SMP

Independent firms, facing tight conditions, turn to hike clause

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Many, if not most, independent electricity suppliers, moving to counter stifling market conditions caused by higher wholesale prices that are severely narrowing profit margins, have begun activating a System Marginal Price (SMP) clause for proportionate upward adjustments of charges in an effort to remain sustainable.

SMP, or wholesale price, levels of up to 55 and 60 euros pr MWh are regarded as an upper limit before the clause, included in supplier agreements but not resorted to until now, is activated. In recent times, however, the SMP has consistently stood at over 65 euros per MWh.

Until now, independent suppliers have hesitated to activate this SMP clause fearing negative customer reactions, but market conditions have tightened up too much for it to be neglected.

The still-dominant main power utility PPC is continuing to offer customers a 15 percent discount for punctual electricity bill payments.

Besides the higher SMP levels, independent suppliers have had to absorb elevated prices at recent NOME auctions – these were introduced about two years ago with the intention of making lower-cost electricity available to emerging players – and have also faced difficulties importing lower-priced electricity from abroad.

Independent electricity suppliers fear 2019 could be their most difficult year yet since emerging relatively recently. A supplier surcharge is set to be lifted but all other market conditions are seen as unfavorable.

 

Traders appeal to Brussels over NOME export limit proposal

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Energy firms primarily active in transboundary electricity trade are seeking European Commission support in an effort to prevent the adoption, in Greece, of restrictions – including indirect measures – on exports of electricity amounts secured at local NOME auctions.

Traders were prompted into action by a Greek Energy Exchange proposal forwarded to a public consultation procedure staged by RAE, the Regulatory Authority for Energy, calling for NOME-related electricity exports to be sold at just under the System Marginal Price (SMP), or wholesale price, rather than lower prices secured at the auctions.

NOME auctions were introduced about two years ago to offer independent energy firms access to the main power utility PPC’s lower-cost lignite and hydrocarbon sources as a means of breaking the utility’s retail electricity market dominance.

In their appeal, export-minded traders have cited the EU’s free-trade principle as their main argument. It is not yet clear how the European Commission could respond.

 

 

 

SMP zeroed out by high wind energy output, low demand

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A combination of low electricity demand and boisterous winds experienced in various parts of Greece over the past few days, which generated extraordinarily high power production at wind energy facilities, ended up flattening the System Marginal Price (SMP), the wholesale price, to zero levels, an unprecedented phenomenon in the country’s electricity market, day-ahead market figures have shown.

The SMP level was zeroed out on the night of September 26 and for an hour after midnight on September 27.

Peak demand during these hours registered at 4,454 MW while 12 power stations – eight lignite-fired, four natural gas-fueled – fed the grid.

Wind energy production reached levels of 1,721 MW during these hours and experienced a further rise to 2,820 MW once photovoltaic output was also added to the grid.

Electricity exports of 6.757 GWh were registered during this period. They determined the SMP level for many hours. It registered at 51.92 euros per MWh, driven lower by the zero-level periods and lower levels during nighttime hours, ranging from 29 to 33 euros per MWh.

SMP level rising, wholesale market structure changing

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Day-ahead market prices in Greece have risen and competition between lignite and gas-fired power stations has intensified amid the unusually hot weather conditions around Europe, pressuring markets to adjust.

Over the past week, prices in the day-ahead market, the main arena for trading power, have ranged between 62 and 66 euros per MWh.

An increase in the cost of CO2 emission rights, which rose to levels over 18 euros per ton level last week for the first time in seven years, has impacted day-ahead market prices.

The unusually hot weather in Europe’s north has led to an increase in the demand for CO2 emission rights following the necessary weather-related withdrawal of nuclear power stations from grids.

The System Marginal Price (SMP) rose to 64.422 euros per MWh in July, roughly 3.8 euros higher than a month earlier. CO2 emission rights were at 16 euros per ton in July and 14 euros per ton in June.

SMP levels have climbed steadily since the beginning of the year, registering an increase of over 50 percent since March, when the SMP was at 44.28 euros per MWh.

As a result of the SMP increase, wholesale electricity prices in the Greek market have been shaped by lignite-fired power stations rather than gas-fired facilities for many hours in the day, even during peak demand, data has shown.

The lignite-fired power stations Agios Dimitrios IV, Megalopoli III, Kardia II and Amynteo I all shaped Greece’s SMP levels for a significant number of hours last week.

Megalopoli IV and Meliti, two of the main units included in PPC’s bailout-required disinvestment of lignite units, remain among the most competitive units capable of withstanding the pressure of competition even amid conditions of heightened CO2 emission right prices at levels of 18 euros per ton.

Prospective bidders of the PPC lignite units will certainly take this into consideration and follow the electricity market developments closely until October, when they will be expected to submit binding bids for the power utility units. The investment risks prompted by heightened CO2 emission right prices in Europe will also play a crucial role in the decisions of investors.

