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NWE electricity market coupling launch date call due imminently

12 Nov 2013 17:09:59 | edem

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A decision regarding whether the NWE market coupling project will launch on 26 November as planned will be made in the next couple of days, a spokesman for the EPEX Spot power exchange, one of the partners in the project, said late on Monday.

Initially an announcement was expected before the start of the European Commission-organised Electricity Regulation Forum, known as the Florence Forum, which began on Tuesday ( see EDEM 31 October 2013 ).

Should the project launch be forced back, trading sources told ICIS that IT problems and difficulties with algorithms could be possible sources of delay. “They had problems getting prices on a couple of odd days,” said one source.

A number of project partners had failed to respond to requests for further comment at the time of publication.

The price coupling project will bring together the already coupled central and western European day-ahead markets of France, Germany, Belgium, the Netherlands and Luxembourg, with Denmark, Estonia, Finland, Austria, the UK, Latvia, Lithuania, Sweden and Norway.

One trading source said he expects 10-20% convergence between UK and French day-ahead prices as a result of the market coupling project.

Another trader was unsure. “If there isn’t sufficient depth to the UK auction, there could be price convergence in certain hours. [However] the majority of hours in a year have prices far apart,” he said, indicating that for most hours he foresees little change in terms of price convergence, compared to existing spreads between the two markets.

A third trader also pointed to opaque market information from France as an obstacle to price convergence. “The flow of information from France is so poor. How can you play that?” he said, citing nuclear availability forecasts as an example.

Convergence?

The UK’s carbon price support mechanism, which keeps UK power prices at a premium to those on the continent will be an obstacle to price convergence between French and UK Day-ahead markets after NWE market coupling is introduced ( see EDEM 3 September 2013 ).

ICIS Day-ahead Baseload indices show that the introduction of the carbon price floor in the UK on 1 April this year pushed the UK Day-ahead Baseload premium to the equivalent French figure in April up to an average of €13.00/MWh throughout the month compared to an average of €10.00/MWh the previous month. In February the UK Day-ahead index premium over France was just €2.50/MWh.

Over the past two years, the only time during which French Day-ahead Baseload prices have consistently held a premium to the UK was in February 2012, when extreme cold weather pushed up the French Day-ahead Baseload index as high as €186.938/MWh on 10 February, which compared with €61.33/MWh in the UK. This was caused by France’s greater dependency on electricity for heating.

The spread between the Dutch and UK day-ahead markets, which have been linked by the 1GW BritNed cable since 1 April 2011, has held a similar range since before the introduction of the cable. The UK Day-ahead Baseload index premium to APX Day-ahead prices varied between €0.00-10.00/MWh for most days since early 2011, data shows.

On some days Dutch day-ahead prices were at a premium of between €0.00-4.50/MWh to the UK equivalents, although this has become less common since the introduction of the cable.

According to a presentation published last month by partners involved in the CWE flow-based market coupling project, the next stage of the project will be launched in late June. Beatrice Mavroleon

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