Renewed competition drives Swiss electricity market discount
Martin Degen
02-Sep-2014
Swiss forward power prices are increasingly falling below equivalent products at the French wholesale electricity market amid a pick-up in competition and increasing Swiss power market liberalisation.
Two companies active in the field – Swiss utility Repower and Germany-based cooperative Trianel – have said they witness increasing interest for services around the sourcing of power and natural gas such as portfolio management and asset optimisation.
The Swiss power market is in an interim stage of liberalisation. Large customers can choose to buy power on the market rather than through long-term contracts.
“A few months ago, we started seeing an increase in interest for [energy] sourcing in particular with regional suppliers in Switzerland,” a spokeswoman for German regional utilities cooperative Trianel told ICIS.
“In particular, in the area of power portfolio management, Trianel is seeing growth,” she added.
Repower said in a statement it too is increasingly providing services for other energy suppliers and major companies. The services include balance group management, extensive trading services, procurement and sales services and support with power plant deployment and portfolio management matters.
The increased competition is likely to put pressure on Swiss wholesale power prices, especially in the ongoing, underlying bearish environment.
For example, when municipal utility Stadtwerke Winterthur opted to source its annual power consumption of 600GWh on the liberalised market through Trianel as of this year, this left its previous supplier with a long position which it needed to sell on at market prices, according to one source.
Contrasting discount
The developments coincide with an increasing discount of Swiss forward power prices compared to their French counterparts in contrast to previous years when Swiss prices either carried a premium or were on par.
This was the case because Swiss companies often imported cheap baseload power from French nuclear plants, while Swiss hydro plants have a relatively high generation cost.
After first trading at €42.30/MWh at the start of this year – just €0.25/MWh below the French Cal ’15 Baseload according to ICIS figures – the Swiss contract last traded at €42.15/MWh on 29 August, which was €1.00/MWh below the closing price of the French contract.
The discount widens on the Swiss Cal ’16 and Cal ’17 Baseload contracts which last transacted at discounts of €2.00/MWh and €2.70/MWh below the French equivalents. Cal ‘17 was compared on 19 August, the last time the contract traded.
As such Swiss power prices are nearing German forward power prices, where the Cal ’15 Baseload on Friday closed €6.30/MWh lower than the Swiss Cal ‘15 Baseload traded, rather than being supported by Italian forward prices where the front year closed €10.40/MWh higher than the French contract on Friday.
This development comes despite a delay in day-ahead market coupling between Switzerland, France, Italy, Austria, Slovenia and Greece which in theory should smooth the price difference among the markets.
Market coupling
Switzerland is unlikely to join the central south European (CSE) day-ahead market coupling region before 2016. As a result of ongoing negotiations with Brussels, Switzerland will likely join Greece in deferring the coupling of its day-ahead market with the Italian equivalent until after next year – and miss the start of CSE coupling set for mid-February ( see EDEM 5 August 2014 ).
The delay in Switzerland joining CSE market coupling will have no negative impact on the developing business of providing trading and portfolio optimisation services, according to Repower and Trianel.
For Repower, its partner strategy with other energy suppliers and industrial companies is mainly country-specific in Switzerland and Italy and therefore is not reliant on the optimisation of cross-border trade. A spokesman said on Thursday. “Therefore we don’t expect specific negative impacts from the unfinished market coupling.”
According to Trianel, the delayed market coupling with Switzerland has no negative implication for our business planning “because we are mainly active in the development of professional portfolio management”. Martin Degen
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