ECC has a high level of expertise in the physical settlement of grid-bound energy (power, natural gas) and energy related products (emission allowances).
ECC is responsible for physical settlement of traded or registered contracts. Nomination includes scheduling of local markets of ECC’s Partner Exchanges and the nomination of cross-border power deliveries as part of various European market coupling initiatives. In this context, ECC assumes the role of the crossborder shipping entity, thus contributing to the further integration of the European electricity markets.
Furthermore, ECC is linked to the Union Registry to perform the delivery of emission allowances. Additionally, since 2016, ECC is connected to the French Registry for Capacity Guarantees.
ECC Physical Settlement
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Power and Natural Gas Process
Role of ECC and ECC Lux
As a Central Counterparty, ECC assumes the role of a market participant in the grid of the transmission system operators (TSOs). Physical Settlement is provided by ECC Lux which has concluded a balancing area agreement with all major European TSOs.
Nomination & Scheduling
In the French RTE market area and in the natural gas market, single-sided nomination is used. This means ECC is authorised to fulfil the physical nomination on behalf of each trading participant. In all other cases, the trading participant also has to submit a schedule.
ECC nominates the net position in the relevant product to the respective TSO within the timeframe specified.
Prerequisites and Responsibilities
Trading participants opting for physical settlement need a balancing area agreement with the relevant TSO. Alternatively, a third-party agreement permitting access to a balancing area can be concluded. For further details, please refer to the section Access to ECC.
From a legal perspective, Clearing Members are not involved in the physical settlement process as delivery is processed by ECC Lux. They act as a payment agent and guarantor.
The TSOs guarantee grid security through balancing of nominated amounts. In case of a mismatch, the special rules of the relevant transmission system operator apply.
ECC supports the vision of an integrated cross-border wholesale energy market in Europe. Together with its Partner Exchanges, network operators and trading participants, ECC is involved in various projects for connecting European electricity markets, the so-called Market Coupling.
Market Coupling Approach
By using the available transmission capacities between the different market areas, the following goals can be achieved:
- minimising differences in prices between two or more market areas
- ensuring convergence of power prices across regions
- reducing price volatility
- providing access to cross-border capacities.
through this, Market Coupling maximises the social welfare and supports the creation of a pan-European market area for power.
Role of ECC
Within the scope of Market Coupling, ECC cooperates closely with the European Power Exchange EPEX SPOT, which covers the German, Austrian, Swiss, French, Dutch, UK and Belgian market areas and the connected TSOs. With its connection to major TSOs across Europe and its expertise in providing physical settlement of power trades, ECC promotes the integration of regional markets towards a Europe-wide electricity market. As a dedicated clearing house, ECC provides clearing and settlement services for cross-border energy flows. It nominates the cross-border electricity flows to the transmission system operators (TSOs) and settles trades for all counterparties involved. ECC contributes to the overall welfare of the European power consumer / producer community by bundling the overall market liquidity and increasing the efficiency of the usage of cross border capacities.
Benefits for Suppliers and Customers
Market Coupling refers to the implicit day-ahead auction of cross-border capacities
- fair and efficient access to cross-border capacities,
- a reduction of price volatility and
- the convergence of power prices across regions.
ECC Clearing in the Framework of Market Coupling
Scheduling for Market Coupling
Emission Rights Process
Advantages of Settlement via ECC
ECC offers substantial expertise in the physical settlement of EUAs and CERs. Our external and internal account structure allows primary- and secondary-market EUAs to be segregated. ECC provides maximum security by guaranteeing the legal origin of the primary auction share of a given member’s EUA holdings.
A member can request a transfer of its holdings to any registry account at any time. The Registry Transfer Request has to be entered via the ECC Member Area. It needs to be approved according to the principle of dual control.
ECC checks the request against the members' actual holdings and subsequently initiates the transfer. As soon as the member has entered a Registry Transfer Request, its holdings are blocked. The account balance is updated after s successful transfer.
Prerequisites and Responsibilities
Before trading, the certificates have to be delivered to the ECC registry account. Trades are fulfilled by means of transfers between ECC's internal delivery accounts. There are no registry transactions.
Members have to ensure that they hold sufficient volumes in their account to fulfil their obligations on the delivery day. The expected balance of holdings is monitored. ECC contacts the member in case of a negative value. In case of non-delivery or a delivery default, ECC cancels the spot transaction or initiates a buy-in procedure.
After payment, the respective number of emissions is debited from the seller's account and the buyer's account is credited with said number of emissions. Internal account transfers are only possible from the primary market account to the secondary market account.
French Capacity Guarantees
ECC offers substantial expertise in the physical settlement of French Capacity Guarantees and has been a reliable partner in this market since 2016. The settlement system is connected to the French Registry for Capacity Guarantees in order to ensure an efficient and fast delivery to the customer accounts.
For the physical delivery of capacity guarantees to your customer account in the RTE Registry no Registry Transfer Request (RTR) in ECCs Member Area has to be created. All capacity guarantees sold are transferred by ECC after the auction to the respective buyer account with a delay of 26 hours. However all guarantees unsold are transferred back to the seller account on the day after the auction immediately
Delivery Reports provide an overview of all physically settled trades to the members. More detailed reports can be accessed via the ECC Member Area.
Each report contains separate data for
- buy and sell transactions
- traded products
- different market areas
For the purpos e of physical delivery, positions are always netted out.
Power and Natural Gas
- Report for the previous delivery day
- Dispatch between 7.30 and 8.00 a.m. CET and at around 10.00 a.m. CET on weekends
- Report for the next delivery day
- Dispatch around 2 p.m. CET every day