Romania emerges as Hungary day-ahead driver – sources

Sophie Udubasceanu

04-Aug-2014

The Romanian Day-ahead electricity exchange could be acting as a driver of Hungarian prompt prices with recent results showing a correlation between the two countries despite high volatility, sources say.

Hungarian prompt contracts moved in line with the Romanian day-ahead during most sessions in July, latest data shows.

The recent scrapping of the last remaining component of the Romanian electricity export tariff, the co-generation fee, came into force on the 1 July, increasing exports into Hungary ( see EDEM 2 July 2014 ). The move wiped some €4.00/MWh from export costs. Cheaper Romanian electricity flows usually head into more expensive Hungary as well as other neighbouring countries.

The Romanian Day-ahead outturn on the OPCOM power exchange showed signs of volatility in July, driven by swift changes in renewable generation ( see EDEM 18 July 2014 ). Hydropower oversupply accentuated weakness on Romanian prompt prices towards the end of the month because hydro producers were forced to generate amid a high risk of overflow, market sources said.

And additional downward pressure arose in Hungary during the last days of July from a curtailment on a 400MW interconnector between Romania and Serbia.

The loss lead to a 200MW increase in the net daily transmission capacity made available on a Romania-Hungary cable to remove some of the excess Romanian hydro electricity.

“[Romanian imports] could be the reason for the volatility [on the Hungarian spot market],” one trader said.

‘Main factor’

Furthermore some traders said Romania had become a driver of the Hungarian spot market. “It is possible [for Romania to become a driver of Hungary], especially in these times with the rest of the Balkans not exporting so much. Then Romania becomes the main factor,” one source noted.

And he continued, saying while cross-border fundamentals could pull the two prompt markets in line with each other, trading strategies could pull them back apart. “Hungary moves in line, with Romania being lower, then [traders] jump in and it diverges,” he explained.

A third trader said he expected such a result following the scrapping of the export tariff.

One market source claimed it was unclear if Romania was “leading Hungary or vice versa”.

However not all traders agreed on the matter. One source said healthy hydro production and mild temperatures, which capped consumption, had influenced the strength of the relationship between the two prompt markets – but this will not be a permanent feature, he said.

“It’s more a question of how long the hydro reserve will last. The [spot] spread will tighten while there is below-normal load and high hydro reserve. But I still do not see Romania as a [permanent] driver.”

However the 1.75GW net export capacity from Romania to neighbouring countries is influencing markets across the region, sources agreed. Most participants said they expect the day-ahead spread between the two countries to narrow further.

Romania is set to join neighbouring Hungary, Slovakia and the Czech Republic in the 4M market coupling project in November. Sophie Udubasceanu

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