Getting ready for Secondary Trading Guidance for Capacity ... Markets Document Librar… · Getting ready for Secondary Trading Guidance for Capacity Market Participants 5 April 2017

Getting ready for Secondary Trading

Guidance for Capacity Market Participants

5 April 2017

Electricity Market Reform

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Your presenters today are…

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Ian Nicholas Vikas Garg Tim Dart

Legal Disclaimer and Copyright

Disclaimer

This guidance document has been prepared by National Grid Electricity Transmission plc (NGET) and is provided voluntarily and

without charge. Whilst NGET has taken all reasonable care in preparing this document, no representation or warranty either expressed

or implied is made as to the accuracy or completeness of the information that it contains and parties using information within the

document should make their own enquiries as to its accuracy and suitability for the purpose for which they use it. Neither NGET nor

any other companies in the National Grid plc group, nor any directors or employees of any such company shall be liable for any error or

misstatement or opinion on which the recipient of this document relies or seeks to rely other than fraudulent misstatement or fraudulent

misrepresentation and does not accept any responsibility for any use which is made of the information or the document or (to the extent

permitted by law) for any damages or losses incurred.

In the event of any conflict or inconsistency between this document and the Capacity Market Rules, the Electricity Capacity Regulations

or the Auction Guidelines, the latter documents take precedence. Capitalised terms used in this document shall have the same

meanings given in the Capacity Market Rules.

Confidentiality

This guidance document, and its contents should be considered as confidential in nature, and document is supplied on this basis. No

part of this document may be reproduced in in any material form (including photocopying and restoring in any medium or electronic

means and whether or not transiently or incidentally) without the written permission of National Grid.

Copyright National Grid 2017, all rights reserved.

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Webinar Etiquette

Take you through the slides

Calls on mute

Ask questions using the chat function in WebEx

All questions are important!

IN 4


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Who is this for?

16/17 TA 17/18 EA 17/18 TA 18/19 T-4 19/20 T-4 20/21 T-4

Existing CMU

New Build CMU

Existing

Interconnector

Unproven /

Proven DSR

Refurb

New Build

Interconnector

Yes No Not Applicable IN 5


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Agenda

Overview of Secondary Trading / Volume Reallocation / Financial

Hedging

Why Secondary Trade?

Who can Secondary Trade?

Volume Reallocation

How is Secondary Trading carried out?

When can I trade?

REMIT

Frequently Asked Questions

IN 6


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Auction and Delivery year timeline

Dec14

Jan 15

Dec 15

Jan 16

Oct 16

Dec 16

Jan 17

May 17

Oct 17

Dec 17

Jan 18

Oct 18

Dec 18

Jan 19

Oct 19

Dec 19

Jan 20

Oct 20

Dec 20

Jan 21

Oct 21

Dec 21

Jan

22

CM delivery year1 18/19

CM delivery year 1 19/20

TA delivery year 16/17

TA delivery year 17/18 TA Auction

CM delivery years 2-15


(18/19) T-1 Auction

(19/20) T-1 Auction

EA delivery year 17/18 EA Auction

SCA Secondary Trading window 17/18 delivery

(May 17-Sep 18)

Secondary Trading window for 18/19 delivery

year (Jan 18- Sep 19) 18/19

17/18 Secondary Trading (ST)

TA/EA

T-4 2018/19

19/20 Secondary Trading window for 19/20 delivery year (Jan

19- Sep 20)

T-4 2019/20

CM delivery year 1 20/21


T-4 2020/21

(19/20) T-1 Auction

IN 7

Secondary Trading summary

Auction participants with a

Capacity Agreement may be

unable to deliver (planned or

forced outages) have the

following options to hedge

position;

IN 8

1. Physical secondary

trading (ex ante)

2. Volume Reallocation (ex

post)

3. Parties are free to

procure a financial

product outside of the

Capacity Market

mechanism.


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Obligation transfer/secondary trade

Transfer of the Capacity obligation from Party A to Party B

Min time period 1 day/ min volume 2MW

The receiving party must have successfully prequalified and

have capacity available (cannot trade above De-rated

capacity).

Transfer requests can commence from end May for Oct 17

delivery year

IN 9


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Can carry out multiple transfers - within de-rating

CMU Transferee satisfies the acceptable transferee

requirements (such as satisfactory performance prior to

trading request).

