transforming the danish retail market

Transforming the Danish retail market

Søren Dupont Kristensen, Vice President, Energinet.dk

Electricity Market Day 2016

About Energinet.dk

The danish retail market transformationIn 2009 the Danish TSO, Energinet.dk, received an assignment from the Danish government, to develop a datahub for the danish retail market.

But we are not the only ones…

Datahubs are introduced to all Nordic countries between 2013-2020.

Strong Nordic cooperation ensures coherent retail market development towards common goals and objectives.

Nordic retail markets – guiding principlesA larger market to support competition and innovationA regional harmonised retail market with low entry barriers will reflect real costs of energy and support innovation of new products and services for the consumers.  

Easy and equal access to data to support transparent marketsEasy and equal access to data as a basis for a transparent retail market in which consumers can make informed choices, and where suppliers and third parties can develop new products and services.  

Linking wholesale and retail market to support security of supplyEnabling increased demand response and consumer flexibility to support cost-effective integration of new-renewable energy sources.

• 3.3 mio. Consumers

• Full liberalisation in 2003

• Central data management model in 2013

• Supplier Centric Market design in 2016

• Smart meter deployment (1,8 mio. in 2016 – all consumers in 2020)

The Danish retail market reform - acceleration of a liberalised retail market

Consumer

DataHub

Supplier Centric Model

Non-regulated pricesHourly

settlement of small

consumers

Increased

transparency

(elpris.dk)

Deployment of smart meters

2016

2013

2016

2016

2016

2020

DataHub - central data management

Ensure a level playing field for all market parties/suppliers through:• Standardized processes for registering and distribution of market data• Reduced entry barriers for new suppliers• One point of entry for changes of supplier

Go-live: March 2013

5. Datahub is "counterpart" for supplier changes and move in/out – faster, more efficient

7. International integration

8. Reduced industry costsRef: Elhub kostanalyse

1. Market neutrality – equal treatmant - fair competition

2. Single source for all metering values and responsible for distribution

6. Aggregator for all grid areas – input to balance settlement

3. High quality and efficient distribution of metering data (common QA standard and benchmarking)

4. Market development through one interface (Datahub towards Suppliers)

9. Better access to data for energy services (3rd parties and ESCO's)

10. Secures privacy and data protection

Datahub – 10 value propositions

Datahub

Supplier centric – new consumer oriented market design

Stimulate innovation through a consumer oriented market design where: Electricity suppliers get 100% customer contact Distribution System Operators become suppliers of wholesale services

(wholesale model) Consumers receive one bill

Go-live as we speak!

Key succes factorsCritical elements for success

Political and regulatory mandate

Clear roles and responsibilities

Strong cooperation and coordination between TSO

and market parties

InnovativeMarketsNon-discriminatory

market access

Incentives for consumers to act

More (and new) products and

services

Consumer convenience

Preconditions

Changing market shares for households

Herfindahl-Hirschman index on a national level 2013Source: Konkurrence om detailkøb af electricitet, Copenhage Economics and Dansk Energi

HHI as a weighted average per grid area 2013-2015Source: Detalmarkedsrapport, Energinet.dk

Mar-13Jun

-13Sep

-13Dec-

13Mar-

14Jun

-14Sep

-14Dec-

14Mar-

15Jun

-15Sep

-15Dec-

150

2000400060008000

10000

Profiled consumersHourly settled consumers

Market concentration per grid areaMarket concentration on a national level

Small increase in supplier swiching

The number of supplier swiches has reached a historical level (7,2%) in 2015.

A further increase is expected after 1. April 2016.2010 2011 2012 2013 2014 2015

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%

Supplier switch, percent of total amount of consumers

Supplier switching rate

Datahub

Market players are finding new ways…

The total number of suppliers registred in Denmark is 70.

An increasing number of suppliers are active in the four largest grid areas more product offerings for consumers

Mar-13

Jun-13

Sep-13

Dec-13Mar-

14Jun

-14Sep

-14Dec-

14Mar-

15Jun

-15Sep

-15Dec-

1520

25

30

35

40

45

Number of active suppliers in four large grid areas

Source: Detalmarkedsrapport, Energinet.dk

More than just gross margins…

Stimulating innovation and the creation of new offerings is a key objective

Competition is contributing to more than reducing gross margins

Source: Konkurrence om detailkøb af electricitet, Copenhage Economics and Dansk Energi

Composition of energy is changing

Linking wholesale and retail markets

Wholesale Market Retail Market

Regional balancing markets

Network Codes (CACM)

Hourly settlementMarket Coupling

Increased price cap in markets

non-regulated prices

Third party acces to data

Supplier centric model - driving innovation

Central Data Management

Aggregators

Framework for distributed flexibility

European/regional driven National driven

Electricity value chain is changing

Transmission DistributionProduction Sales

Energy products &services

What are the new value propositions?

Consumer flexibility- Enable clear price signals to consumers and industries

Solution selling through financial products

Financial products

+ Energy savings

Energy together with hardware and

software?

Market driven digital development and new technologies are game changers

Ekspotential technologies influencing the energy sector:

1. Sensors / automation (IoT)2. Artificial Intelligence3. Electric vehicles4. Solar panels5. Storage of elektricity (batteries)6. Mobile / Cloud solutions7. Open Data / Big Data8. Digitale money (Bitcoins)

New business models

Traditional vs

innovative products

Gap between wholesale and retail markets

Increasning RES technologies with

ZMC

Weak investment signalsLacking consumer flexibility

Electricity Market Disruptive technologies

GAME CHANGER

Liberalised markets

GAME CHANGER

New market partiesGAME CHANGER

DigitalisationGAME CHANGER

Low prices ?New game changers will impact the future market.. but how?

3rd parties

Questions?

Søren Dupont KristensenEnerginet.dksdk@energinet.dk