 D-1

• IDM Auction 2 – 24 ½hr periods with auction held in the morning of D

Local intraday (i.e. not cross-border)

– Continuous trading on half hourly trading periods; and

– Additional local auctions (where appropriate/required)

Interim Intraday Arrangements Proposal

* PAR is the cost of the last X MW of balancing delivered.

23:00

Trading Day

DAM Auction 1 Gate Closure: 11:00

23:00

IDM Auction 1

DAM Volumes

IDM Auction 2

23:00

I-SEM Intraday Market Gates

IDM Auction 1 Gate Closure: 15:30

IDM Auction 2 Gate Closure: 08:30

11:00

MW Schedules

Interim Intraday Arrangements Proposal

Trading Day-1

Continuous Local Intraday

IDM Auction 2 timing can be flexible (e.g. 07:00 to 09:00)

13:30

Continuous matching locally

(and local auctions where appropriate)

Access to implicit cross-border intraday auctions capacity between I-SEM and GB

– Assume we will initially contract with APX in GB for cross-border arrangements as APX currently manages all IDM volumes

Continuous trading locally – using similar arrangements to GB, participants can:

– Coordinate adjustment of commercial positions from previous auctions

– Run and plan power generation closer to delivery

– Manage unforeseen events such as power outages

Introduction of continuous local trading will facilitate moving to XBID LIP

Benefits of Proposed Solution

Prices are set at point of trade – more certainty

Cross border arrangements are firm – less risk

– Capacity and power sold in one single transaction and participants are not exposed to interconnector outages

– Optimal use of the interconnectors – more efficiency

Local continuous trading locally (and local auctions) – participants can

– Coordinate adjustment of commercial positions from previous auctions

– Run and plan power generation closer to delivery

– Manage unforeseen events such as power outages

– Implement similar in-house trading arrangements to those used in GB or elsewhere

Greater level of compliance with CACM Guideline

– Local continuous provides a pathway to Local Implementation Project and XBID

Continuous trading locally requires less NEMO operational resources to manage compared to more CB auctions

Why is this better than today?

The local continuous market would not provide cross-border access

– Third party trading services may be required for priority dispatch cross-border after any cross-border intraday auctions if number of auctions is low

– An alternative such as the BritNed approach is suggested by EPEX – explicit auctions intraday … then participants nominate into intraday markets

XBID and Local Implementation Project (LIP) objectives may not be met if there are no implicit cross-border auctions or continuous cross-border

PXs in GB will have to agree on approach to implementation of cross-border order book sharing mechanisms

– Currently only one intraday auction at 15:30

– APX market share is 100% of intraday capacity….concern about liquidity splitting

Limitations

Implementation timeframe and complexity

Liquidity and market access

SEM and GB market participant acceptance of solution

Market participant implementation complexity

– For those only in the SEM currently

– For those already engaged in European cross-border trading

Facilitation of balance responsibility actions in the intraday timeframe

– System security – i.e. balancing market interactions

Alignment with CACM XBID and Local Implementation Plan

– XBID Accession stream considerations

Facilitation of Renewables – e.g. priority dispatch

Operating costs and ongoing running of the market (both in SEM and GB)

Decision Influenced by:

Questions

Technical Engagement

92

NEMO BLG, 4th April 2016

EirGrid/SONI I-SEM Solutions Overview

Note: There are many other data flows associated with these entities, this diagram provides a high level view

Registration Overview - Planned

SEM Registration Function

Clearing House

BAL/IMBAL CRM NEMO

Market Participant

Clearing Member (Bank with ECC agreement)

Registration Application

Trading Platform

Trading System Set

Initial Application as Non-Clearing

Member

2

1

3b 3c

4

4

3a

Registration Process

95

• 1 – MP negotiates clearing member agreement with clearing bank

• 2 – Send in I-SEM registration for all relevant markets (CRM/BAL as well as EirGrid/SONI NEMO)

• 3a – I-SEM registration processes application for EirGrid/SONI NEMO, as well as other markets

• 3b – I-SEM registration organises setup for trading with trading platform

• 3c – I-SEM registration initial vetting and sent on application for clearing house to process

• 4a & 4b – Market Participant liaise directly with clearing house and clearing member to complete tri-lateral clearing or direct clearing agreements

Gate Closure for Balancing Market

Differences between what PNs represent and how they are determined:

Passive interconnector PNs must reflect latest market results at all times;

PNs must be calculated after gate closure to reflect final market results because receipt of these results is after gate closure.

Interconnector PNs

Market Participant Interconnector

Market Involvement Active. Passive.

Market Results Represent Commercial position. Flow results from algorithm.

PN Calculation Agent Self. TSO.

PN Calculation Timing Any time before or after ex-ante trade. Automated process after receipt of ex-ante flow results.

PN Represents Minute-by-minute profile of intended running in absence of TSO action. Physically feasible.

Minute-by-minute profile of interconnector running due to market results. Physically feasible.

Link to Ex-Ante Market Results

At gate closure. Soft link (settlement, market monitoring).

At all times, latest results. Hard link (system calculations).

If IDM trades allowed up to Gate Closure, need to allow time for IC flow results to be processed into FPN for any last-minute trades, example:

Interconnector PNs (example)

IDM Trade Activity

Market Participant Ex-Ante Commercial Position

Market Participant PN/FPN

Interconnector Ex-Ante

Flow

Interconnector PN/FPN

Gate Closure

Process Time Process Time

Can update PN before trade

Can only update PN after trade

Interfaces, Reports, Connectivity

Release Planned Rel. Date

Focus

MPUD 1 June 2016 Balancing Market: interfaces, connectivity requirements (type 2/3) AOLR: interfaces, connectivity requirements (type 2)

MPUD 2 Sep 2016 DA/ID Market: interfaces, connectivity requirements (type 2/3), Balancing Market: reports; AOLR: reports

MPUD 3 Dec 2016

Balancing Market: participant interface toolkit DA/ID: reports FTR: reports, interfaces, connectivity requirements (type 2/3) Information in preparation for Connectivity (CCQT) testing CRM: interfaces, reports, connectivity requirements (type 2/3)

MPUD 4 Mar 2017 Information in preparation for Market Trial

MPUD 5 June 2017 Information in preparation for Go-Live

The Market Participant Update Document (MPUD) contains functional and technical information related to interfaces, reports, and connectivity.

Questions