Greek power Day-ahead prices to fall after new model start, traders

LONDON (ICIS)–Bullish delivery prices in the first days of operation of the Greek power exchange HEnEx are likely to subside amid improving supply and falling demand, according to local market participants.

The exchange launched its new market model with Day-ahead, intraday and balancing trading platforms over the weekend.

Day-ahead prices closed at:

– €53.56/MWh for delivery 1 November

– €60.99/MWh for delivery 2 November

– €56.01/MWh for delivery 3 November.

On average, Greek prices held over €23/MWh premium to the equivalent on Hungarian exchange HUPX – a benchmark for the region – over the same period.

Prices were also significantly higher than the last assessed level for the Greek November ‘20 forward contract at €47.75/MWh.

BULLISH FUNDAMENTALS

Local traders said the high prices were realistic when looking at the regional fundamentals.

“There were fundamentals that pushed the prices high the first three days such as low renewable production, while imports were significantly reduced due to maintenance of the Italian-Greek and Greek-Turkish interconnectors,” said one of them.

Expectations for rising wind availability later in the week will be a key bearish driver. Wind output is set to hover around 2GW on average between 6-8 November, up from current below 1GW levels, according to ICIS analyst forecasts.

“This [higher wind] will be a test for the new model,” added the same source.

Three local market participants polled by ICIS said the day-ahead price is likely to fall closer to €50.00/MWh.

“I think in the next days people will feel more confident and will start to bid according to their profitability . I believe the day-ahead price will go closer to €50/MWh,” said a second trader.

Separately, capacity on the 500MW Italian-Greek cable is set to return to normal from 4 November, according to the Joint Allocation Office. Flows on the Greek-Turkish border are set to resume on 9 November, according to the Coordinated Auction Office in South East Europe (SEE CAO).

However, on the same day maintenance on the Greek-Bulgarian cable will commence, due to last until 30 November, according to Bulgarian grid operator ESO. Bulgaria is a key import source for Greece.

DROPPING DEMAND

Greek demand is expected to be affected by the one-month partial lockdown imposed by the government from this week.

Falling demand will affect the bidding behaviour of participants in the day-ahead auction as the new market model has changed the minimum and maximum bidding prices from the previous €0/MWh – €300/MWh to the new €-500/MWh – €3,000/MWh, added the second source.

This could lead to unexpected volatility.

NEW MODEL

Greece’s new power market model is set to increase competition and transparency, reduce energy costs for consumers and businesses and boost power exports, said Greek energy minister Kostis Hatzidakis in a statement on 29 October.

Greece’s day-ahead power market is expected to couple with the Italian market in December and with the Bulgarian market in the first quarter of 2021, added Hatzidakis.

Although traders have expressed doubts that these market coupling deadlines can be met.