Austria-Hungary cross-border capacity price down on improved hydropower supply

The price to flow power from Austria to Hungary in February fell month on month because the Hungarian electricity contract was driven down by improved Balkan hydropower availability and weak prices on the spot market.

The cost of cross-border capacity between Austria and Hungary, the main route for flows from the more liquid German market to Hungary, closed at €13.15/MWh, down €0.95/MWh compared with January, according to auction results published by the Joint Allocation Office (JAO) on Thursday.

The price was €0.475/MWh below the last assessed spread between the German-Hungarian February contracts on Wednesday.

However, on Thursday the Hungarian front month opened the session €0.325/MWh below Wednesday’s close and continued to fall consistently throughout the session. Increased hydropower availability in the Balkans and weak spot pricers were considered the main bearish drivers.

However, traders expressed mixed outlooks on how long hydro was likely to remain strong. Some were concerned that the market had exaggerated the importance of the hydro stock improvement when valuing the front month. With temperatures forecast to fall below average in the region during the week ahead, demand is set to rise.

“People are relying too much on a few days of increased hydro [when assessing the front month], and they forget what real Balkan winter means,” one trader said.

Similarly, cross-border capacity in direction Slovakia to Hungary also shed value month on month, driven by expectations of decreased demand for imports from Hungary. irina.peltegova@icis.com