target model

Consumers paying the price for balancing market turbulence

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Low and medium-voltage consumers – households, businesses, small-scale producers and industrial producers – are paying the price for the target model’s persisting market turbulence that has led to higher wholesale prices, especially in the balancing market, nearly three months after the launch of new markets.

Interventions made by authorities have yet to fully resolve issues and offer market stability.

Additional costs have been passed on to consumers despite no official price-hike announcements by electricity suppliers.

In the medium-voltage category, prices have risen to levels of between 67 and 69 euros per MWh from 59 to 61 euros per MWh prior to November’s launch of target model markets, introduced as a step towards harmonizing Greece’s market with EU markets.

The market turbulence has also overwhelmed consumers in the low-voltage category, where prices have risen consistently.

With the exception of the power utility PPC, whose prices have remained steady as the company’s supply contracts do not include wholesale market-related clauses, independent suppliers have passed on their elevated electricity purchasing costs to consumers through higher tariff rates. Most independent suppliers include wholesale market clauses in their supply agreements.

Making matters more troubling and confusing for consumers, independent suppliers each employ different wholesale market clause-activation levels and resulting pricing formulas, meaning it is difficult to tell whether their supply terms are being adhered to or not.

Price hikes by independent suppliers have ranged from 7 to 35 percent, electricity bills sent to energypress by frustrated consumers show.

At present, there is no sign of any price de-escalation. The cost of wholesale electricity in the balancing market has remained on an upward trajectory. Last week (January 18-24), price levels averaged 10.82 euros per MWh, up from 7.77 euros per MWh in the previous week.

The wholesale market clauses of independent suppliers are expected to keep producing price hikes for some time even if possible additional measures by RAE, the Regulatory Authority for Energy, lead to an overall price de-escalation. This is due to a latency between the wholesale clearing procedure and clause activation.

 

Retroactive enforcement of balancing market rules sought

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Non-vertically integrated electricity suppliers are seeking retroactive implementation of measures introduced recently by RAE, the Regulatory Authority for Energy, to contain balancing market prices at rational levels.

Balancing market costs rose sharply in the weeks following November’s launch of new target model markets, prompting an escalation of wholesale electricity prices that severely increased the purchasing costs of non-vertically integrated electricity suppliers.

These suppliers are now determined to seek returns from RAE and power grid operator IPTO for additional outlays prompted by flaws in balancing market rules that were not detected until after the launch of new markets.

A set of new rules just introduced by RAE constitute recognition by the authority of the abusive behavior practiced by producers prior to the intervention, the suppliers contend.

Non-vertically integrated electricity suppliers are pushing for even stronger measures. They believe the new rules rely too much on the goodwill and cooperation of producers, still able to return to irrational behavior and consequently threaten the sustainability of firms and financially pressure consumers.

On the same wavelength, EVIKEN, the Association of Industrial Energy Consumers, has criticized RAE for backing away from its own proposals, noting industrial energy costs currently depend on whether balancing market participants will exercise pricing restraint.

Key issues in new minister’s first session with EC officials

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Today’s first meeting, via teleconference, between Greece’s recently appointed energy minister Kostas Skrekas and European Commission authorities, as part of Brussels’ ninth post-bailout review, will focus on four key issues: power utility PPC’s lignite monopoly; the proper functioning of target model markets; energy-sector privatizations, and the decarbonization plan for west Macedonia, a lignite-dependent area in the country’s north.

The four issues were addressed in preliminary talks last week between Alexandra Sdoukou, secretary-general of Greece’s environment and energy ministry and Brussels technocrats.

It remains to be seen if the European Commission will again commend Athens, and to what extent, for the target model’s functioning, as Brussels had done last November, when the model’s new markets in Greece were launched as a step to harmonize EU energy markets.

However, weeks into the launch, balancing market costs skyrocketed, leading to sharply increased wholesale electricity prices. RAE, the Regulatory Authority for Energy, is now considering to introduce an adjustable price-containing measure to be set as a percentage of day-ahead market prices.

