Brussels calls for supplier strategies mitigating market risk

The European Commission, as part of a series of EU electricity market revisions proposed just days ago, has called on energy regulators to ensure that suppliers implement adequate hedging strategies to mitigate the risk of wholesale market changes by maintaining good liquidity levels and corresponding price signals in short-term markets.

This requirement would be met through a statement from EU electricity suppliers to their respective regulatory authorities setting out measures taken, sector experts have told energypress, noting, however, that it would be a useful yet fairly soft obligation of limited effect.

Apart from its reference to an “adequate compensation strategy” by electricity suppliers, the European Commission’s text does not provide further details on how this could be ensured. Consequently, any monitoring by authorities will not, it appears, be based on measurements and specific indicators.

Brussels proposals include PPA priority, RES growth support

A series of European Commission proposals for the EU electricity market do not call for any major changes to its structuring but make note of the need for mild revisions to the current model through the implementation of various market tools.

A draft of the proposals, obtained by energypress ahead of their official presentation, scheduled for March 14, highlights the need for industry to be provided obstacle-free access to long-term tools, such as PPAs; consumer rights for fixed tariffs and improved market information; and long-term markets offering investment support for RES development.

Also, revisions must ensure that the benefits of renewables reach consumers, the draft notes, placing emphasis on the functioning of the intraday market and its improved liquidity.

It also calls for transmission operators to develop a market tool limiting consumption peaks during the most challenging times of the day as a means of better managing demand and limiting prices.

The European Commission, according to the draft, continues to support the existing market model, stressing “it has provided a well-integrated market, allowing Europe to reap the economic benefits of the single energy market under normal conditions, assuring adequacy of supply and decarbonization”.

However, it admits that “in the midst of the crisis the current model has shown certain major weaknesses related to elevated and volatile fuel prices and short-term electricity markets that have exposed consumers to significant price increases”.


Faults observed in Greek model proposed for electricity market

A fundamental change in the way energy prices are set in the market and, consequently, the elimination of demand-side signals for market participants has been identified as a key disadvantage in a Greek model for changing the structure of the electricity market in Europe, according to a new study carried out by the EPICO Klimalnnovation institute from Germany in cooperation with Aurora Energy Research.

The study analyses the impact of Greek and Iberian models as the two currently discussed options and also explores a third option for building a future-proof market design based on merit order, by securing investments in renewables and allowing for stronger long-term hedging opportunities for consumers to shield them against price spikes and volatility.

According to the study’s findings, the “Greek model fundamentally changes how prices are set in the market, making major impact, as the price signal gives crucial information to market participants, showing levels of scarcity and guiding the dispatch.” It goes on to note: “As all renewables would fall under contracts for difference (CfDs), it [Greek model] would put an end to market-based renewables and hamper their system-friendly design,” adding demand-side flexibility is crucially needed for the future power market system.

Creating separate pools for technologies, with a part of them under a regulated income stream, “risks to impact cross-border trading,” while “the less generation reacts to the cross-border price signals, the less efficient the market coupling process is,” the study notes.

Mid-voltage market competition strong in ’22, PPC market share contracts

Competition between electricity suppliers in the mid-voltage category was, contrary to the low-voltage category, intense in 2022, as highlighted by the significant market share contraction of power utility PPC, down to 36.01 percent in November after starting the year at 42.36 percent, in the mid-voltage category.

The overwhelming majority of companies in Greece belong to the mid-voltage category. Besides reduced electricity usage in the second half of the year, the significant drop in electricity demand in the mid-voltage category may also be attributed to company closures during the energy crisis.

A gainer, Mytilineos’ mid-voltage market share increased to 16.61 percent in November, up from 13.48 percent in January.

Heron also achieved a mid-voltage market share increase, reaching 14.78 percent in November from 12.39 percent in January.

Elpedison’s market share in this category rose marginally to 6.96 percent from 6.66 percent over the eleven-month period.

NRG’s share fell to 9.06 percent from 9.41 percent. Elsewhere, Watt & Volt’s share slipped to 0.84 percent from 0.89 percent, Fysiko Aerio’s share rose to 4.87 percent from 3.47 percent, Volterra’s share increased to 7.09 percent from 6.22 percent. Zenith’s share contracted to 0.40 percent from 0.62 percent, as did Volton’s share, to 0.5 percent from 0.78 percent.

