German regulator softens intra-day electricity market reforms

The German energy regulator has bowed to pressure from market participants by putting forward less-stringent reforms to intra-day trading regulations, according to an updated proposal dated 19 November and seen by ICIS on Monday.

Crucially, BNetzA has backed down from a proposed ban on non-asset-backed trading in the intraday market.

As the proposals have recognised, non-asset-backed intra-day trading helps provide liquidity in a market, which is essential for the successful integration of difficult-to-forecast wind and solar power generation.

But open positions will need to be closed 15 minutes before going into delivery unless there is an unforeseen change in the generation and consumption forecast, according to the document.

The day-after market

According to the new proposals, companies on the intra-day market will still be able to nominate positions after delivery to transmission system operators (TSOs).

Originally BNetzA planned a complete stop to what was termed the Day-after market, or the nomination of positions to TSOs the day after delivery, out of concerns that it would allow fraud and endanger system stability.

Traders often use the Day-after market to nominate generation which changed at short notice, such as when power plants trip or when renewable power generation turns out differently to what was forecast.

For example, it allows them to balance an unforeseen long position with an unforeseen short position held by a different market participant.

The original proposal created an outcry among traders who said a ban of the Day-after market would punish them for events that are beyond their control.

Breach

In its update, BNetzA is proposing that a breach of the duties of an intraday trading company would be punished in stages – a yellow card for a first breach, a red card for a second breach – instead of automatically cancelling the right to be active on the German intraday market.

But the regulator does want to retain the right to enforce an automatic ban if it suspects fraudulent behaviour is behind a breach of duties. “In the rare case of a cancellation of the balancing area all market participants, exchanges and distribution grid operators will be informed immediately,” BNetzA said in the text.

Also, the regulator still wants to ban day-after nominations for positions where it cannot be proven they were taken ahead of delivery. This is likely a bid to make generation more predictable for TSOs.

Based on the updated proposal, trading companies would still face an increase in administrative duties. Any change in the generation forecast would need to be reported to TSOs immediately.

A second workshop with market participants is to be held by the regulator on 1 December before a final decision is made. Martin Degen