6 The distinction between ‘futures’ and ‘forward’ markets in the context of the GB electricity market is that a forward trade is a trade for physical delivery, while a future trade is a financial contract written against a reference price. Forward trading is more prevalent in GB, while futures trading is more prevalent in the Australian NEM 10/10/ · The second is that no system is perfect, so that any system of electricity trading is likely to need periodic adjustment and reform. The major virtues of NETA are twofold: that NETA moves the electricity market much closer to that of a normal market; and that it puts in place a governance structure that allows for relatively easy adjustment and blogger.comted Reading Time: 10 mins 29/07/ · The supply of electricity to UK businesses and homes is a complicated process but put simply electricity is generated and used in real-time with the trick being to balance the generation to meet the required supply demand. In this article we explain how electricity trading blogger.comted Reading Time: 3 mins
Policy and regulatory programmes | Ofgem
Below is the draft of a lecture given on 10th October as part of the 'The Beesley Lectures: Lectures On Regulation Series X ' organised by Professor David Currie of the London Business School and Professor Colin Robinson of the IEA. This is reproduced with the kind permission of Professor Uk electricity trading system. This paper argues that currently British migration laws are skewed against economic migrants in a way which is harmful both to the migrants themselves, and also to the UK population.
Below is the draft of a lecture given on Tuesday 24th October as part of the 'The Beesley Lectures: Lectures On Regulation Series X ' organised by Professor David Currie of the London Business School and Professor Colin Robinson of the IEA. This is reproduced with the kind permission of Professor Robinson.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information. Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns.
These cookies track visitors across websites and collect information to provide customized ads, uk electricity trading system. Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc. Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features, uk electricity trading system.
Undefined cookies are those that are being analyzed and have not been classified into a category as yet. Skip to content. The New Electricity Trading Arrangements in England and Wales. The Beesley Lectures: Lectures on Regulation Introduction My task this evening is to review the new electricity trading arrangements NETA which will come into force quite soon.
This uk electricity trading system cannot be that of an objective outsider, since my role has more that of an insider. I sense that my role is more that of accomplice than objective observer.
Uk electricity trading system, tonight I wear my academic hat. My aim, therefore, is to step back from the fray and provide an objective account of the new arrangements.
How successful I am in that I leave to uk electricity trading system to judge. May I make one final point before plunging into the substance of what I have to say. This longstanding lecture series was the brainchild of my late colleague, Professor Michael Beesley, after whom the lecture series is now named.
Michael was the grandfather of the British regulatory model, and a major influence on many aspects of its practical operation, uk electricity trading system. He was also an important influence on the reform of electricity trading, serving as Economic Adviser to Ofgem on NETA, working closely with Eileen Marshall and her team.
I well remember Michael just a few weeks before his death in animated discussion about the details of the reform. We shall miss his contribution this evening, but it is apposite that this first lecture in the new Beesley lecture series should be on the reform that was so close to his heart just before his sudden and unexpected death. The structure of this paper is as follows.
The first part addresses a key issue concerning the Pool arrangement: whether the problem of generator dominance in the Pool arises from the degree of concentration in generation, or from the market rules. The former would point to the need for divestment; the latter for changing the market rules. I argue that, although both matter, reform of the market rules is crucial to delivering a well-ordered market.
I then go on to review some other areas of controversy, both past and continuing. Some of these are issues on which I think the answers are clear-cut; others are ones where we may well need to learn from experience and allow evolution. I also consider those issues that will need to be addressed in the future. Finally, I reflect on two questions: what are the main achievements of the new arrangements relative to the old; and why is it that reform has been pushed through successfully on this occasion, whereas in the past it has been ducked, despite the overwhelming evidence of the need for change?
Two basic ideas, both learnt from Michael Beesley, have underpinned my thinking on NETA since I got involved in electricity trading reform. The first is that, on the whole, market relationships work much uk electricity trading system than any form of regulation or administered uk electricity trading system, not least in promoting innovation and change.
The second is that no system is perfect, so that any system of electricity trading is likely to need periodic adjustment and reform. The major virtues of NETA are twofold: that NETA moves the electricity market much closer to that of a normal market; and that it puts in place a governance structure that allows for relatively easy adjustment and change.
In both respects, it represents a major advance on the Pool. Industry Structure versus Market Rules The deficiencies of the Pool arrangement are well known and require little rehearsing. The arrangement was put in place just prior to privatisation to provide a rudimentary market mechanism whereby a privatised and decentralised electricity industry could operate in a way consistent with the need to maintain balance on the network and subject to the physical laws governing electrical systems.
Essentially it consisted of grafting part of the previous centralised control system onto the market system. Generators were required to bid into a centralised market the Pooland the system operator NGC used the old computer programme GOAL to schedule generation to match demand in a supposedly efficient manner given the information in the bids.
Those who put this arrangement in place generally saw it as a quick fix to ensure that a privatised and decentralised system could function, uk electricity trading system. They thought it would quite quickly be replaced by a more sophisticated arrangement, uk electricity trading system.
However, such change was impeded by the structure for the governance of the Pool arrangement put in place at privatisation. This was a mutual structure, relying on near consensus to effect change. The obvious difficulty with such an arrangement was that reform in the general interest could be blocked by vested interests. In practice, although there was some evolution, as GOAL morphed into Super-GOAL, it was quite limited. This was a severe weakness of the way electricity privatisation was effected.
