Market participants range across the entire length of the power sector value chain, from generators to retailers (Table 7). As of September 2018, there were 514 active participants in ISO New England.9

Table 7. Institutions and market participants

Nord Pool

The Nordic power market is widely viewed as one of the most successful power markets in the world. Today it exists as part of the integrated European market coupling effort.

Source: Nordic Council of Ministers (2018), Nordic Energy Statistics 2018; Nord Pool (2018), 2018 Annual Report.

Nord Pool is one of several exchanges currently active in the European market coupling. As a result, in total Nord Pool has approximately 380 members from 20 countries. Membership is varied, including large utilities, municipalities, end consumers, producers, retailers, brokers, start-ups and small businesses.

Nord Pool’s buy-side volume for the Nordic markets only was 367 TWh in 2018, which means that the market share in the Nordic area, compared with consumption, was approximately 90% in 2018. The rest of the trading is done bilaterally outside Nord Pool. The day-ahead market is the most liquid, with approximately 500 TWh traded. The day-ahead market is complemented by a financial forward market in the Nordics which is run by Nasdaq OMX Commodities. Consumers and producers use the financial market for risk mitigation if they do not wish to be exposed to the day-ahead price volatility.

9 A handful of these participants are involved only in regulatory and management aspects, such as state public utility commissions. To give a sense of the number of external participants in the market, 39 are Canadian, including entities such as Hydro Quebec, Brookfield, Emera and numerous Ontario-based companies. The membership list is available at www.iso- ne.com/participate/participant-asset-listings/directory.

58

Governing agreements and regulation

One reason the Nord Pool market has succeeded in organising a single market across a number of (often quite varied) countries is because it is regulated based on principles, not detailed rules. The Nord Pool market licence is just five pages and lists only a set of principal requirements and framework for the operation. Detailed rules do, of course, exist, but under a principles-based approach, market rules may be adjusted to reflect changing circumstances or new ideas, so long as those adjustments are consistent with the governing principles.

For example, one key requirement in the Nord Pool exchange rules is that every market participant at Nord Pool post collaterals to be allowed to trade. This protects both the power exchange and the market participants from counterparty risk in the markets. The size of the required collateral, however, is determined by the market participants’ trading behaviour, and thus it changes over time.

Nord Pool has been granted a cross-border trading licence from the Norges Vassdrags – og Energidirektorat (NVE), the Norwegian Water Resources and Energy Directorate. In addition, each of the Nord Pool countries (as with all other EU countries) mandates TPA (that is, all market participants are granted equal access to the grid so long as they comply with the appropriate set of rules and technical requirements). Practically speaking, this means that the TSOs cannot block market participants from connecting to the grid, and therefore must allow them to participate in cross-border power trading.

The European network codes play a central role in the rules governing power trading. The network codes set requirements for nearly all aspects of the European power system, and as such act as the target model for the European power markets. This includes regulations that directly impact cross-border power trade, such as capacity allocation and congestion management (CACM) and rules on transparency (Figure 37).

Figure 37. Nord Pool rules and regulations related to power trading

Note: REMIT= Regulation on wholesale Energy Market Integrity and Transparency; CACM = Capacity Allocation and Congestion Management Source: Nord Pool.

59