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Zeitschrift für Energiewirtschaft
Published in: Zeitschrift für Energiewirtschaft 2/2017

16-05-2017

State of the German Short-Term Power Market

Published in: Zeitschrift für Energiewirtschaft | Issue 2/2017

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Abstract

The paper at hand provides a comprehensive overview of the current state of the German short-term power market with focus on trading and efficiency. The pivotal question is whether current market designs are appropriate to maximise social welfare. If this can’t be confirmed, trade-offs between technical restrictions, transparency requirements, the structure of the supply side and regulators focusing mainly on consumer surplus are analysed, which prevent markets from being fully efficient. The emphasis is on Germany due to it’s central location in Europe, it’s sheer size and the rapid increase of renewable generation in recent years. This development forced the German power market into a state of transition. As a result, developments in Germany might serve as a blueprint for other European countries. The introduction of negative day-ahead prices, the implementation of a very liquid intraday trading, a quarter hourly auction and market-based systems for the procurement of Ancillary Services are just some examples of Germany’s pioneering role. On the other hand, negative effects of the rapid changes such as the excessive use of non-market based redispatch measures and system endangering imbalance price regimes shall also be explored. As a matter of course, cross-references to other European countries and harmonisation projects are included as the German market is well interconnected with neighbouring markets.
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Footnotes
1
Formerly known as European Energy Exchange (EEX).
 
2
Even though EPEX is active in other market areas such as France and Switzerland, we will only refer to EPEX in terms of the German market area hereafter.
 
3
A more detailed comparison of OTC and exchanged-based DA trading at the German power market can be found in Viehmann (2011).
 
4
According to press releases published by EPEX Spot, traded volumes increased from 127 TWh in 2007 to 264 TWh in 2015.
 
5
Even if OTC-trading if often facilitated by electronic broker platforms, it takes place directly between two counterparties. A common database of these trades did not exist.
 
6
See also regulation (EU) No 1348/2014 on data reporting implementing § 8(2) and § 8(6) of Regulation (EU) No 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency.
 
7
The term market area is also often referred to as market zone, bidding zone or price zone.
 
8
Cross-border capacities to some neighboring market areas are still auctioned-off by the means of explicit cross-border capacity auctions, see Sect. 2.1 for more details.
 
9
See Sect. 4.1 for a more in depth discussion of UPAs vs. PABAs.
 
10
With the implementation of Price Coupling of Regions (PCR) in February 2014, price floor was increased to −500 €/MWh.
 
11
Officially named 15-min. intraday auction as it is held after the DA nomination deadline at 2.30 p.m.
 
12
In contrast to EPEX, EXAA holds a combined auction of hourly and quarter hourly products to ensure that the average of four quarter hourly prices are equal to the hourly price.
 
13
The only exception is the Italian power exchange IPEX.
 
14
Currently, EPEX permits three linked block bid families per portfolio and a maximum of seven block bids per family. Additionally, EPEX allows for five exclusive block bid families per portfolio with a maximum of 24 block bids per family.
 
15
See Muche (2014) on the complexity of DA pump-storage unit bidding.
 
16
The abuse of market power in electricity markets usually increases producers surplus and decreases consumer rents. As long as demand is inelastic and the least-cost production units are employed, total welfare is not affected.
 
17
Equivalant to 67.4% of the total net-production of 598.8 TWh.
 
18
Equivalant to 51.5% of the total net-production of 581.3 TWh.
 
19
Including Austria.
 
20
For additional information on interconnector economics see Turvey (2006) and Richter and Viehmann (2014).
 
21
All of these issues refer to daily DA explicit cross-border auctions. Long term auctions for monthly or yearly capacity are not affected as capacities that are not used are handed back to the auction office and sold again in daily explicit or implicit auctions (use-it-or-lose-it principle).
 
22
Currently, there is not bottleneck between Germany and Austria, hence both countries are considered to be one market area with identical prices.
 
23
Commission Regulation (EU) 2015/1222 is establishing a guideline on Capacity Allocation and Congestion Management (CACM).
 
24
The French Powernext and the German EEX merged and created EPEX Spot in 2008.
 
25
At the same time, Great Britain was included into the market coupling. Later, Spain, Portugal (both in May 2014) and Italy (in February 2015) joined in.
 
26
Even if non-intuitive flows maximise overall social welfare, market areas that export even though prices are higher obviously feel disadvantaged.
 
27
Decision by OLG Düsseldorf, VI-3 Kart 313/12 (V).
 
28
See § 32 of regulation (EU) 2015/1222.
 
29
According to press releases by EPEX, volumes have increased from 10.2 TWh in 2010 to 15.8 TWh in 2012 to 47.1 TWh in 2014.
 
30
Start of trading of quarter hourly products has been shifted to 4 p.m. due to introduction of the quarter hourly auction (see Sect. 1.2).
 
31
In March 2011, the lead time has been reduced from 75 to 45 min.
 
32
While EPEX was the first PX in Europe to provide an API, the concept of APIs is not new in the wider financal markets.
 
33
According to Budish et al. (2014), the time scale and reaction times of computer traders are in an order of magnitude of 0.0001 s nowadays.
 
34
The OTR shows the ratio of order submissions or modifications per trade that has been actually concluded.
 
35
Also referred to as Frequency Containment Reserve (FCR).
 
36
Also referred to as Automatic Frequency Restoration Reserve (aFRR).
 
37
Also referred to as Tertiary Reserve or Manual Frequency Restoration Reserve (mFRR).
 
38
For more technical details, visit the website regelleistung.net or ENTSO-E (2014b).
 
39
The contracts for upward and downward regulation during peak times on weekdays (8 a.m. to 8 p.m.) are referred to as PosHT and NegHT, during off-peak times they are referred to as PosNT and NegNT.
 
40
According to Müsgens et al. (2014), procurement of AS in Germany via competitive auctions first started in 2002.
 
41
According to § 8 of Stromnetzzugangsverordnung (StromNZV) from 2005, PABAs have to be used to procure balancing capacity.
 
42
Before November 2011, the length of the product period for both PR and SR was 1 month, lead time was about two weeks (Müsgens et al. 2012).
 
43
As there are no auctions on weekends and public holidays, lead times are larger for Sundays, Mondays, public holidays and days after public holidays.
 
44
Data can be found on the website eex-transparency.com.
 
45
While extra-marginal bids for PR are not published either, extra-marginal bids for MR are published.
 
46
The latest version shall be published on the common TSO website regelleistung.net.
 
47
The closer DA prices are to imbalance prices, the larger this incentive gets.
 
48
In § 8, paragraph 4.
 
49
At their common website Regelleistung.net.
 
50
BSPs receive the real-time balancing activation signals as they have to provide balancing energy.
 
51
EnBW Transportnetze, TenneT TSO and 50Hertz Transmission or their legal predecessors respectively. In 2010, the fourth German TSO Amprion joined in as well.
 
52
Also referred to as Netzregelverbund.
 
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Metadata
Title
State of the German Short-Term Power Market
Publication date
16-05-2017
Published in
Zeitschrift für Energiewirtschaft / Issue 2/2017
Print ISSN: 0343-5377
Electronic ISSN: 1866-2765
DOI
https://doi.org/10.1007/s12398-017-0196-9

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