Greece prepares for pressure as Italian cable is set to return

Greek electricity prices are expected to come under significant pressure as the interconnector to Italy starts testing on Monday and could come back online shortly after. Greek transmission system operator (TSO) ADMIE announced the imminent return of the cable on Friday.

Current pool prices could drop by €10.00/MWh as a result, sources polled by ICIS said, while some impact may be felt on the Turkish market as well.

Six-month-long maintenance started on the 500 MW Greek-Italy link at the beginning of 2014 ( see EDEM 18 November 2013 ). This followed constant limitations and outages, which started with a sudden failure that had forced the interconnector into outage in July 2013.

The Greek TSO ADMIE has previously said that the interconnector will return at full capacity on 15 July ( see EDEM 16 June 2014 )

However, ADMIE’s latest announcement indicates a slight delay in the planned return, with the interconnector now expected online on 17 July – pending successful testing.

Market impact

Sources polled by ICIS expect the cable’s return to have a bearish impact on the Greek pool price, most commonly known as the system marginal price (SMP).

Typically, cheaper Greek electricity flows into the more expensive Italy. However, several factors have changed this dynamic of late. A recent fall in Italian gas prices and high renewable generation availability have pressured prices in the country’s southern region in particular. Combined with the interconnector’s absence, this saw the exchange spot outturn for Saturday’s delivery saw the Greek SMP settle at a €14.933/MWh premium over the Italian equivalent. With such a shift in premium, Italian flows are expected to head into Greece.

Traders expect the cable to weaken the Greek market again, with one of them quoting a possible drop of around €10.00/MWh for weekdays. “This is because 500 MW is 6-10% of the [total] demand,” he said. A second trader agreed and noted: “If 7-10GWh of imports enter Greece on a daily basis prices could be pressured significantly.”

If Greek prices fall below a certain point, the spread to Turkey might shift, the second source added. “If the SMP starts dropping we may see a rise of exports towards Turkey,” he noted. However, he pointed out that he expected the magnitude of the bearish impact to outweigh any strength that could come from higher export demand.

With Greek power prices bolstered, and the Turkish market under pressure, a premium shift boosted bidding interest for capacity at the cross-border monthly auction that took place in June ( see EDEM 19 June 2014 ).Sophie Udubasceanu