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23 January 2014 09:00

No. 04/2014 - Important information for members regarding NWE price coupling launch 4 February 2014

Nord Pool Spot wishes to remind all members of important changes which take effect from the implementation of the North-Western Europe (NWE) day-ahead price coupling project on 4 February 2014.

NWE is the first implementation of the Price Coupling of Region (PCR) solution, developed by seven European power exchanges, and is a significant step towards an integrated European power market.

Rules and regulations updated
Nord Pool Spot has updated all rules and regulations in accordance with the NWE project and informed members of this in Exchange info no. 03/2014 – ‘Amendments to Nord Pool Spot’s regulations – general terms and trading appendices’.

Daily publication of Elspot area prices and Elspot system price
After NWE go-live normal publication time to the market for Elspot prices will be 12:42 CET. This is the common price publication time for all participating power exchanges. Nord Pool Spot will continue to publish an operational message before publication time that announces “Preliminary Elspot prices expected at 12:42”.

After publication at 12.42 CET there will be a 10 minute verification process by the Transmission System Operators (TSOs) during which the prices and cross border flows will be confirmed. When final confirmation has been received from all involved parties, a confirmation message will be given to the market. Nord Pool Spot will publish an operational message reading ‘Elspot Prices are confirmed’. This message will normally be published within 10-15 minutes after sending the first message.

This verification process is already live in the Central Western European region. There has never been a case where results have been rejected after preliminary publication.

Since Elspot area prices and the system prices are not calculated in the same process, if issues related to calculation of the system price should occur, area prices will be published independently to comply with nomination deadlines at the TSOs.

Nord Pool Spot aims at having all prices published simultaneously. As always, Nord Pool Spot will keep members informed through operational messages regarding publication times.

Flexible hourly orders fully available
Flexible hourly orders will be fully available for all members from 4 February. The product specification and regulations related to this product are identical to those valid prior to their suspension in August 2013. Members can read more about all Nord Pool Spot products in our Product Specification and Elspot market regulations.  

New algorithm - Euphemia
The Price Coupling of Regions (PCR) solution will be introduced using a new common algorithm, called Euphemia. The Euphemia algorithm is built on the same principles as our current SESAM algorithm. Bids and offers are matched subject to optimisation of social welfare respecting network constraints and conditions in the orders. As a result, the change of algorithm has no influence on the calculation of prices from the existing algorithm SESAM. The new algorithm respects the specific features of the various power markets across Europe. A detailed specification is published here.

For the purpose of harmonisation, a common selection rule is agreed between the parties in the Euphemia algorithm in the event of price indeterminacy due to vertical overlaps of the purchase and sales curves. The algorithm will pick the mid-point of the intersection, to be fair to both buyers and sellers in such situations. This is a change from the selection rule currently used in SESAM, where the point closest to zero is chosen.

(Price indeterminacy occurs in one bidding area when there are at least two feasible solutions with different price, but with the same matched volume, the same block selections and the same social welfare. As all solutions have identical social welfare, the algorithm chooses the price based on a defined selection rule.)

Members should note that this new rule is expected to come into use only in very rare cases. The reason is that generally in the situation of indeterminacy in an area the price is determined based on the orders in neighboring areas.

The Euphemia algorithm used at launch may, in exceptional situations, select the highest price from the vertical overlap of the curves instead of the mid-point price. Although this is low risk, this may become the case in single hours. This potential issue is fixed in the new version of the algorithm. As of 22 January 2014, an updated version of the algorithm has been thoroughly tested and is in the process of validation.

Full and partial NWE decoupling scenarios
A full NWE decoupling is a situation where it is not possible, for a specific day, to allocate the cross zonal capacities (CZCs) via the implicit allocation for the internal Central Western Europe (CWE), for Great Britain (GB), for the CWE – Nordic interconnectors and for the CWE – GB interconnectors. Internally, the Nordic/Baltic area will still remain coupled.

A partial decoupling is a situation where there is no implicit allocation of cross zonal capacities (CZCs) for one or more border(s) or interconnector(s), but all other borders/interconnectors remain coupled.

In case Nord Pool Spot is decoupled, the Elspot market will be reopened for all members for a period (normally 10 minutes) announced by Nord Pool Spot. If the market is reopened, Elspot orders can be modified.

Procedures for both partial decoupling and full decoupling scenarios are described in detail here.

More information
On the Nord Pool Spot website, members can find more information and specific documentation related to the NWE project.

About Nord Pool Spot
Nord Pool Spot operates Europe’s leading power markets, offering both day-ahead and intraday trading to its members. 370 companies from 20 countries trade on Nord Pool Spot’s markets in the Nordic and Baltic regions, and on our UK market N2EX. In 2013 the group had a total turnover of 493 TWh traded power. Our markets are operated from offices in Oslo, Stockholm, Helsinki, Copenhagen, Tallinn and London. Nord Pool Spot strives continually to strengthen its business by working with integrity, together with members and stakeholders, to achieve excellence.

Lysaker, 23 January 2014

For further information, please contact: 
Hilde A. K. Rosenblad, Manager Nordic and Baltic Operations, +47 67 10 91 74 
Stina Johansen, Head of Communications, +47 916 50 603 (for press enquiries)


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