 

 

High hydropower, RES output, exports prompt SMP swings

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The Greek electricity wholesale market’s System Marginal Price (SMP) has fluctuated wildly over the past three days, ranging from zero to 75 euros per MWh, key driving factors being the need to lower overfilled water reservoirs at hydropower facilities, increased RES sector output, as well as elevated electricity prices in Italy, which has spurred exports to the neighboring market.

Hydropower facilities have steadily provided 30,000 MWh over the past three days, while, during this period, RES output has risen to as much as 41,000 MWh, meaning the two sources have covered over half the country’s daily electricity needs.

Electricity imports rose to levels ranging from approximately 10,000 to 16,000 MWh over the past three days, while high prices in Italy have prompted electricity exports of roughly 9,000 MWh per day. This export activity has impacted Greece’s SMP during certain hours.

Last Sunday, for nine hours in total, the SMP was down to zero, whch lowered the day’s average SMP to just 29.41 euros per MWh. The increased contributions to the system by the hydropower and RES sectors left no room for imports, leading to the day’s zero-level SMP.

A day later, on Monday, the SMP rose sharply to 53.7 euros per MWh, and, for two hours, climbed even higher to over 75 euros per MWh, a level shaped by high-priced electricity exports to Italy.

A similar picture has prevailed today with the average SMP level positioned at slightly below 51 euros per MWh, as well as high-priced exports to Italy, which took the SMP to 71 euros per MWh for an hour.

The higher average SMP registered yesterday and today led to an increase in thermal production, reaching 52,000 MWh.

SMP plunges amid need to lower hydropower reservoirs

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The oversupply of water at the main power utility PPC’s hydropower facilities, resulting from recent periods of heavy rainfall, is significantly impacting the market as a subsequent need to increase the use of these hydropower facilities, the intention being to lower water reserve levels and avoid any overflow-related threats, is drastically limiting contributions to the system by thermal units (lignite and gas-fired power stations).

Wholesale electricity prices have plunged as a result of these unusual conditions. Water reserves at PPC’s hydropower facilities now exceed the maximum level by 15 percent and offer a capacity of 2,835 GWh. The maximum level permitted, for this time of the year, is 2,460 GWh.

As a result, PPC will need to generate 375 GWh of electricity with its hydropower facilities to bring water levels at reservoirs back down to normal. A further influx of water into the power utility’s reservoirs is soon expected once snow coverage begins to melt.

The duration of PPC’s water reservoir emptying period remains unknown. Future rainfall and snow melting rates will obviously play a role.

This excess water supply, along with renewable energy output, has priority dispatch rights. The current conditions are subsequently limiting contributions to the system by thermal units.

Day-ahead market data released for today by LAGIE, the Electricity Market Operator, noted that hydropower and RES facilities would cover 55 percent of total electricity demand. Hydropower facilities were planned to provide 33,508 MWh of the 136,596 MWh total, while RES facilities would dispatch 41,674 MWh. A further 10,000 MWh was planned to be imported, bringing the total to just over 85,000 MWh. This left about 51,000 MWh for the thermal units to cover.

The impact on the market is immense. According to the LAGIE data, the System Marginal Price (wholesale price) was set at 2 euros per MWh early in the day and later in the evening, and at 5 euros per MWh for a further three hours during the day. All this resulted in an extremely low SMP average for the day, at 32.18 euros per MWh. The maximum price for the day reached 50.46 euros per MWh.

Four of the five PPC Agios Dimitrios lignite-fired power station units, as well as the power utility’s Kardia IV, Megalopoli III, Amynteo II and Meliti were called into action for the lignite-fired electricity supply to the grid.

As for the natural gas-fueled units, PPC’s Aliveri V and Megalopoli V were called into action along with private-sector units, for limited periods, operated by ENTHES, Elpedison, Protergia and Korinthos Power.

 

 

 

Megalopoli V launch ready, hidden unit costs disclosed

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The main power utility PPC’s new Megalopoli V power unit, which has been put through an extended trial run, offering the facility priority system rights, is now set for its commercial launch.

A related statement by IPTO, the power grid operator, has been delivered to RAE, the Regulatory Authority for Energy, which is expected to approve the power plan’s launch within the next few days, sources said.

Once commercially launched, Megalopoli V will need to offer competitive prices shaped by its variable costs, a development that is expected to impact the wholesale electricity market.

The first signs of impact have become apparent over the past few days. The utility has temporarily stopped operating, following the trial run’s completion, which has led to an increase in the level of lignite-fired electricity production as well as higher gas-fueled generation by independent units, currently finding more space in the market, as suggested by day-ahead market data released by LAGIE, the Electricity Market Operator.

According to this data, the heightened activity of lignite-fired units has disclosed the high variable costs of certain units, especially during hours when these units are shaping the System Marginal Price (SMP).

It has become apparent, for example, that PPC’s Agios Dimitrios units will today exceed 56 euros per MWh, a cost level carrying notorious utility issues such as overstaffing and bloated remuneration packages.

According to LAGIE’s day-ahead market data, PPC’s Agios Dimitrios 2 is today offering an SMP of 59.22 euros per MWh, Agios Dimitrios IV is at 56.2 euros per MWh and Kardia at 54.5 euros per MWh. Quite clearly, such levels offer plenty of capacity for correction and cost reduction, as is expected to be highlighted in a study now being conducted by the consulting firm McKinsey.

