Due to the Commission Regulation (EU) 2015/1222, establishing a guideline on capacity allocation and congestion management (“CACM-VO”), the implementation of a European market coupling of day ahead and intraday markets for electric energy has formally started.
The aim of the Regulation is to provide a technically and organizationally standardised framework in order to daily execute a collaboratively implicit synchronous European day-ahead auction. Therefore it is no longer necessary to acquire capacity rights in advance, as the available transmission capacity is already included as a factor in the pricing of the market coupling auction (implicit auction).
Based on the pan-European liquidity, the technology behind the market coupling calculates a unified market price for every bidding zone. The differences concerning the market prices between the bidding zones are a result of capacity shortages.
While developments in the patch of day-ahead are rather advanced, solutions for the intraday market coupling are still in process and not operative yet.
What does NEMO stand for?
The CACM-VO introduces the nominated electricity market operator (“NEMO”) formally as new actor. NEMO is an energy exchange, which can be considered as an access to the market coupling. Orders for the unified European day-ahead auction at 12:00 will be made at a NEMO, who transfers the offers to the common auction system and will then receive the results from the system. Equal time limits (e.g. market close, receipt of results) as well as same price and liquidity within one bidding zone (in case there is more than one NEMO within one bidding zone) are valid for all NEMOs.
What does PCR stand for?
PCR means Price Coupling of Regions und is an initiative of several European energy exchanges. PCR provides the technology for the unified day-ahead market coupling, whereby the centrepiece is the trading algorithm.
When does the regulation become effective?
The CACM-VO has already entered into force on August 14th, 2015. Currently several stated periods with regard to more precise rules for the realization of more than one NEMO within a bidding zone are running (next to other legal formalisations of already partially existing solutions).
Will there be a single day ahead price for overall Europe in the future?
In the course of the 12:00 auction, there will be one price per market region (pricing zone). Since the pricing happens via a central algorithm for all exchanges, the price is independent of the exchange quoted at.
The common target is the optimisation and standardisation of prices in overall Europe. Due to restrictions (capacity shortages at the borders of pricing zones) there will be different prices per market region.
Is EXAA’s 10:15 Auction affected by the NEMO activities?
The market coupling does not have an influence on EXAA’s 10:15 auction. In the future, all EXAA traders will have the opportunity to participate in two day-ahead auctions at EXAA:
- The 10:15 auction with EXAA pricing and consideration of quarter hour products
- The 12:00 auction in the course of the European market coupling with unified pricing of all offers within one market region
How is a NEMO influenced by a market split of Austria/Germany?
The implementation of a capacity shortage between Austria and Germany does not have an immediate influence on the functions of a coupled market. The technically defined capacities, which will be determined by the respective TSOs for the day-ahead auction, would be considered for the pricing by the PCR, just as for every other border between market regions in Europe. Different prices between Austria and Germany may be calculated in case of insufficient capacity.
What is the prospective difference between EXAA, EPEX or any other exchange with regard to the day-ahead auction at 12:00 o’clock?
The transfer of all offers of all market participants of all exchanges to a central instance for calculation results in an optimisation of the overall liquidity. There will be no difference how much volume is bundled at one exchange. Unless there are any technical defaults, all exchanges will publish the same price and dispose of the same allocation quota at the 12:00 auction.
Competition between the exchanges participating in the 12:00 auction will rather be formed in terms of fees, service quality, technical support or other specific services (e.g. clearing and collateral management).
How does the Clearing and collateral management of EXAA work regarding the effectiveness of NEMO?
Collateral management at EXAA will stay uncomplicated and comfortable. Even though members of EXAA will have access to two auctions (10:15 and market coupling at 12:00), they will have to deposit collateral only once, because the requirements of both auctions will be netted.
What is the current status regarding NEMO and Intraday-market?
EXAA has been nominated as day-ahead and intraday NEMO in Austria. Preparations for the European market coupling for intraday are, with active involvement of EXAA, currently running. EXAA will of course inform you in case any new information exists.
Will quarter-hour products be traded at NEMO?
The day-ahead market coupling currently involves all 24 hours and several block products. You will of course still have the opportunity the trade your desired profile of quarter-hours at the 10:15 day-ahead auction of EXAA.
Which trading products will EXAA as exchange place offer in the course of NEMO?
EXAA will offer products, which are not permitted at the 10:15 auction, during the 12:00 auction. These are, among others, flexible block products, which can be individually set by yourself in a highly user-friendly editor.
How about liquidity, safety of execution and technical safety?
The consideration of a central calculation algorithm (PCR) of all offers of all exchanges results in the bundling of the biggest possible liquidity all over Europe (resp. the included market regions). This means that the liquidity is of the same size, irrespective of the exchange you have placed your orders at.
In the worst case, technical problems can lead to a “De-Coupling”, where all affected exchanges will carry out separate auctions.
How about NEMO and REMIT?
EXAA will continue for every market participant at no cost to send all necessary REMIT reports to ACER, which are arising from the 10:15 auction and the market coupling. It goes without saying that our data service is available for you at both auctions. With this service you are enabled to obtain your REMIT Reporting File via a secured server in order to instruct a third party with the REMIT report or to archive the reported data yourself.