Full issue - Ministère de l'énergie et des mines

ELECTRICITY ELECTRICITY TRANSPORTATION
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Energie & Mines
38
Regardless of the type of market, we
find certain constants. This concerns :
■ Third party access to the network
■ The benchmark price
■ The existence of a regulator
■ The independence of the network’s
management (compared to the
actor(s))
■ The scope (link with the System
Operator)
As a rule of thumb, two large types of
market dominate :
■ The “Pool” type markets
■ The “Stock” type markets
Of course, depending on the experience
of each involved, and the specificities
of a country within the same type,
we find several variations :
■ The “Pool” type markets: Bond markets
– these types of markets are mainly
found in North America (PJM, XX-
ISO, etc.), in Australia, in Spain and in
the UK – first version. These last two
countries are in the middle of changing
and are moving towards “Stock” type
markets.
■ The “Stock” type markets: Voluntary
markets – these are so-called “Spot”
markets, particularly in Europe (APX,
PowerNext, etc.)
■ In both types of market, specific
transactions between players may be
made; these are bilateral contracts or
OTC (Over The Counter) contracts.
Before making a brief description of
how these markets operate, we need to
point out :
■ Today, and due to the experience gained,
the tendency is towards developing
“Stock” type markets. A lot of
“Pool” type markets are in the process
of changing towards the “Spot” type.
■ The role of the Electricity Markets is
not to "lower” the prices of energy, as is
the custom to think, but to give a
benchmark price for energy, which
enables the different players to be able
to position themselves. This is why, in
this type of market, dealing with 5 to
10% of the total energy which circulates
in a network is amply sufficient.
Nevertheless, we will always look for a
greater market share insofar as it
increases turnover and adds more credibility
to this market.
november 2005
Regardless of the type of market, it is
essential for two elements to be present :
■ A measurement system (quick, reliable,
automatic and accepted) for the
energy produced or consumed by each
player involved in the market.
■ Capacities to succeed in the liquidations
of transactions between the
players (role which is very often devolved
to the Market Operators). In the
case of our country, the problem of the
banking system’s performance will be
surely posed as a precursor to a performing
market system.
As a rule of thumb, all these markets
are based on simple rules in their operating
and strict rules in their application.
No interference outside the market
and outside its rules is accepted.
The regulators, when they exist, supervise
these questions. We may cite the
main ones :
■ Total transparency: all the transactions
will be made clearly, and can be fully
audited – a posteriori – if necessary.
■ Impartial neutrality of the body responsible
for the operating of the market, i.e.
the Market Operator with, as a corollary,
strict respect of confidentiality.
The latter, in the opinion of a lot of
experts, is a critical point which must be
guaranteed at any price. Confidentiality
does not only concern the Market
Operator, but also the other structures
such as the Manager of the network and
the System Operator.
■ Equality and Equity of treatment, with
no player having a dominant position or a
capacity to disrupt the market.
■ The obligation to strictly respect the
commitments: i.e. existence of sufficiently
clear and fully comprehensive operating
rules, as well as a guarantee system
enable all the transactions to be purified
which are made in the market.
All the markets – in particular the most
current ones: Day Ahead Market – operate
according to the principle of the
fixing :
■ Bids and offers are expressed by the
market players depending on a very
precise timing and for each maturity.
■ At the close of offers, we determine
the price of energy for the maturity:
this is the fixing.
■ All the offers to the left of the fixing
point are retained, and the others are
excluded.
■ The market prices are displayed - this
is the benchmark price.
On the other hand, if we consider the
overall operating of the electric system,
the markets have to offer other services,
the most important of which are :
■ The balancing markets.
■ The network losses’ markets – essential
for the network managers who find
a means here of minimising the costs of
the energy consumed by the network
which they are responsible for.
■ The reserve markets necessary for
the equilibrium of the Productionconsumption
system.
■ The “black start” services.
■ …
■ And now, the so-called "Futures"
markets, i.e. the future weeks and
months markets.
The operating of these so-called secondary
markets – may be done according
to the principle of the fixing or according
to other principles; for example:
the PAB (Pay As Bid).
The market Operator
This is the structure which is responsible
for the operating of the electricity
market. It is, generally, a private company
and/or a company having sufficient
independence in relation to the
market players and other bodies.
It must have the following essential
characteristics :
■ Total independence from the market
players or any other supervisory body.
■ Guarantee perfect confidentiality on
the market transactions.
■ Strictly respect the market rules.
■ Not itself be a player in this market:
principle of neutrality.
Its role consists of :
■ Coordinating the market: registering
the market players
■ Receiving offers
■ Determining the fixing (MCP :
Market Clearing Price)
■ Controlling the execution of market
orders
■ Liquidating the transactions made on
the market
■ Offering other market services
To fulfil this role, the Market Operator
may have :
■ Means of communication and
exchanges of information with the dif-