Roles and Responsibilities

network ownersnetwork ownerssystem operator(s)system operator(s)

regulatorsregulatorsInfrastructureInfrastructure

brokersbrokerspower exchange(s)power exchange(s) Market PlacesMarket Places

generatorsgeneratorsconsumersconsumerssupplierssupplierstraderstraders

Market ParticipantsMarket Participants

portfolio managersportfolio managersbalance responsiblebalance responsible Service ProvidersService Providers

Roles and Responsibilitiesstakeholders in the market

regulated

bala

nce re

sp

on

sib

leb

ala

nce re

sp

on

sib

le

portfolioportfoliomanagersmanagers

traderstraders power exchangepower exchangebrokersbrokers supplierssuppliers

generatorsgenerators

consumersconsumers

syste

m o

pera

tors

syste

m o

pera

tors

netw

ork

sn

etw

ork

s

$$ $$

$$$$$$

$$$$ $$ $$ $$

MWhMWh

MWhMWh

$$

Roles and Responsibilitiesinteractions

Interfaces

Procurement ancillary services:• Automatic frequency control• Reactive power• Power reserves

Overview Interfaces

Bids/offersTrade confirmation

Transmission System Operator (TSO)

Balancing Mechanism Transmission and System Services

Market Participants

Charges for transmission and system services

Balance ResponsibleParticipants

Grid owners, industry and generators connected to the main grid

Grid owners

Generators andlarge- scale industry

Financial settlementof net Imbalances

Purchase/saleReal Time Market (RTM)

and financial settlement

Volume in bilateral contractsFinancial settlement

of individual Imbalances

DAM trade Schedules

Transmission capacities for DAM

All spot market participants

Metereddata

DAM trade Schedules

Power Exchange

Activated within15 minutes

Activated within 15 minutes - 48 hours

Instantaneous disturbance reserves

ca. 1200 MW

MW

Price

Reserves

Fast ReservesThe Real Time Markets

Spot Market

Instantaneousfrequency reserves

600 MW per 0,1 Hz

Reserves are requiredboth in the spot marketand the real time market

Option based market for short termpower reserves

Market for Short Term Reserve Capacity

> 2700 MW

TSOHow to maintain sufficientshort term reserves? (example)

Balance Responsibilitygeneral description

BR1+10

BRG1

SO0

BR2+3

BR3+5

BR4-8

BR5-8

BR6-7

BR70

BR8+5

BRG2

+10 -15 +5

Markets and Pricing Mechanisms

When is which price determined?

Long-term Security of Supply and Incentive for Investment

System Security and

Reliability

Generation Optimization

more than one day ahead one dayahead

real-time

hedging against the price riskand

optimizing the financial partof the power portfolio

optimizing thephysical part

of thepower portfolio

dispatchingaccording

to thecommitments

schedulingown generationfor real-time

The Electricity Market ReformTimeline of Participation

Basics of the Expected Price

short

ru

n m

arg

inal co

st

installed capacity

hydro windnuclear

coal

gas

oil

diesel

lowconsumption

highconsumption

Marginal Generation CostsLoad Scenarios

MW

h/h

time

consumption

one year

Fundamental FactorsFor example Consumption

$/M

Wh

time

system marginal costs

one year

Marginal System CostsBased on a Consumption Pattern

time

market price

one year

$/M

Wh

Market PriceBased on a Marginal System Costs

$/M

Wh

a

nd

M

Wh

/h

time

expected market price

expected system marginal costs

expected consumption

next year

Market ExpectancyBased on Input

$/M

Wh

time

expected market price “normal scenario”

worst case scenario “high”

worst case scenario “low”

next year

Market ExpectancyScenarios

cash flowfrom buyer to seller

cash flowfrom seller to buyer

$/M

Wh

time

Contract Price

contract delivery period

HEDGING

Reference Price higher than

Contract Price

Reference Price lower than

Contract Price

DerivativesCash Flow - Hedging

Basics of the Spot (or: DAM) Price

Participating in the Spot Market Optimizing the physical delivery contract portfolio

Hour 20: Power portfolio content

• own generationG1 = 150 MW C’ = 100 YTL/MWhG2 = 100 MW C’ = 150 YTL/MWh

• purchased bilateral contractB1 = 50 MWB2 = 50 MW

• sold bilateral contractB1 = 25 MWB2 = 50 MW

• commitments towards not hourly metered customersforecasted load obligation = 50 MW

