Elia Group Sa/nv · EURONEXT:ELI
Elia Group Sa/nv — Investor Presentation (February 2014)
59 slides from Elia Group Sa/nv's investor presentation, Feb 28, 2014
Slide 1: Strategic reserves
Strategic reserves Task Force “Implementation Strategic Reserves” 28 February 2014
Slide 2: Agenda TF ISR – 28/2/2014 (13h30-17h30)
Agenda TF ISR – 28/2/2014 (13h30-17h30) Location: VBO-FEB, Rue Ravenstein 4, 1000 Brussels Note: entrance to the event exclusively via the above adress! Topic Presenter Time Approval of draft minutes 1st TF ISR 17/2/2014 Elia 10 minutes Market design Elia 1 hour In the context of the “functioning ru
Slide 3: Agenda
Agenda START: 13h30 • Approval of draft minutes TF ISR 17/2/’14 • Practical arrangements: website 13h40 • Market design ( Functioning rules) 14h40 • Product design ( Functioning rules / Procedure(*)) BREAK: 15h55 Coffee Break 16h15 • Tender design (Procedure(*)) END: 17h30 (*) Procedure to consti
Slide 4: Approval of draft minutes TF ISR 17/2/’14
Approval of draft minutes TF ISR 17/2/’14 Reactions received from: - ANODE: clarification on link economic trigger (Belpex) & very high balancing price Proposed amendment: Elia explained that the procedure of offering SR to the market in a separate process “after” the clearing guarantees that the ma
Slide 5: Practical arrangements: website
Practical arrangements: website • Public website TF ISR is online: http://www.elia.be/en/about-elia/Users-group/Strategic-Reserves- Implementation-Task-Force • Presentations given by Elia or other stakeholder in TF ISR: online ASAP after the TF meeting • Stakeholder reactions received in writing bet
Slide 6: Agenda
Agenda START: 13h30 • Approval of draft minutes TF ISR 17/2/’14 • Practical arrangements: website 13h40 • Market design ( Functioning rules) 14h40 • Product design ( Functioning rules / Procedure(*)) BREAK: 15h55 Coffee Break 16h15 • Tender design (Procedure(*)) END: 17h30 (*) Procedure to consti
Slide 7: Introduction & disclaimer
Introduction & disclaimer Overall goals and principles taken into account include: • Limit the negative impact of strategic reserves on the energy market • Aim for techno-economic efficient solutions in the entire design • Aim for effective solutions • Aim for solutions which are feasible to reasona
Slide 8: High-level view of Elia on the SR design
High-level view of Elia on the SR design 1. Detection 2. Notification 3. Verification 4. Injection & Balancing • Economic • Select & • Verify the • SR actually trigger based inform SR for need for SR injects on Belgian warming before going • Impact on curtailment in • Inform over to balancing Belpex
Slide 9: Step 1: Detection
Step 1: Detection A combination of two activation triggers with clear priorities for detecting the need of SR to be launched is useful: Economic trigger: Activation is linked to Belgian curtailment in Belpex-DAM •Limited to Belgian curtailment •Offered to ‘avoided curtailed Belgian bids’ at 3000 €/M
Slide 10: Step 2: Notification
Step 2: Notification Given the required profile determined in the detection phase, the next steps are: Selection of the SR to be activated for ‘warming up’. • Elia selects SR based on a techno-economic evaluation. • Note: ‘warming up’ does not directly imply injection, this first requires ‘verificat
Slide 11: Step 3: Verification
Step 3: Verification Once SR have been notified, they reach the moment to decide if they actually have to inject energy in the zone or not (yet). The need is verified by Elia. Elia verifies the anticipated need of SR. • The need defined via the economic trigger has not changed. However, better infor
Slide 12: Step 4: Injection & Balancing
Step 4: Injection & Balancing Once verified, SR will be actually injecting and become visible in the control area’s position. This impacts the balancing market. SR injects into the control area. Different effects created by injection as a consequence of economic and/ or technical trigger. • Energy f
Slide 13: Agenda
Agenda START: 13h30 • Approval of draft minutes TF ISR 17/2/’14 • Practical arrangements: website 13h40 • Market design ( functioning rules) 14h40 • Product design ( Functioning rules / Procedure(*)) BREAK: 15h55 Coffee Break 16h15 • Tender design (Procedure(*)) END: 17h30 (*) Procedure to consti
Slide 14: Principles
Principles • Strategic reserves are set up, in order to deal with eventual structural shortages. • For a winter period of 5 months: 1/11-31/3 • They are activated Because of an observed deficit of energy in the DAM market (economic trigger) Because of a risk of structural shortage of the control
Slide 15: Two different products: SGR and SDR
Two different products: SGR and SDR SGR SDR Provided by production units that are out of the Consumption is primarily driven by their core business market (art 7quinquies) and thus by definition and not (only) by the electricity market. Their participation exclusively dedicated to the Strategic Rese
Slide 16: SGR Design
SGR Design TF ISR – 28/2/2014 16
Slide 17: SGR principles: Capacity Reservation (1/2)
