Increased wholesale electricity prices in Europe, still only partially reflected in the Greek market, are increasing the challenges faced by local suppliers.
CO2 emission right costs have risen over the past three months, especially in May, while fuel and natural gas price levels have also climbed to remain at elevated levels.
These developments have sharply increased prices of electricity futures markets contracts both in Germany, guiding European developments, and in regional markets impacting Greece, namely Hungary, which shapes prices in Balkan countries interconnected with Greece, as well as Italy, a key market also interconnected with the Greek grid.
In Germany, wholesale electricity prices rose by approximately 10 euros per MWh in a month. In Italy, current electricity futures contracts concerning delivery in July are being established at levels of around 75 euros per MWh.
In Hungary, energy supply term contracts covering all of 2019 (CAL-19 contracts) rose by 6.3 percent in May, from 47.45 euros per MWh to 50.78 euros per MWh. Compared to price levels in March, the cost of CAL -19 contracts has increase by 22 percent, from 41.65 euros per MWh to 50.78 euros per MWh.
These regional price increases are already impacting the Greek market, where the System Marginal Price, or wholesale price, averaged 56.33 euros per MWh in May. June contracts are being established at 59 euros euros per MWh.
Worse still for independent suppliers, the starting price at the country’s next NOME auction, next month, will be significantly increased.
Higher price levels in regional markets have made electricity exports a more attractive prospect for local traders, resulting in further upward pressure on local prices.
Given the current market conditions, lofty price levels reached at previous NOME auctions no longer look as bad, officials at independent supply firms have told energypress. Elevated NOME auction prices of 45.2 euros per MWh reached at the end of 2017 are no longer regarded as lofty and will soon be reminisced, independent supply firm officials said.
NOME auctions were introduced in Greece nearly two years ago to offer independent suppliers access to the main power utility PPC’s lower-cost lignite and hydrocarbon sources.
It remains to be seen whether independent suppliers, especially smaller players, will be able to handle these wholesale price increases as they push to penetrate the retail market. Export and trading will offer suppliers some profit opportunities but, at current wholesale price levels, most firms, including PPC, are incurring losses in the local retail supply market.
Under normal market conditions, wholesale price increases lead to higher retail prices. But this is not so in the Greek electricity market, still distorted. State-controlled PPC, the dominant player, does not set its retail prices based on cost but political decisions taken at the energy ministry, keeping electricity price levels lower than they should be.
This market distortion is affecting the ability of independent suppliers to compete and gain more respectable retail market shares as they are forced to follow PPC and keep their price offers low.
An upcoming reduction of the RES-supporting supplier surcharge will offer independent suppliers some relief, but it does not appear to be enough to offset the higher wholesale prices, while CAT payments paid by suppliers are expected to be reintroduced.