The holder of an obligation across winter (even 1 day) will

need to prove Satisfactory Performance Days

If traded out then SPD not required

IN 10


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not also a Bidder or Capacity Provider of a Defaulting CMU

Interconnector not able to ST before 2019. However ability

allowed to trade in EA so 2017/18 not 2018/19 then 2019/20

IN 11


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Volume Reallocation

Ability to cover obligation post stress event with registered

participant.

Meet the acceptable transferee requirements

Register to be CMVRP in advance of delivery period

Capacity volume register updated WD10

Allocate volume to Submit a CMVRN WD 11-19

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Why Trade?

Value of obligation trading;

1MW in 2017 Early Auction £6.95 clearing price. Annual obligation

payment £6,950

For every HH non-delivered for a stress event = 1x 24th payment

£6,950/12= £289

In any month max is capped at 2 months payments

£6,950/6 = £1,158

In a delivery year max loss = 100% capacity payment

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Who can Secondary Trade?

An Acceptable Transferee is any of the following:

CMU Opted-out at the T-4 Auction and has since Prequalified in

the T-1

Prospective CMU that has achieved the Substantial Completion

Milestone prior to the Delivery Year

A Capacity Provider of a CMU that Prequalified but does have a

Capacity Agreement

An Eligible Secondary Trading Entrant

IN 14


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Secondary Trading Entrant

Secondary Trading Entrant means the Applicant for:

Existing Generating CMU comprising biomass plant which is

exiting the Low Carbon Exclusion

Existing Interconnector CMU

Proven DSR CMU

CMU which is an Existing CMU;

Terminated new build unit subsequently been built

For the T-1 Auction the unit was not Existing CM

IN 15


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Tim Dart

How is Secondary Trading carried out in the EMR Portal?

VG 16

Vikas Garg


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Secondary Trading Process Map

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Agree terms of trade Party A

(Transferor)

Party B (Transferee)

Review by Delivery

Body

Submit trade application in EMR Portal

Party B review the application

Update to Register, CAN

and EMRS (depending upon

outcome)


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Secondary Trading Process Map

Secondary Trading Steps

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Party A (Transferor), the obligation holder, and Party B an Acceptable Transferee for obligation transfers, agree the terms of the trade between themselves.

Party A submits the trade request via the EMR Portal and Party B approves the request with at least 5WD notice before the obligation to be transferred starts. This will detail the transferor, transferee, length of the trade and the volume to be transferred.

The DB will then process the request and the transferor and transferee will be notified of the result.

If the trade is approved the details are added to the register and the obligation changes are sent to EMRS for the settlements to be amended.

Step 1

Step 2

Step 3

Step 4


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Secondary Trading Steps

Step 2 -

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Transferor submit the trade application in EMR Portal


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Step 2

Step 2 Continues…

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Select Delivery Year

Select Transferee Company and CMU

Select Trade schedule and Volume

Step 2 -


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Step 2 Continued

Step 2 Continues…

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Transferor to see the list of trades initiated

Step 2 Continues… Step 2 -


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Step 2 Continued

Step 2 Continues…

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Once submitted by Transferor, Transferee receives a notification of the trade

Step 2 Continues… Step 2 Continues… Step 2 -


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Step 2 Continued

Step 2 Continues…

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Transferee to review trade and process



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Step 2 Continued

Step 2 Continues…

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Step 2 Continued

Step 3 and 4

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Step 3 and 4

Step 3 and 4

Once processed by Transferee, Transferor and Delivery

Body (DB) receive notification

DB review and trade detail and process it within 5WD

If trade is approved the details are added to the register and

the obligation changes are sent to EMRS for the settlements

to be amended

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Step 3 and 4 continued


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Tim Dart

When can I trade - trading timeline

REMIT

Frequently asked Questions

TD 27

Tim Dart


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Early Auction delivery year

April May June July Aug Sep Nov Dec Sep 18

Oct 17

2017

Webinar & training material will be available.

Contact details

requested by DB.

Secondary Trading Entrant - apply to prequalify for ST

(not during auction prequalification)

Secondary Trading Contact details

published

Secondary Trade Registration to DB

Auction PQ Assessment

TD 28

Volume reallocation

Trading Timeline


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REMIT1 obligations

REMIT is Regulation (EU) No 1227/2011 of the European Parliament and of the

Council of 25 October 2011 on wholesale energy market integrity and transparency.

It entered into force on 28 December 2011.

