Utility Week

28 | 18TH - 24TH MARCH 2016 | UTILITY WEEK Markets & Trading The growth in renewable gen- eration led to an increase in the amount of hedging undertaken by UK traders in 2015, according to a report by Icis. The price reporting firm said over-the-counter (OTC) trading volumes shi€ed from the near to the far curve during the year, with front season volumes fall- ing by 14 per cent year on year and volumes two and three sea- sons ahead climbing by 17 per cent and 13 per cent respectively. The increase in hedging ELECTRICITY Growth of renewables led to increased hedging by traders in 2015 was attributed to rising sales of fixed-rate retail tariffs, tightened supply margins, uncertainty over the carbon price and the growth of intermittent renewable genera- tion, which cannot be relied upon to provide power on demand. Editor of the Icis European Daily Electricity Market report, Jamie Stewart, told Utility Week: "The actual physical output had to be traded on the short-term market because they've been very difficult to predict… but that out- put still has to be hedged for… so This week Energy traders need clarity on Remit Market in the dark on regulator's approach to second round of Remit rules, coming in on 7 April The energy market faces uncer- tainty over the enforcement of new transparency rules that come into force next month, OpenLink has warned. The trading so€ware firm said there is a lack of clarity over how lenient Ofgem will be when the second round of Regulation on Wholesale Energy Market Integrity and Transparency (Remit) rules are introduced on 7 April. The first tranche of Remit regulation was introduced by the EU last October. It required energy market traders to submit data to the European Agency for the Coopera- tion of Energy Regulators (Acer) on their exchange-based trades. The second tranche will require traders to also submit data on over-the-counter (OTC) trades – bilateral transactions that take place outside of exchanges. Acer will collect the data, and Ofgem will enforce the rules. OpenLink head of policy, Aviv Handler, told Utility Week it is not clear how quickly the new rules will be enforced: "Who can say whether somebody who fails to report would be sanctioned by the regulator on day one?" Handler also called on Acer not to leave any further updates on how to report data to the last minute. Acer said it won't change any of the rules before 7 April "in order to smoothen the reporting process for the stakeholders". When asked by Utility Week to comment, Ofgem responded: "Market participants have a responsibility to comply with the rules coming in next month. If we find anyone is in breach of Remit requirements, we will carefully consider the individual circumstances." TG ENERGY Energy UK calls for 'level playing field' for interconnectors Interconnectors need to be able to compete "on a level playing field" with local power sources, according to Energy UK's director of generation. Barbara Vest told the Scottish Renewables conference in Edin- burgh earlier this month she had been surprised at the strength of support for interconnectors when conducting an industry survey recently. However, she said concerns had been expressed about the UK becoming over-reliant on interconnectors and over unfair competition with native generators: "We attract imports from Europe which displace our indigenous supplies and then at some point in the future we get a long cold spell, no wind, no sunshine, or something happens abroad… and those flows just don't happen." Vest said the government needed to "make sure that every- body's in competition on a level playing field with each other, so European imports to the UK aren't subsidised beyond where they should be". Speaking at the conference later in the day, National Grid chief executive Steve Holliday said Britain looked likely to become increasingly reliant on such power links. He said the UK was projected to make use them throughout three of the company's four future energy scenarios. Last year, the government announced that interconnectors would be eligible to participate in the second capacity market auction despite opposition from big energy companies. ELECTRICITY Scottish Islands to provide 5% of British power by 2030 Renewable generation on the Scottish Islands could supply as much as 5 per cent of Britain's electricity by 2030, according to a report by the Scottish government and management consultancy firm Baringa. The report suggests that the Western Isles, Orkney and Shetland could supply up to 5 per cent of Britain's total electricity demand by 2030 through further deployment of renewable energy, and invest- ment in grid infrastructure and generating assets. It predicts that renew- able generation on the Islands could grow to 1GW by 2020 and another 1.4GW by 2030. Scotland as a whole accounted for around 30 per cent of total UK renewable electricity generation in 2014 – a record high – 12.4 per cent up from the previous year. Traders will have to submit data on OTC trades come into the system… then you're also going to get this increase in forward curve liquid- ity. You would also expect an increase in short-term liquidity, but not necessarily relative to the curve." Overall OTC volumes during 2015 decreased by 4.2 per cent when compared with 2014. The report said this was partly down to a dispute between Russia and Ukraine in the second quarter of 2014, which had threatened gas supplies to the rest of Europe. UK TRADED VOLUMES Source: ICIS 300 250 200 150 100 50 0 Season +1 Season +2 Season +3 Season +4 Season +5 Season +6 2015 2014 that's where the [power purchase agreement] market comes in. "As you get more renewables TWh

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