SOFIA/LJUBLJANA, October 27 (SeeNews) – Power shortages and price imbalances in southeast Europe necessitate a regional energy exchange to create an efficient market, but transmission bottlenecks, monopolistic structures and a lack of a regulatory framework stand in the way of a successful project, analysts said.
At present, four functional energy exchanges are relevant to the southeast European region: EEX in Germany, EXAA in Austria, OPCOM in Romania and Pool in Greece and a new bourse is to be launched at end-October.
However, government subsidies on electricity for both households and industry in most countries in the region help state-run power utilities to maintain a dominant position and prevent the development of efficient domestic markets and a regional market as well, analysts say.
Both Macedonia and Bulgaria, where state power transmission companies dominate the market, are yet to agree on the first steps to establishing some kind of an energy trading platform and to set up a regulatory framework for settlement and clearing of such transactions.
“[An analysis] is expected to be presented [to the cabinet] by the end of this month,” said Pavle Petrevski, in charge of the project at Macedonia's Economy Ministry.
Bulgarian experts have already submitted a feasibility study to the cabinet, said Boyan Ivantchev, who headed the team, but could not give a timeframe for further steps.
Meanwhile, electricity traders in Bulgaria, which used to be the key electricity exporter in the region and is still an essential supplier to energy-hungry Greece, Macedonia and Albania, are trying to operate on a regional level at Greece’s power bourse Pool, said Nikolai Vuzev, head of Bulgaria's leading electricity trader, Energy Finance Group.
“A bourse in Bulgaria is currently not a reasonable idea, given 85% of the market is regulated,” Vuzev said, adding that low government-regulated prices of electricity were currently keeping the market down.
Meanwhile, a Slovenia-based regional project, Borzen SouthPool (BSP), is aiming to intensify cross-border trade. BSP is scheduled to launch auctions and spot trading of electricity in a few days, starting in the markets of Slovenia and Serbia, saying it will meet “high interest” from both energy traders and state-owned power companies.
“The organised market brings mainly a possibility for financial security and lower transaction costs for the participants on the market, it brings a more stable and predictable environment, which is also important for investors,” BSP’s managing director Damjan Stanek told SeeNews.
BSP’s idea is that regional governments will be indirectly included in the trading through their power companies, which would enhance transparency, regional integration and liberalisation.
But experts agree that countries in the region should create a unified regulatory framework for transactions on energy bourses in order to secure the development of a joint market.
Serbian power monopoly Elektroprivreda Srbije and the country’s power grid operator Elektromreza Srbije will likely trade on BSP, according to Serbian news agency B92.
Bulgaria’s power firm NEK and its nuclear plant Kozloduy, however, are not likely to trade directly at such a bourse, because they are usually using trading companies to diversify risk, Vuzev said.
BSP is open for electricity traders to become shareholders. Slovenian power trader GEN-I and Serbian electricity trading company Rudnap Group have already expressed interest.
GEN-I is already present on four power exchanges, and its board chairman, Robert Golob, warned that BSP enters a very fragmented market in southeastern Europe where in most countries energy bourses are still just at the planning stage.
However, he was optimistic that the new bourse would attract new participants and develop a regional market, as bourse trading “is much simpler than bilateral trading,” bringing “standardisation of financial settlement”.
Nenad Savic, communications director of EFT, a leading electricity trader in the region, agreed, saying that the success of an energy exchange was primarily dependent on the level of liquidity it is able to attract and the number of participants. However, he added that BSP would make more sense at the final stages of market deregulation and development in the region, not now.
Slovenia is on the threshold of Europe, and BSP can either become a meeting point of southeast European producers and western European buyers, or a tool to balance out cross border fees and prices of imported electricity in the separate countries, which sometimes vary by 100%, Vuzev said.
However, although many countries in the region need electricity imports, interstate transmission links are underdeveloped and carrying electricity across borders costs much, due to high cross-border fees, reaching up to one third of the price of imported electricity.
“In order to reach a bourse, you must play for capacity, or use a company in a given country that already has capacity, which will lead to a power struggle for capacity, which will hike the prices,” Vuzev explained.
(SeeNews reporter Valentina Dimitrievska contributed to this analysis.)