REMIT introduced a consistent EU-wide framework:

Defining market abuse, in the form of market manipulation, attempted market

manipulation and insider trading, in wholesale energy markets.

Explicitly prohibiting market manipulation, attempted market manipulation and

insider trading in wholesale energy markets.

Establishing a new framework for monitoring wholesale energy markets to detect

and deter market manipulation and insider trading.

Enforcing these prohibitions and sanctions breaches of market abuse rules at

national level.

Ofgem https://www.ofgem.gov.uk/publications-and-updates/remit-registration-faq

ACER http://www.acer.europa.eu/en/the_eu_energy_market/Legislation/Pages/default.aspx

1 Regulation (EU) No 1227/2011 of 25 October 2011 on wholesale energy market integrity and transparency TD 29


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https://www.ofgem.gov.uk/publications-and-updates/remit-registration-faq









http://www.acer.europa.eu/en/the_eu_energy_market/Legislation/Pages/default.aspx

REMIT obligations – Secondary Trading

‘Market Participants’, as defined in REMIT, should ensure that they

understand and comply with the requirements of REMIT and associated

Regulations and guidance.

In accordance with Article 8 of REMIT, Market Participants are required to

report contracts for the transportation of electricity concluded between

Market Participants on secondary markets specifying physical or financial

capacity obligations. This includes resale and transfer of capacity

obligations and therefore Market Participants should ensure that they

comply with the reporting requirements of REMIT in carrying out this

activity.

Please seek your own legal advice to ensure that understand your

REMIT requirements.

TD 30


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Q: I am a new build generator but won’t be built for the

delivery year; can I Secondary Trade out my obligation?

A: You will need to meet the SCM to be able to trade.

Please refer to Rule 9.2.5 (a)

Q: I didn’t prequalify for the early Auction but wish to

secondary trade, how do I do this?

A: If you are eligible to qualify as a Secondary Trading

Entrant then it is possible to take on obligations through

Secondary Trading. If you don’t fit into this category then

you cannot receive an obligation through Secondary

Trading.

TD 31


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Q: How do I register to become a Secondary Trading

Entrant?

A: Carry out the prequalification process the same way

as if you were to enter the auction for the same delivery

year but apply for secondary trading (as opposed to

applying to enter an auction)

You will be able to submit a prequalification application

outside the normal prequalification window and the DB

has 3 months to give the decision.

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Q: If I take on an obligation through secondary trade, what

performance monitoring is involved?

A: If you hold an obligation (even for 1 day) in the winter

(Oct-April) then you will need to meet the satisfactory

performance days (Rule 13.4).

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Q: What options do I have if I have an outage to all or part

of my CMU?

A: If you have a planned outage you can trade all or part

of your obligation away to another an acceptable

transferee ahead of the date or even before the delivery

begins .

If the outage occurs during a stress event period a

participant still has the option to participate in volume

reallocation if they can agree to reallocate their capacity

to another acceptable transferee.

TD 34


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Q: I can generate above my Auction Acquired Capacity

Obligation (AACO) – am I able to secondary trade this

additional capacity?

A: For a generating CMU you are not able to secondary

trade capacity above your AACO. However if you over-

generate in a stress event it is possible for you to

participate in Volume Reallocation after the event.

For a Proven DSR CMU, if the AACO is below their de-

rated capacity then it is possible to secondary trade up

to the proven de-rated capacity level. Again, DSR units

can participate in Volume Reallocation after the event. TD 35


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Ian Nicholas, Vikas Garg, Tim Dart – CM Auction Team

Key Messages

Delivery starts Oct for Secondary Trading

End October deadline for volume reallocation

Finalising system readiness for end May

You will need to provide your contact detail so we can

publish for each CMU (on EA register) a contact detail (with

and without agreements)

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Key Messages


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ACTION: You will need to provide your contact detail so we can publish for each

CMU (on EA register) a contact detail (with and without agreements)

Guidance Documents

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Guidance


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https://www.emrdeliverybody.com/Capacity Markets Document Library/Secondary Trading Guidance 25 Jan 2017.pdf

https://www.emrdeliverybody.com/cm/home.aspx

Tell us what you think ….

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Tell us what you think…


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Metering Assessments

If you have any questions about the content of this guidance document, please

contact the EMR team at:

[email protected]

+44 (0) 1926 655 300

Contact

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mailto:[email protected]