Corrected: Heat wave to keep pressure on SEE electricity spot, front month

(The outage timeline in the 12th line in this story has been corrected.)

Electricity prices in Hungary and the Balkan region are likely to stay high until the end of the month, supported by forecasts of continuing hot weather and low hydro generation, as well as regional outages.

This is likely to feed into an already bullish front month, although in delivery prices in July could go either way depending on the weather, traders said.

The Hungarian day-ahead hit monthly highs on both the over-the-counter (OTC) screen and the exchange on Wednesday.

Weather-driven demand was the main factor supporting the spot.

The price was further supported by:

• Capacity reduction at Hungary’s Paks nuclear power plant for some hours on Thursday

• Low Romanian wind

• Weak hydro availability in the western Balkans

• Reduced daily cross-border capacity from Poland to Slovakia

• Outages at Slovenia’s 539MW Sostanj coal-fired unit and Slovakia’s 500MW Bohunice nuclear

• Uncertainty about the return of 360MW Dunamenti gas-fired plant in Hungary.

One Balkan trader also reported that an outage at 300MW Ugljevik coal-fired plant in Bosnia will start on 1 July.

Supply is set to improve on Friday with Sostanj expected to return in the afternoon and higher wind output forecast in Romania.

However, prices are unlikely to see significant relief until the end of the month, according to one regional trader who pointed at ongoing hot weather as the key price driver.

“Next week is super bullish. That is a continuation of this week’s heat, a demand increase should happen naturally as people can’t stand the heat any more, so they switch on everything they can,” he said.

Temperatures are expected to stay up to 6°C above average in Hungary and the Balkans in the next five days, according to WSI.

The Hungarian Week 26 Baseload last traded at €51.75/MWh on Wednesday afternoon. To compare, Week 25 was last assessed at €44.15/MWh.

Hydro

The hydro picture in the region was mixed. Romanian reservoirs continued to tick up week on week, crossing slightly above 2015 levels but remaining below the relatively wet 2016.

Danube flows at the Bazias point stood at 3,500 cubic metres per second (cbm/s) on Wednesday, well below the June multi-year average of 6,400cbm/s.

Flows are forecast to fall to 2,900cbm/s by next Wednesday, according to the Romanian National Institute of Hydrology and Water Management.

Serbian reservoirs were stable week on week, while Greek reservoirs remained at a multi-year low.

Bosnia was saving water in its Bileca lake, according to the Balkan trader, and was exporting less power as a result.

“Planned [availability in Bileca] is 850GWh, the real situation is 590GWh. It’s [getting] better, but not because of extra water. They didn’t use HPP [hydro power plants] at all,” he said.

Albania was experiencing a flurry of unplanned outages at hydro power plants, according to ENTSO-E data. But the country was believed to be dry, therefore the plants would not have been operating, according to a third regional trader.

Bulgaria appeared to be the only country to have a significant hydro improvement. On Monday state-owned utility NEK, the owner of the majority of hydro power assets, held its first selling auction for forward capacity so far this year, with another one scheduled for Monday.

NEK was also actively selling on the day-ahead market, which has been keeping prices on Bulgarian exchange IBEX relatively low this week, according to one Bulgarian trader.

July outlook

The Hungarian front month is likely to remain supported as long as spot stays high. At traded levels around €51.00/MWh the contract seemed slightly overpriced, according to the third trader, given that 1.5GW of capacity was expected to return from maintenance in the region next month.

He added that some of the support for July was coming from companies that had sold the contract at lower levels previously, but were now on the buy side.

Weather will remain the key driver in delivery. “[July] is obviously a weather trade. It’s a tricky call, kind of a coin flip,” the second trader said. irina.peltegova@icis.com