SGR principles Capacity Reservation (1/2) 1. Characteristics • Power Plants or Configuration of Power Units for which closure is announced or that are shut down • The reserved capacity will be fully available for SR (all or nothing) • Submitted to CIPU-like procedures (maintenance, availability, D-A
Slide 18: SGR design principles: Capacity reservation (2/2)
SGR design principles Capacity reservation (2/2) How is unavailability determined: • Missing MW is defined as max(0; Reserved Capacity - Pmax available) - A monitoring will be made in order to identify systematic and unjustified delta’s between the Reserved Capacity and the Pmax nominated Reserved
Slide 19: SGR design principles: Activation (1/2)
SGR design principles Activation (1/2) 1. Characteristics: • Elia specifies which power plant must be used and the level of power to reach (Set point ≥ Pmin and ≤ Pmax) • An activation is characterized by different periods and steps. Elia will define in the contract the maximum value for each of the
Slide 20: SGR design principles: Activation (2/2)
SGR design principles Activation (2/2) 3. Remuneration and penalty: • Remuneration @ contractually fixed prices - Warm up period: fixed [€] + prolongation price [€/Hour] - Energy component: min(requested energy ; injected energy) [€/MWh] • Penalty for non delivered energy - Example: 2*activation pri
Slide 21: SDR Design
SDR Design TF ISR – 28/2/2014 21
Slide 22: SDR Design: Principles
SDR Design Principles 1. Providers: • Provided by TSO grid connected load for the first year (individual or aggregated) • (Pool of) Grid users whose consumption is traditionally high during the winter period 2. Slow ICH-like principle: • At Elia’s request, the SDR provider lowers his consumption und
Slide 23: SDR Design: Capacity reservation
SDR Design Capacity reservation 1. No fixed capacity obligation but commitment to lower the consumption at any moment under the SL • Purpose: avoid incentive to consume in order to reach a fixed capacity obligation • Candidates are grid users with a traditionally high consumption during critical per
Slide 24: SDR Design: Activation
SDR Design Activation 1. Characteristics • As for SGR, an activation is characterized by different periods and steps. Elia will define in the contract the maximum values for each of them - Warm up period : preparation period needed in order to be able to lower the offtake and where a cancellation is
Slide 25: Agenda
Agenda START: 13h30 • Approval of draft minutes TF ISR 17/2/’14 • Practical arrangements: website 13h40 • Market design ( functioning rules) 14h40 • Product design (Procedure(*)) BREAK: 15h55 Coffee Break 16h15 • Tender design (Procedure(*)) END: 17h30 (*) Procedure to constitute the reserve TF I
Slide 26: Agenda
Agenda START: 13h30 • Approval of draft minutes TF ISR 17/2/’14 • Practical arrangements: website 13h40 • Market design ( functioning rules) 14h40 • Product design ( Functioning rules / Procedure(*)) BREAK: 15h55 Coffee Break 16h15 • Tender design (Procedure(*)) END: 17h30 (*) Procedure to consti
Slide 27: Procedure for constitution of SR: Modalities for participation
Procedure for constitution of SR Modalities for participation After consultation, Elia has to determine and publish the modalities of the procedure for constitution of Strategic Reserve. Article 7quinquies stipulates that Elia determines (and publishes) the procedure for constitution of strategic
Slide 28: Procedure for constitution of SR: Tendering process
Procedure for constitution of SR Tendering process [Practical guide EC]: Procurements and grants are awarded according to strict rules. These help ensuring that suitably qualified contractors and grant beneficiaries are chosen without bias and that the best value for money or the best price is obt
Slide 29: Procedure for constitution of SR: Tendering Calendar
Procedure for constitution of SR Tendering Calender As presented during the taskforce of 17/02/2013: Administration, CREG and Elia have agreed on a calendar for the 2015/2015 tendering. < 13/04/2014 The Minister will instruct Elia to implement Strategic Reserves; Minister Elia < 05/05/2015 Elia
Slide 30: Procedure for constitution of SR: Eligibility criteria (1/3)
Procedure for constitution of SR Eligibility criteria (1/3) SGR/SDR candidates, tenderers or applicants will be excluded from participation in procurement procedures if (Non-exhaustive list / standard clauses): • they are bankrupt or are having their affairs administered by the courts, have entere
Slide 31: Procedure for constitution of SR: Eligibility criteria (2/3)
Procedure for constitution of SR Eligibility criteria (2/3) A certification procedure will take place in order to asses whether or not SDR is eligible to offer (and if so: for how many MW). Key issue is that SDR should be contracted with Demand Side flexibility not already exploited. For winter 20
Slide 32: Procedure for constitution of SR: Eligibility criteria (3/3)
Procedure for constitution of SR Eligibility criteria (3/3) A certification procedure will take place in order to asses whether or not SGR is eligible to offer (and if so: for how many MW). For SGR this will be a translation of the law under adoption (art 7quinquis); For winter 2014/2015, in order
Slide 33: Procedure for constitution of SR: Call for tender
