Generators slam Romanian plan to scrap flexible electricity contracts

Romania is to ban the trade of flexible electricity contracts from 1 January 2015, it emerged on Tuesday. But the controversial move could plunge renewables producers into major difficulties, traders have warned.

The bill, published on energy regulator ANRE’s website on Tuesday, adds further state control to the wholesale market and eliminates the possibility of trading a non-standard contract on one of OPCOM’s bilateral platforms. Some sources said this could discourage green energy producers from forward trading.

The platform was the only remaining option for such flexible contracts. Power exchange OPCOM operates three platforms for electricity trading: the OTC platform and two bilateral platforms, one of which already accepts only standard contracts.

The flexibility of a contract includes the delivery period and the volume which in some cases includes variations. For example on 8 August, Alpiq held a tender offering electricity with a volume between 0.001/MWh and 1MWh between 19 August 2014 and 18 August 2015.

The last shock ban on trading outside OPCOM saw the Romanian wholesale electricity market grind to a halt for two years ( see EDEM 18 September 2012 ) which did not ease until OPCOM launched its OTC platform in March.

Lack of flexibility

Market participants have leapt to voice concern over the severe impact that they say the regulatory change will have on green energy producers. “It will kill the already non-existent market,” said one trader.

The flexible contracts were a vital piece in the trading jigsaw for renewables installations, especially wind and solar generators, for which output volumes are often volatile. Meanwhile the major thermal power producer Complexul Energetic Oltenia (CEO) also often opted to trade flexible contracts. But these producers will now see this option swept away

“The implications [of the bill] are major, concerning imbalance, banks and cash flow,” a second source active on the market noted.

A third source also slammed the measure, saying it could discourage forward trade, with activity from renewables producers on other platforms limited. “It is a liquidation measure aimed at the energy business and wholesale trading,” he insisted. “This will mean just one less country on the trading map.”

The regulator had not commented on the matter by the time of publication.

Exchange liquidity

The regulatory change could increase day-ahead liquidity on state-owned power exchange OPCOM, traders pointed out. This is because volumes for sale on a day-ahead basis are more precise because the generation forecast for renewables installations is more accurate. “Those that have short-term open positions would need to find a new solution. Everyone will sell fixed quantities at fixed prices,” one trader commented.

Similarly, intra-day trade could also see a boost in liquidity, if positions are not covered on the day-ahead market, ICIS understands.

One trader pointed out if there is a boost in liquidity on the day-ahead market, OPCOM would also see an increase in profits from exchange fees.

The bill could well be perceived as the latest hit on the renewables sector. Green energy producers saw the allocation of a portion of their green certificates postponed until 2017 and 2018 in July last year ( see EDEM 5 June 2013 ), and a further subsidy cut followed in January 2014 year ( see EDEM 18 December 2013 ). Finally, a lower-than-expected quota for green certificates fed into oversupply causing prices on the certificates market to plummet to the minimum of New Lei 130.69/MWh ( see EDEM 17 June 2014 ). Sophie Udubasceanu