Month-ahead pricing prevents electricity prices from falling

Greece’s month-ahead pricing model in the energy market has prevented a recent 40 percent plunge in natural gas prices from pushing down electricity prices, currently at 248.24 euros per MWh, as has been the case in numerous other European countries.

Rigid electricity prices in the Greek market have sparked political debate, prompting the main opposition party, leftist Syriza, to claim speculative trading is at play.

However, Greece’s month-ahead energy pricing model can be attributed to this lack of correlation between gas and electricity prices in Greece, making the country an oddity in the European energy market.

As a result of the lack of an international spot market in Greece, electricity producers in the country purchase natural gas for each forthcoming month at price levels valid in the preceding month.

Electricity being produced at present factors in natural gas price levels from November, when purchased, instead of the current spot market price for natural gas, which has fallen to a ten-month low, not reached since last February.

Natural gas prices were consistently above 100 euros per MWh in November, peaking at 146 euros per MWh, but price levels yesterday, for January contracts, fell to less than 80 euros per MWh, continuing a downward trajectory that has been recorded over the past eight days.

Insufficient grid interconnections between Greece and neighboring markets, limiting the size of the Greek market, are a key reason behind the absence of an international spot market here.