RAE consultation on balancing market restrictions ends today

RAE, the Regulatory Authority for Energy, will need to make decisions following today’s conclusion of its public consultation on a price ceiling proposed by the authority for electricity producer offers in the balancing market.

The authority held a series of meetings yesterday with all producers operating gas-fueled power stations and will now need to decide on whether to incorporate observations made by producers into its plan as part of the effort to resolve issues that have become apparent during the first six weeks of the target model’s new markets, including the balancing market. Wholesale electricity prices have risen sharply.

Producers have tabled a number of varying, even conflicting, proposals. Some producers insist that the imposition of any restrictive measure runs contrary to the free-market principles promised by the target model. Others believe any restrictions should be set at low levels, but not as low as levels proposed by RAE.

Producers believe the balancing market’s problem is linked to energy quantities not price restrictions, warning that supply sufficiency problems could result during periods of high demand if levels as low as those proposed by RAE are eventually set.

Balancing market restrictions have applied until recently in more mature markets such as those of Belgium and the Netherlands. Balancing market conditions differ from country to country as respective levels of flexibility vary.

 

 

Producers content with target model markets, suppliers edgy

Any nervousness felt by producers over the target model’s new markets ahead of their November 1 launch are swiftly being quelled by rational trading results. On the contrary, non-vertically integrated suppliers have experienced cost increases and, as a result, are concerned about their company prospects.

Although it still too early to tell, electricity producers believe day-ahead market prices are reflecting actual conditions, rising with shortages and falling with any oversupply.

Day-ahead market prices began at 60.44 euros per MWh on November 11, fell as low as 41.11 euros per MWh on Saturday and rose to 68.36 euros per MWh for today.

These price levels for the day-ahead market, known as the System Marginal Price under the previous system, are regarded as being at rational levels.

Producers have also expressed satisfaction over the balancing market, a largely unknown entity prior to the target model’s launch. Prices have been high, enabling units with flexibility to ensure solid earnings.

Day-ahead market prices are projected to fall, which would subsequently limit electricity imports and require domestic power stations to operate for longer hours.

Higher earnings for producers mean greater costs for suppliers. Non-integrated suppliers are concerned about their prospects under such conditions.