Procedure for constitution of SR Call for tender Call for Tender during 4 weeks All certified candidates will receive the tendering specifications (contracts) and bidding instructions. (to fill in the bidding sheet) Offers will be composed of (draft - under construction): - An offer number serving
Slide 34: Procedure for constitution of SR: Terms of reference and technical specifications
Procedure for constitution of SR Terms of reference and technical specifications The purpose of Terms of Reference and Technical Specifications is to give instructions and guidance to contractors to submit a tender which responds to all technical and administrative requirements. The complete Terms
Slide 35: Procedure for constitution of SR: Selection and Award Criteria (1/3)
Procedure for constitution of SR Selection and Award Criteria (1/3) After the call for tender, Elia will write a report for CREG with all offers, motivations, prices and volumes, offered for SR. + Elia will also propose a technic-economic combination of offers. Based on this report, CREG will writ
Slide 36: Procedure for constitution of SR: Selection and Award Criteria (2/3)
Procedure for constitution of SR Selection and Award Criteria (2/3) In line with previous considerations, Elia considers the possibility to determine a minimum and/or a maximum participation for SDR in strategic reserves. Minimum of X MW - Avoid lock-out of demand because of “indivisible SGR”; - E
Slide 37: Procedure for constitution of SR: Selection and Award Criteria (3/3)
Procedure for constitution of SR Selection and Award Criteria (3/3) In order to compare offers, the total cost will be considered. 𝑇𝐶 = 𝑅𝑒𝑠 + #𝐴𝑐𝑡 ∗ (𝐴1 + 𝐴2 ∗ 𝐴𝑐𝑡_𝑑𝑢𝑟𝑎𝑡𝑖𝑜𝑛) With: • Res, A1 & A2 have to be offered • TC: Total cost by the bidders • Res: Reservation…
Slide 38: Back-up: Calibration of parameters
Back-up: Calibration of parameters Calibration can be done based on simulations if volume are fixed: - Monte Carlo simulation (total of 500 simulations) - Average number of activation can be used to calibrate #Act - Total or average activation duration and ENS can be used to calibrate #Act_dur TF IS
Slide 39: ANNEX
ANNEX TF ISR – 28/2/2014 39
Slide 40: Annex 1: market design - Guide for the reader
Annex 1: market design Guide for the reader Annex 1 repeats the slides shown in the part “market design”, but adds for each topic extra slides with extra information/clarification. The slides from the presentation are solely repeated to provide sufficient structure and coherence to the full slide pa
Slide 41: Introduction & disclaimer
Introduction & disclaimer Overall goals and principles taken into account include: • Limit the negative impact of strategic reserves on the energy market • Aim for techno-economic efficient solutions in the entire design • Aim for effective solutions • Aim for solutions which are feasible to reasona
Slide 42: High-level view of Elia on the SR design
High-level view of Elia on the SR design 1. Detection 2. Notification 3. Verification 4. Injection & Balancing • Economic • Select & • Verify the • SR actually trigger based inform SR for need for SR injects on Belgian warming before going • Impact on curtailment in • Inform over to balancing Belpex
Slide 43: Step 1: Detection
Step 1: Detection A combination of two activation triggers with clear priorities for detecting the need of SR to be launched is useful: Economic trigger: Activation is linked to Belgian curtailment in Belpex-DAM •Limited to Belgian curtailment •Offered to ‘avoided curtailed Belgian bids’ at 3000 €/M
Slide 44: Step 1: Detection Highlights
Step 1: Detection Highlights • Elia is best placed to “manage” the SR and based on the two triggers and make the best techno-economic selection of SR to be activated (cf. next step ‘notification’). • Implication: Elia should be counterparty towards Belpex for any volumes activated based on the Belpe
Slide 45: Step 1: Detection Economic trigger
Step 1: Detection Economic trigger Main characteristics: Market-oriented approach No cross-border leakage via DAM Flexibility in SR activation remains TF ISR – 28/2/2014 Limited complexity in terms of implementation 45
Slide 46: Step 1: Detection Technical trigger
Step 1: Detection Technical trigger Timing of detection process: - Starts already from W-1 - More detailed views from D-1 onwards until real-time The technical trigger is primarily based on a “spinning reserve” forecast . Spinning Reserve actually monitors the system flexibility for the Elia Control
Slide 47: Step 2: Notification
Step 2: Notification Given the required profile determined in the detection phase, the next steps are: Selection of the SR to be activated for ‘warming up’. • Elia selects SR based on a techno-economic evaluation. • Note: ‘warming up’ does not directly imply injection, this first requires ‘verificat
Slide 48: Step 2: Notification Highlights
Step 2: Notification Highlights • The selection process is done by Elia at preparation next day, when Elia has first view on all information (nominations, neighbouring countries, etc.). • The selection of SGR and SDR to be notified is based on a techno-economic approach: o Minimize total costs (e.g.