Spot Piyasaya KatılımFiziksel Sözleşme Portföyünün Optimizasyonu

Saat 20: Elektrik portföy içeriği

• Kendi üretimiG1 = 150 MW C’ = 100 YTL/MWhG2 = 100 MW C’ = 150 YTL/MWh

• Alış ikili anlaşma B1 = 50 MWB2 = 50 MW

• Satış ikili anlaşma B1 = 25 MWB2 = 50 MW

• Saatlik sayaç ölçümü yapılmayan müşterilere verilen taahhütler için karşılanması gereken tahmini yük = 50 MW

Hour 20:

Power portfolio optimization bid

price 0 100 101 150 151 5000

volume 25 25 -125 -125 -225 -225

100 200 MW0

25

50

75

100

125

150

5000

purchase

sale

Participating in the Spot Market Optimizing the physical delivery contract portfolio

Saat 20:

Elektrik Portföyü Optimizasyonu Teklifi

fiyat 0 100 101 150 151 5000

miktar 25 25 -125 -125 -225 -225

100 200 MW0

25

50

75

100

125

150

5000

purchase

sale

Spot Piyasaya KatılımFiziksel Sözleşme Portföyünün Optimizasyonu

satış

alış

100 200 MW0

25

50

75

100

125

150

5000

purchase

sale

100 200 MW0

25

50

75

100

125

150

5000

purchase

sale

2

Supply and Demand CurveWeek 33/2001, Thursday, Hour 20, MCP

Supply and Demand CurveWeek 33/2001, Thursday, Hour 20, MCP

MCP = 180 YTL/MWh

1

Volume = Sale of 225 MWh

3

Participating in the Spot Market Optimizing the physical delivery contract portfolio

100 200 MW0

25

50

75

100

125

150

5000

purchase

sale

100 200 MW0

25

50

75

100

125

150

5000

purchase

sale

2

Supply and Demand CurveWeek 33/2001, Thursday, Hour 20, MCP

Supply and Demand CurveWeek 33/2001, Thursday, Hour 20, MCP

PTF = 180 YTL/MWh

1

Miktar = 225 MWh Satış

3

satış

alış

Spot Piyasaya KatılımFiziksel Sözleşme Portföyünün Optimizasyonu

M W

H o ur1 6 12 18 24

Bilateral Trade

Spot Trade

M W

H o ur1 6 12 18 24

Bilateral Trade

Spot Trade

EfficiencyTrading into Balance (Example: Consumer)

M W

H o ur1 6 12 18 24

Bilateral Trade

Spot Trade

M W

H o ur1 6 12 18 24

Bilateral Trade

Spot Trade

Imbalance SettlementInvoicing Negative and Crediting Positive Imbalances

(Example: Consumer)

TURK-EL’s operational hoursMWh/h

hour 00-01

400

285

contractedgeneration

00-01

meteredgeneration

00-01

CaseCase

TURK-EL’s settlement due to the metered values

400 MWhcontracted

00-01

285 MWhmetered

generation

00-01

100 MWhBM contract

00-01

15 MWhImbalance

???

TURK-EL is invoiced for this imbalance:

the Imbalance Volume multiplied with the

Imbalance Price

CaseCase

Basic Theory of Output and Costs

price < output dependent costoperational losses

variable cost < price < minimum average costcovering output dependent costs and

reducing output independent cost losses

price > minimum average costoperational profit

Minimum Price to be achieved short-term: P = output dependent cost

Break-Even Point: P = minimum average cost

0

outputdependentcost

Cost (based on optimum output) / PriceCost (based on optimum output) / Price

minimumaveragecost

TheoryTheory

Hourly Contracts and their Impact on Strategies

The hourly based bidsThe hourly based bidsEach hour requires a separate bid. This implies that the output dependent costs of a unit can be “in the price” during some hours and “out of the price” in others.

• Base load units should be bid at “0”-prices in those hours they are needed to be scheduled

• Mid load and peak load units should “take care” of eventual start and stop costs in their bid-price

MCP & output dependent costs

24 hours

Alternative 1

24 hours

Alternative 2

24 hours

(Theory)

a not functioning market

a functioning market

base load units

mid load units

peak load units

MCP & output dependent costs

MCP & output dependent costs

CaseCase