Strong Romanian electricity exports expected over winter

18 August 2014 06:00 Source:ICIS

Serbia looks set to remain in urgent need of electricity imports from Romania over the coming winter, latest figures indicate.

Flows of electricity from Romania into neighbouring countries rocketed in the first half of the year taking their cue from lower prices and tight power systems in neighbouring markets, a report published by transmission system operator Transelectrica on Friday revealed.

Exports into Serbia jumped, with data between January and June showing a figure six times higher than in the same period of 2013.

The transmission system operator (TSO) attributed the increase in flows to severe flooding in Serbia in May that affected the country’s power plant availability.

While so far Serbia’s hydro production has been strong and met fairly mild demand, with the winter months approaching, market participants say flows from Romania will continue high into Serbia over the fourth quarter.

Traders’ expectations concerning any price impact remain mixed.

Adverse weather

Given the floods caused lasting damage in the country’s coal supply, Serbia is still in the process of pumping out water from the mine pits.

Market participants said the situation could return to normal as late as March 2015. This could leave the system in great need of Romanian electricity when winter consumption kicks in.

One of the most affected areas was the Kolubara mine which supplies, among other units, the 1.65GW Nikola Tesla power plant ( see EDEM 19 May 2014 ).

Acting director of utility EPS Aleksander Obradovic said in a previous statement that damage at the Kolubara mine was so severe partly because of a lack of investment over the last 10 years.

According to the same statement, a heavy storm at the end of July hit the thermal power plant Kostolac and the accompanying coal mine. However the situation in the country remained balanced as run-of-river production increased and EPS refrained from any buying activity at the time.

Obradovic noted the damage was greater than what followed when the floods hit in May and “new investment in the production system” was required. Repair work began soon after, ICIS understands.

Winter outlook

If the situation in the coal mines does not improve by December, traders agreed it could add support to regional prices. “These hydro stocks will last for one month and will cover current consumption without bigger problems,” one regional trader noted.

The source added that the neighbouring markets could see some impact on prices if the water is not pumped out of the mine pits until December, as hydropower stocks decrease and the Serbian system becomes tight.

With the need for imports from Romania deemed long-lasting, the impact on Romanian prices is clouded by an uncertain weather forecast so far in advance.

With lower solar output once the sunny season ends Romania could be subject to some uptick in prompt prices, some say. Until now, recent weak outturns on the Romanian Day-ahead market have been pressured by hydro oversupply and high photovoltaic generation.

Consumption question

Meanwhile other market participants noted that cheap Romanian electricity will not necessarily increase in value, as wind generation is expected to kick in once autumn settles in.

In addition, consumption still will play a key part with recent statements from the prime minister indicating the country is entering recession could indicate a low demand curve during the fourth quarter.

Despite reservoir stocks above 97%, hydro production in Romania expected in the fourth quarter remains highly dependent on precipitation.

Initial expectations indicate the coal supply in Serbia could be reduced for a year as a result of the severe flooding ( see EDEM 22 May 2014 ).

The TSO report on the first six month of this year also shows flows into Hungary almost tripled compared to the first half of 2013. Transelectrica said a profitable spread to more expensive Hungary encouraged exports.

Since Romania scrapped its export tariff on 1 July ( see EDEM 2 July 2014 ) flows hit maximum, with the Romanian prompt perceived as a possible driver of the Hungarian equivalents ( see EDEM 4 August 2014 ). Sophie Udubasceanu

By Sophie Udubasceanu