Market players fear European energy inaccuracies could lead to further woes

Major energy market players agree European energy consumers could face many more rounds of pressure over the next few years as a result of errors and inaccuracies plaguing the EU’s energy transition plan towards renewables.

Energy market players are not doubting the EU’s decarbonization goal, seeing it as irreversible, but do believe the European Commission must rectify, as soon as possible, current mechanism faults and market distortions whose resulting deficiencies are being exploited by traders and monopolies, such as Russian gas giant Gazprom, earning excessive revenues at present.

Europe appears to have trapped itself in mechanisms that do not seem to be working, fueling rising concerns among enterprises and industrial players.

Measures must be taken right now at national and European levels. For instance, windfall profits, sparked by sharp wholesale price increases, need to be stopped through the introduction of related taxes, as has been the case in Spain, market players suggest.

Also, electricity prices need to cease reflecting the spot market’s surging prices and instead be shaped by the actual cost of the energy mix, comprised of low-cost renewables (30-35%), high-cost natural gas (30%), lignite (10%), hydropower (10%), plus imports.

In addition, green PPAs reflecting actual cost need to player a bigger role. In Germany, for example, 90 percent of electricity supply is currently made available through PPAs.

Fearing this crisis could last, industrial players in Greece are moving to secure futures contracts covering supply for the next three to four years.

 

Futures market launched in adverse conditions, PPC the market maker

The energy exchange’s futures market begins operating today, far sooner than planned following considerable efforts from all agencies and authorities involved, but the launch comes at a time of adverse conditions.

Authorities, given the currently unfavorable abnormal market conditions, will be content to see this new platform operate without technical glitches. Trial runs ahead of today’s launch did not produce problems.

The current pressure felt by financial markets and electricity suppliers has reined in early expectations.

Power utility PPC will assume the crucial role of market maker, bringing in the embryonic market’s first futures products.

The early launch of the futures market was promoted by the energy ministry to help cover electricity supplier needs following the premature termination of NOME auctions.

Limit on target model electricity contracts, consultation soon

An upper limit is expected to be imposed on the amount of electricity production companies will be entitled to negotiate for target model contracts, according to a decision by authorities to be forwarded for public consultation within the next few days.

The implementation of an upper limit restricting the amount of electricity a company is permitted to negotiate in the futures market is foreseen in the target model plan. The remainder of electricity will need to be channeled into the day-ahead market to ensure that necessary amounts are available.

For months now, officials have speculated about the level of the upper limit. A clearer picture is expected within the next few days, when terms are forwarded for consultation.

Power utility PPC and independent companies have offered differing views. PPC has insisted on an elevated maximum level, an opinion shared by industrial figures, including EVIKEN, the Association of Industrial Energy Consumers, who believe low-level limits would not enable them to establish contracts with PPC for electricity amounts fully covering their needs.

Authorities in rush for new futures product as NOME replacement

Authorities and agencies, primarily Greece’s energy exchange, tasked with designing a futures product intended to replace the country’s NOME auctions, being abolished, are racing against a time limit imposed by the European Commission.

The introduction of a six-month product, to run from this coming January to June, is being considered, according to a recent update provided by the government to Brussels.

Preparations leading to the establishment of required platforms by the end of the year are being pushed ahead.

Various developments have shrunk the available time for the new product’s introduction by six months, placing all authorities involved under considerable time pressure.

The Greek energy exchange, aiming to start operating in February, is currently working closely will all other relevant agencies on various issues, including the delivery of a product to replace the NOME auctions.

The level of readiness of power utility PPC to assume the role of market maker of the new futures product is pivotal.