Market share figures remained relatively stable in the low-voltage category between January and November, as highlighted by the marginal change in the market share of power utility PPC, the main player, from 64.53 percent in January to 64.32 percent in November.

Mytilineos’ market share in the low-voltage category fell marginally to 6.34 percent from 6.47 percent. Heron experienced a rise to 6.39 percent from 6.01 percent. Elpedison’s market share slid to 4.92 percent from 5.10 percent and NRG’s share rose to 4.36 percent from 3.77 percent.




Demand response for electricity markets in first quarter of 2023

The Energy Exchange is preparing a demand-response mechanism for all electricity markets, in accordance with the European framework, and is aiming for a launch within the first quarter of 2023.

Brussels’ Clean Energy Package and subsequent European Regulations enable full access of demand response mechanisms into electricity markets. EU member states, market operators, and energy exchanges have been requested to take all necessary measures to make this possible.

The basic idea is to actively involve demand response mechanisms (consumption side) to ultimately allow for better management of the energy market.

For its part, the Energy Exchange is taking all necessary steps to provide the technical capacity offering this service to participants.

Distribution loads or industrial loads will be able to participate, on competitive terms, in all markets with electricity producers, while at the same time setting signals for the balancing market.

As for regulatory matters, the Energy Exchange is already preparing an amendment to day-ahead and intraday market regulation, which will soon be forwarded to RAE, the Regulatory Authority for Energy, so that it may stage public consultation before adopting relevant regulation.

Price caps a risky solution, expert warns, proposing filters for bids

A leading energy market expert, professor Alex Papalexopoulos, has reiterated his opposition to a complete reform of the European electricity market, believing proposals currently being tabled will lead to perilous conditions.

Speaking at the 17th IAEE European Energy Conference, Dr. Papalexopoulos, the architect behind Greece’s target model, noted markets are signaling the need for reduced dependence on natural gas, representing too great a share of the energy mix.

The European electricity market needs reforms, but not in the manner currently being discussed in Brussels, Dr. Papalexopoulos contended. Instead, revisions should focus on issues such as flexibility and back-up solutions, the expert noted.

Dr. Papalexopoulos pointed out that US wholesale markets are equipped with special filters that examine offers submitted by gas units and determine whether these have the potential to manipulate the market. Equivalent filters do not exist in Europe, resulting in excessively high prices, he noted.

Dr. Papalexopoulos expressed doubts about price caps and recovery of windfall profits, noting they actually do not exist.


No essential market share changes for suppliers after some mobility

Consumer switches from one electricity supplier to another appear to be stabilizing following some month-to-month mobility between January and October, a reflection of the unease felt by consumers amid the energy crisis.

Power utility PPC, the dominant market player and key source of new customers for independent suppliers, has virtually regained mild market losses experienced since January.

PPC began the year with a 43.37 percent market share, at the end of January, in the mid-voltage category, before dropping as low as 35.35 percent in March, only to eventually rebound to 41.73 percent by August.

In the low-voltage category, PPC began the year with a market share of 65.16 percent, achieving marginal gains in ensuing months for a market share of 66.78 percent by August.

Overall, PPC’s market share was 64.50 percent in January, experienced a slight dip to no less than 63.36 percent in May, and ended August at 64.41 percent, virtually unchanged from the beginning of the year.



Power suppliers under enormous strain because of increased liquidity needs and high costs

Power suppliers in Greece have reached a critical point considering their inability to finance their increasing liquidity needs and remain in operation.
The suppliers’ capital needs are increasing rapidly along with power prices, since these companies are obligated to pay cash for the electricy they buy daily in the energy exchange.
Given the fact that in August power prices are expected to rise significantly, since the price of gas is passed on one month later in the Greek market, the suppliers’ liquidity needs will also rise considerably.
Furthermore, suppliers are also faced with the following:
Financing for over a month consumer subsidies announced by the government.
The rise of unpaid bills and arrears on behalf of consumers.
Damages from consumers who make use of easy change of supplier.
The obligation to pay their charges to grid operators regardless of having collected it by their consumers.
Suppliers have exhausted their ability to procure new financing from banks, as well as their shareholders’ ability to support them.