Price Zone Split

What changes in the Electricity Day Ahead Market Germany(D)/ Austria(A) from     Oct. 1, 2018?

A congestion management system between Austria and Germany will be applied as of 1 October 2018. Currently 4,900 MW (minimum) capacity is planned. This will divide the previously common price zone D/A into two price zones D and A.

What Day Ahead auctions are (were) in place before Oct. 1, 2018?

There are two of them:

  • The 10:15 Auction for the common price zone D/A
  • The 12:00 Auction for the common price zone D/A

........and thus generally two different clearing prices per product (hour, block) and delivery date.

At 10:15 EXAA (without the participation of other exchanges) auctions a common order book D/A from bids and offers, regardless of whether these shall be scheduled in the Austrian or a German control zone. Since it is a common order book, the (10:15) price for D and A is the same.

At 12:00 the order books for D and A (and all connected exchanges/countries/price zones) are auctioned implicitly with the corresponding cross-border capacities within the framework of European market coupling. Since the border capacities D/A are unlimited, the (12:00) price for D and A is the same.

What Day Ahead Auctions are in place as of Oct. 1, 2018?

There are still 2 auctions but with 4 prices - a 10:15 auction with the order books Austria and Germany and a 12:00 market coupling auction with the order books Austria and Germany - with generally four different clearing prices per product and delivery day.

At 10:15 EXAA auctions one order book for D and one for A separately. This results in a (10:15) price for A and a generally different (10:15) price for D.

At 12:00 the order books for D and A (and all connected exchanges/countries/price zones) are auctioned implicitly with the corresponding cross-border capacities within the framework of European market coupling. The cross-border capacities D/A, like all other cross-border capacities between the different European price zones, are included, resulting in a (12:00) price for A and, depending on the utilization of the available transmission capacities, a different (12:00) price for D.

Which auctions can be traded on EXAA?

  • The 10:15 Auction with the order books Austria and Germany
  • The 12:00 Market Coupling Auction with the order books Austria and Germany (as soon as possible via multi nemo cooperation)

 

 

Are there any additional costs for EXAA membership?

No.

The EXAA membership fee (10,000 EUR p.a.) covers all auctions and price zones. For both the 10:15 and 12:00 auctions, a trading account for D and A is included.

Two spread accounts which are required for spread-orders are also included. (EXAA 10:15 auction only).

What about the quarter-hour products?

These remain tradable even after price zone separation in the 10:15 auction. There will generally only be different clearing prices for D and A from 1 Oct. 2018.

Quarter-hour products are not available in the 12:00 auction.

What about the quarter-hour products?

These remain tradable even after price zone separation in the 10:15 auction. There will generally only be different clearing prices for D and A from 1 Oct. 2018.

Quarter-hour products are not available in the 12:00 auction.

Can capacity D - A be traded?

Longterm (for years and months) FTRs (financial transmission rights) are auctioned via JAO (Joint Allocation Office) http://www.jao.eu. If there are different clearing prices in the price zones in the 12:00 market coupling auction, the price difference is paid out to the holders of the FTRs.

Day Ahead capacities will not be auctioned.

Spread- Orders in the 10:15 auction (more on this below) can be used defacto like day ahead capacities.  

Are there still X- border nominations?

No, no external schedules can be nominated by market participants or balancing responsible parties after the price zone separation. The available capacity goes to the implicit auction at 12:00 Market Coupling Auction.

What is to be done for EXAA members until October 1, 2018?

1. NOTHING, if you have trading accounts for A and want to continue using them
2. NOTHING, if you have trading accounts for D and want to continue using them

If you want to trade both, in Austria and Germany, you also need a trade account in A and D respectively.

If you want to use the new spread- orders at the 10:15 auction, you also need spread accounts.

When are the clearing prices in the 12:00 auction different?

If the resulting exchange of supply and demand between the price zones (e.g. D and A) in the 12.00 auction is smaller than the day-ahead capacity, the clearing prices converge, i.e. they are the same for the respective delivery hour in both price zones. If capacity is not sufficient, the price in the net purchasing price zone will be higher than in the net supplying price zone.

Does a Day Ahead capacity also go into the 10:15 auction?

No, the order books of the 10:15 auction will be auctioned separately for the price zones D and A and will generally result in different clearing prices - even if the clearing prices for D and A should be the same in the 12:00 auction.

New: Spread- Orders in the 10:15 Auction

What is the spread?

Generally speaking, this is understood as a price difference. In particular we are talking about a location spread, specifically the difference between the prices of an electricity product in the two Day Ahead Auctions at 10:15 between the market areas Austria and Germany. Whereby the sign was arbitrarily chosen (defined) by subtraction of the German from the Austrian price.

