CEE electricity market coupling to launch in Q4 2014

19 February 2014 17:28 Source:ICIS

Romania will join its neighbours Hungary, Slovakia and the Czech Republic in the central and eastern Europe (CEE) market coupling in Q4 2014, the transmission system operators (TSOs) involved in the project said on Wednesday.

While Romania is on board, trading sources think the fee for exporting power from the country could hinder its prices converging with those of the other countries. Sources active in the region do think prices in the local OPCOM exchange would increase after the project was launched. One trader said the export fee would make it hard for Romanian prices to couple with Hungarian, but cancelling the fee would deprive the Romanian TSO of some cash flow.

The last reduction came into force on 1 January 2014, after the government approved a 20% cut in the cogeneration fee ( see EDEM 02 January 2014 ). The exact amount of the export tariff could not be confirmed to ICIS but the cogeneration fee now stands at New Lei 18.383/MWh (€4.09/MWh).

Hungary impact

Sources welcomed the development, with some expecting some better stability and more transparency in the markets. Others pin-pointed a more pronounced impact on the Hungarian market. One Hungarian trader noted that the expansion will likely decrease the volatility of Hungarian prices, if the cross-border capacity available daily is sufficient.

But another regional trader said that the market coupling expansion is not likely to affect spreads on the longer-dated contracts, between the countries. “On the monthly and yearly basis, there will always be congestion on borders,” he said.

Polish absence

Poland was supposed to be included but pulled out. Its TSO will continue to be an observer to the project as previously agreed.

The market coupling was supposed to include five markets, but the project was riddled with uncertainty over Poland’s inclusion ( see EDEM 10 July 2013 ). Due to issues with the gate closing time, Poland decided to back out, leaving the remaining four markets to go ahead ( see EDEM 27 August 2013 ).

The power exchanges successfully completed the first steps in preparing the platform for the implementation of the price coupling of regions or PCR solution into their technical infrastructure in line with the target model for the internal energy market. The platform used in the project can be extended to other markets and regions.

Market coupling will eliminate the need for daily cross-border capacity auctions and aim price convergence. Sophie Udubasceanu and Karolina Zagrodna

By Sophie Udubasceanu