In defence, one can perhaps note that few appreciated at the time just how strong would be the vested interests against change. These vested interests came from the ability of the large portfolio generators to manipulate the Pool price. This has been well documented in a number of uk electricity trading system, and requires little reiteration. See, for example, Armstrong, Cowan and Vickers for an early discussion, as well as Von der Fehr and Harbord,Wolak and Patrick,Brealey and Lapuerta,and Wolfram, The interesting question concerns the source of this market power.
Two different sources are usually identified: dominant market positions; and the specifics of the Pool rules. There is clearly a lot in both views. At privatisation, the generation market was dominated by the two big players, National Power and PowerGen.
For most of the period since privatisation the market shares of these companies have been a source of concern. Now overall market shares are appreciably lower, uk electricity trading system, but the issue remains a live one. That is partly because the big generators continue to have large market shares in the sub-market for mid-merit and peaking plant, which generally determines the uniform Pool price System Marginal Price that all generation is paid.
Whether this sub-market dominance would be of such concern if it did not set the overall market price is less clear. Thus the issue of dominance may well uk electricity trading system a product of the Pool rules, and this certainly helps to explain why in this market concerns about dominance arise at levels of market share that in other markets would not attract much interest.
This last point is a rather crucial one, and deserves more discussion. Some commentators have argued that the issue of dominance is the key in respect of generation, uk electricity trading system, and that by focusing on trading arrangements NETA is missing the main target. On this view, it has been the gradual divestment by the large generators that has been key in bringing greater competition to the wholesale market, so that the new trading arrangements are a side-show.
I disagree profoundly with this view, because it ignores the important influence that trading arrangements have on the scope for collusion, whether overt or implicit, in price setting. The reason why relatively low market shares in this sector go together with concerns over dominance is that the Pool arrangements have uk electricity trading system collusion. NETA, by contrast, should discourage it. Let me develop this point first in the context of the Pool.
The essential feature of the Pool is and I can still use the present tense that in bidding generators are essentially dealing with a computer programme, GOAL or son of GOAL. Uk electricity trading system course, the outcome of their transactions depends on how other bidders interact with the same programme; but nonetheless all transactions are mediated through GOAL, uk electricity trading system.
Not surprisingly, smart individuals playing repeatedly can hit on strategies certain to be mixed that systematically beat GOAL. The benefits of such strategies accrue to generators in the form uk electricity trading system of a higher System Marginal Price or other payments eg capacity paymentsand the costs fall on customers.
Note that in developing this argument I have said nothing about the particular trading rules within the Pool. I could engage in a long digression on the many different and clever ways in which sophisticated bidders can take GOAL and customers to the cleaners, but I do not propose to do so. For my point is much more general: almost irrespective of the form of rules used by the computer programme at the heart of the Pool responsible for scheduling, smart people will learn the optimal way to outwit it.
And since all uk electricity trading system are playing with the same programme, they will alight on similar types of strategy for winning. In effect, the programme acts to co-ordinate the different players, encouraging and sustaining a form of parallel behaviour to the detriment of customers. Such parallel behaviour is normally banned under the UK Fair Trading Act as a complex monopoly. It greatly amplifies the impact of strategic behaviour. What is certainly undesirable when carried out singly becomes totally unacceptable when generalised.
Now, of course, I have slightly overstated my case. Those with some knowledge of auction theory may argue that it is possible to devise a set of optimal rules for bidding that elicits the optimal price, and that a Pool that embodies such rules will not suffer from the defect that I have just been discussing. I will come to a key argument against this proposition in a moment. But first note an implication of the current line of argument.
Any deviation from the optimal rule is likely to be exploited by bidders uk electricity trading system the detriment of customers. In this respect, a compulsory Pool arrangement is unlikely to be robust in its performance, uk electricity trading system. This is a serious deficiency once one notes the complexity of devising an optimal set of auction rules for electricity. The theoretical models assume, for understandable reasons of theoretical tractability, that electricity is a homogeneous commodity, at least within each period of trade.
Yet it is not. Electricity supplied at different points of the grid entails different transmission losses, and more importantly has quite different value because of transmission constraints.
Unless the trading period shrinks to an instant, electricity supplied at different moments within the trading period has different value, depending on the demands on the system.
Acceptance of generation from one plant for one period of trade may well necessarily entail acceptance of supply for adjacent periods because of inflexibilities in turning generation on and off, and these characteristics differ from plant to plant.
I uk electricity trading system no auction theorist, but I guess that the resulting interdependencies between auction periods greatly complicate the design of optimal auction rules. Resulting sub-optimalities in design will then give rise to the problems that I have been discussing.
Market design for electricity – Comparing the US and EU - Fabien Roques
, time: 8:20How Does Electricity Trading Work?
29/07/ · The supply of electricity to UK businesses and homes is a complicated process but put simply electricity is generated and used in real-time with the trick being to balance the generation to meet the required supply demand. In this article we explain how electricity trading blogger.comted Reading Time: 3 mins 31/12/ · The UK government has concluded a Free Trade Agreement with the EU to come into effect following the transition period, ending 31 December This agreement provides a Estimated Reading Time: 1 min 10/10/ · The second is that no system is perfect, so that any system of electricity trading is likely to need periodic adjustment and reform. The major virtues of NETA are twofold: that NETA moves the electricity market much closer to that of a normal market; and that it puts in place a governance structure that allows for relatively easy adjustment and blogger.comted Reading Time: 10 mins
No comments:
Post a Comment