Slide 49: Step 3: Verification
Step 3: Verification Once SR have been notified, they reach the moment to decide if they actually have to inject energy in the zone or not (yet). The need is verified by Elia. Elia verifies the anticipated need of SR. • The need defined via the economic trigger has not changed. However, better infor
Slide 50: Step 3: Verification Highlights
Step 3: Verification Highlights • The concepts of verification matches the technical process of generation units with longer start-up times (e.g. boiler heating). • The techno-economic evaluation of ‘keeping warm’ or ‘stopping’ should be based on the anticipated risk for needing SR in later hours an
Slide 51: Step 4: Injection & Balancing
Step 4: Injection & Balancing Once verified, SR will be actually injecting and become visible in the control area’s position. This impacts the balancing market. SR injects into the control area. Different effects created by injection as a consequence of economic and/ or technical trigger. • Energy f
Slide 52: Step 4: Injection & Balancing Highlights
Step 4: Injection & Balancing Highlights • A clear, ex ante defined and observable criterion for “structural shortage” is required. This criterion has a significant relevance for the imbalance prices. • Such criterion should be in line with the aim of the mechanism and reflect adequacy issues. • In
Slide 53: Step 4: Residual energy and impact on balancing
Step 4: Injection & Balancing Residual energy and impact on balancing Starting point for the impact on the balancing market is the question whether the injected energy already has a counterparty or not? • YES, for energy sold on Belpex following the economic trigger • NO, for energy resulting from t
Slide 54: Step 4: Residual energy and impact on balancing
Step 4: Injection & Balancing Residual energy and impact on balancing Alternative imbalance pricing rules are needed to cope without SR. The actual real-time system conditions should determine the ultimate effect: • Situation 1: IF strategic reserves are activated, AND IF there is “structural shorta
Slide 55: Step 4: Residual energy and impact on balancing
Step 4: Injection & Balancing Residual energy and impact on balancing Situation 1: IF strategic reserves are activated, AND IF there is “structural shortage”, THEN the imbalance price should be very high (>> 3000 €/MWh) Situation 2: IF strategic reserves are activated, AND there is NO “structural sh
Slide 56: Step 4: Residual energy and impact on balancing
Step 4: Injection & Balancing Residual energy and impact on balancing An important design element is the notion of “structural shortage”. • Structural shortage is only observed in the balancing time frame, i.e. in real- time. • Structural shortage should be clearly distinguished from residual imbala
Slide 57: Information flow to the market (1/2)
Information flow to the market (1/2) When will Elia inform the market on the triggering, activation, etc. of strategic reserves? • Economic trigger: shortly after the publication of Belpex results (incl. the use of SR), if triggered • Remark: Belpex might inform their market participants as well on
Slide 58: Information flow to the market (2/2)
Information flow to the market (2/2) Concerning the criterion for “structural shortage” in real-time: • Market parties will be able to follow the situation on the online Elia dashboard (http://www.elia.be/en/grid-data/dashboard). • The dashboard can indicate the critical limit for structural shortag
Slide 59: Annex 2: product design - SGR design principles
Annex 2: product design SGR design principles Capacity reservation CIPU procedures: • For organizational reasons the SGR units will follow the 6 CIPU procedures which give an accurate view on the status/availability of each of them - The “W-1 ready-to-run” procedure gives the status of the PU: ava