Spread = Price (A) - Price (D)

Note: The assumptions of market analysts assume an average higher price in Austria than in Germany, which will result in a mostly positive spread, but negative spreads are absolutely possible.

Why doesn't this spread exist before Oct. 1, 2018?

Until 1 October 2018, there was no bottleneck for cross-border electricity supplies between Austrian and German control zones for market participants. X- border nominations are or were practically unlimited. An unrestricted exchange between supply and demand on the market resulted in a (in this case common) price zone A/D.

What is a Spread- Order?

   In addition to "normal" price-dependent bids, e.g. for limited purchase:

   "If price in A is 30 EUR at most, buy 10 MW base in A"

   there are now also spread-dependent bids as of Oct.1, 2018, e.g.:

   "Up to a spread - price(A)-price(D) - of at most 1,- Euro, buy 10 MW base
                               in  A and sell 10 MW in D at the same time.
" Or:

                               "From a spread - price(A)-price(D) - of at least 3,- Euro, sell 10 MW base
                               in A and buy 10 MW in D at the same time".

How is a spread order executed?

If the order condition (spread limit) is fulfilled, this results in the physical execution of an identical purchase quantity in one price zone and a sales quantity in the other price zone. During the execution allocation, it is ensured that the amounts of the purchase and sales quantities are always of equal size. If, for example, only a partial quantity can be implemented on one side (e.g. 80 instead of 100 MW), then the opposite side would also be reduced to 80 MW.

For which products are spread bids possible?

For base and peak

How are spread orders included in price calculation?

The 10:15 auctions for the price zones D and A are not completely separated but calculated in a common algorithm. In addition to the usual price limits, spread limits are also taken into account when determining the clearing prices and the allotment of quantities.

Why do spread orders "virtually" couple the prices of zones A/D in the 10:15 auction?

According to the sign convention: Spread = Price A - Price D,

additional spread purchases "raise" the price A and "lower" the price D or

additional spread sales "lower" the price A and "raise" the price D.

Via the market expectation for the price difference A-D with which traders place spread bids, these have the effect of an indirect, so to speak virtual market coupling.

What is needed to use spread- orders?

  • Balancing agreement in D (optionally 50Hertz, AMPRION, TenneT, TransnetBW)
  • Balancing agreement in A (with APCS for APG)
  • 10:15 spread account in D (in membership fees included)
  • 10:15 spread account in A (in membership fees included)

What are the transaction fees (EUR/MWh) for spread- orders?

0,0375 EUR/MWh (per leg)....this is half the fee for normal bids (0,075 EUR/MWh)

This means that in total 0,075 EUR/MWh is charged for the execution of a spread bid, covering purchase in one price zone and sale in the other.

For liquidity providers quantities (from 480 MWh daily) a further 25% reduction is possible, i.e. to de facto 0.028125 EUR/MWh.

What are typical applications for spread orders?

  • Shift physical position between D and A at 10:15 in one single step
    • Starting position is e.g.: long in D, short in A
      • Buy spread unlimited (market order)…so sell in D and buy in A
      • Pay practically only 1 x transaction fee
  • Optimized (10:15 or 12:00) shift of position between D and A
    • e.g.: Long in D, short in A
      • Assumption: Price D at 12:00 = Price A at 12:00
      • Buy spread (10:15) up to minus 0,2 EUR (min. optimization expected)
        • I.e. buy in A und sell in D, if A is at least 20ct cheaper than D
      • …otherwise 2 separate trades at 12:00:  buy in A und sell in D
  • Prop trade on spread expectation for 12:00
    • No physical starting position
      • Assumption: Price D at 12:00 = price A at 12:00
      • Buy spread (10:15) up to minus 0,5 EUR (min. profit expected)
      • Sell spread (10:15) from plus 0,5 EUR (min. profit expected)
      • If then the spread (10:15) is larger than 0,5 Euro or smaller than minus 0,5 EUR…
        • …the spread order is executed accordingly and physical delivery takes place in the respective bidding zone
      • Closing the position, e.g. in the form of a respective buy-back/re-sale at 12:00 by means of market orders
        • If assumption 12:00 price D = 12:00 price A  occurs…
      • Profit of min 0,5 EUR/MWh

 

 

What are the benefits of spread orders?

Via spread orders in the 10:15 auction, a price dependence ("virtual coupling") between the two order books for the price zones Austria and Germany is achieved and thus

  • offers traders a new arbitrage opportunity,
  • enables cross border optimization with physical fulfillment,
  • approximate the 10:15 prices for D and A providing additional price stability
  • indirectly maintain the joint liquidity pool.
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