The timing of Megalopoli V’s commercial launch does not appear to have been left to chance. Its 500 MW to be offered to the system will be added to the CATs to be targeted by PPC. (It should be noted that this new unit is actually an 800-MW facility but 300 MW remains unavailable because the network has yet to be upgraded.

 

 

 

Lifting purchase price restrictions would trouble power producers

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Target model positions supported by energy-intensive industrial energy consumers in a public consultation procedure staged by LAGIE, the Electricity Market Operator, have brought to the fore a proposal calling for the abolishment of minimum-price limits on electricity purchases.

The abolishment of minimum-price limits on electricity purchases has raised concerns over the sustainability of independent electricity producers.

LAGIE’s proposal entails setting a minimum price limit on electricity  purchase offers that is equal to the variable costs of each electricity producer.

Though all sides acknowledge that restrictions will eventually be lifted amid the new market model, certain players support that minimum purchase price limits are currently needed to protect market liquidity.

The operator and certain market players contend that the market is not yet mature enough for restriction-free offers, which, they believe, would threaten the sustainability of independent electricity producers.

According to sources, market authorities want to maintain minimum purchase price limits as their abolishment would reduce the System Marginal Price (SMP) by 10 euros per MWh, a study has indicated.

Such a development would be favorable for the main power utility PPC, which, as the market’s biggest supplier, purchases significant electricity amounts to cover its needs.

Consumers, especially major-scale consumers such as steel industries, would also benefit as their energy costs could be significantly reduced during low-demand hours, especially at night.

The target model is aiming to harmonize the electricity wholesale market with EU standards.

 

 

 

SMP, up €18 during PPC market test, discouraging for investors

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Greece’s System Marginal Price (SMP), representing the wholesale electricity price, has risen by as much as 18 euros per MWh during a market test held as a prelude to PPC’s bailout-required sell-off of lignite units. The rise was determined by the utility’s Meliti unit, included in the sale package.

This increase is not expected to bode well with investors contemplating the upcoming PPC sale of lignite units.

On December 1, at 2am, the SMP, shaped by the Meliti unit, registered at 40.421 euros per MW. Today, at 10am, the SMP, once again shaped by the Meliti unit, reached 58.087 euros per MWh.

Responses by prospective investors to a market test questionannaire prepared by the European Commission’s Directorate-General for Competition and concerning the PPC sale have now been collected by Brussels authorities and are currently being processed. The feedback is believed to be unfavorable.

The major price fluctuation caused by PPC’s Meliti unit could simply be technical. For example, maintenance costs over the past month may have been factored into calculations. However, this SMP rise could also be related to the market test and overall sale procedure.

 

Grid already pressured ahead of winter, SMP level high

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Though still only autumn, the country’s grid is already beginning to feel growing pressure, as reflected by yesterday’s elevated System Marginal Price (SMP), which exceeded 90 euros per MWh. A similar trend is expected today.

The pressure being felt by the grid has been attributed to the excessive use of the country’s hydropower stations during the energy crisis last winter. Hydropower station reservoirs have yet to be refilled.

Conditions could prove difficult in the winter if weather conditions are acute and the grid is subject to any unexpected input problems.

At present, all private-sector power stations are available for grid contributions, while, as for the main power utility PPC, its Komotini and gas-fired Megalopoli V units are undergoing maintenance work, Agios Dimitrios II and V are being upgraded, and Kardia I and IV have issues.

Yesterday evening, between 7 and 9 pm, Terna’s small Heron unit was called into action for contribution to the grid. This unit had remained inactive for an extended period prior to yesterday.

Also yesterday, SMP levels were impacted by extremely elevated hydropower price levels for three hours. PPC’s Platanovrisi hydropower facility came into use last night to help cover the grid’s needs at price levels of as much as 91 euros per MWh.

Greece’s hydropower station reservoirs are currently at the second-lowest level since 2005.

Yesterday’s grid contributions also included several hours of input from the Former Yugoslav Republic of Macedonia (Fyrom) grid, at price levels of more than 70 euros per MWh.

According to forecasts, the electricity market will continue operating amid such conditions for as long as Megalopoli V is sidelined by the ongoing maintenance work.

 

 

Heavy winter, heatwave drive up first-half SMP average

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The System Marginal Price (SMP), or electricity wholesale price, averaged 53.11 euros per MWh in the first half of 2017, driven up by last winter’s energy crisis, especially developments during the month of January, when the SMP rose sharply to 74.595 euros per MWh, data provided by LAGIE, the Electricity Market Operator, has shown.

The SMP averaged a far lower level of 46.961 euros per MWh between March and May. However, in June, the SMP gained 5.587 euros per MWh compared to May. Higher temperatures, combined with higher tourism industry-related demand, played a role in this rise.

Overall, the average SMP for the first half of 2017 rose considerably compared to the equivalent period a year earlier, gaining 23.965 percent. A year-on-year rise of 15.695 percent was registered for the four-month period covering March to June.