The European Commission, in the latest talks, can also be expected to push for the launch of a market test concerning an agreement offering independent players access to PPC’s lignite-based electricity production.

Though the interest of independent players for lignite-based electricity may have diminished given its increased cost, this antitrust case, unresolved for years, remains a big concern for the government as Brussels could associate it with pending Greek issues.

The complexity of PPC’s lignite monopoly case was deepened following a decision by the previous energy minister, Costis Hatzidakis, to bundle the matter with a Greek compensation request based on the utility’s need to keep running lignite-fired power stations for energy sufficiency. According to reports, his successor, Skrekas, will not sway from this policy.

As for energy-sector privatizations, a sale plan for gas supplier DEPA Commercial has attracted considerable interest but officials are concerned as parent company DEPA is embroiled in an ongoing lawsuit with ELFE (Hellenic Fertilizers and Chemicals).

DEPA has appealed a verdict awarding the producer a compensation amount of 60 million euros following overcharging claims. The case could be deferred until September, meaning binding bids by possible DEPA Commercial buyers may need to be delayed.

Greece’s decarbonization master plan features 16 key investment proposals that are expected to create over 8,000 jobs, directly and indirectly, in lignite-dependent areas. However, numerous complex matters need to be resolved, including the transfer of related property controlled by PPC, Brussels’ approval of a series of incentives for new investments, and scores of licensing issues.

Greek-Italian market coupling boosts transaction efficiency

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The Greek-Italian electricity market coupling of day-ahead markets, launched on December 15 as part of the target model, is living up to its expectations as a safety valve facilitating optimal electricity flow between countries.

The initiative, operating through a single price coupling algorithm, EUPHEMIA (Pan-European Hybrid Electricity Market Integration Algorithm), which calculates energy allocation, net positions and transboundary electricity prices, has run smoothly since its launch over a month ago.

Greek-Italian transboundary electricity transactions admittedly enjoyed a high level of maturity prior to the introduction of market coupling, courtesy of reliable price forecasts by participants for the Greek and Italian markets.

A grid interconnection, in the form of a 163-km, 400-kV voltage and 500-MW capacity subsea cable, has been in service since 2002.

However, the market-coupling initiative has taken the efficiency of these transboundary Greek-Italian electricity transactions to a higher level as auctions allocating grid interconnection capacities are no longer required.

Since the mid-December coupling of the Greek and Italian energy markets, electricity has constantly flowed from the market offering lower prices to the higher-priced market, proving this market system’s ability to utilize interconnections to their fullest.

Market coupling of the Greek and Bulgarian day-ahead markets is planned to follow, its launch scheduled for spring.

An increased number of interconnected electricity markets promises to give the Greek wholesale electricity market a regional role. However, transboundary grid interconnections will need to be upgraded if this is to be achieved.

Balancing market costs subdued for second consecutive week

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Balancing market costs remained subdued for a second consecutive week, the total cost of three uplift accounts, according to official data provided by power grid operator IPTO, registering 5.87 euros per MWh in the tenth week since the November 1 launch of the target model. Its introduction prompted sharp balancing cost increases in the first few weeks.

More specifically, the uplift 1 account reached €1.39 per MWh, uplift 2 was €0.79 per MWh, and uplift 3 registered €3.69 per MWh.

According to IPTO data on the three uplift accounts during the first ten weeks of the target model, their total cost was €8.37 per MWh in the first week, climbed to €15.68, €19.45 and €20.06 per MWh in the second, third and fourth weeks, respectively, before peaking at €43.37 per MWh in the fifth week. The uplift total then plunged to €8.08 per MWh in the sixth week, before eventually falling further to levels of €5.74 and €5.87 per MWh in the ninth and tenth weeks, respectively.

Day-ahead market prices have also been low over the past two weeks of subdued balancing market costs, meaning the overall cost in the wholesale market has dropped.

Low electricity demand as a result of the mild winter weather, so far; the lockdown measures, even if not absolute; more accurate electricity demand forecasts by power grid operator IPTO; as well as increased output by RES and hydropower units, have all been cited as factors in the reduced cost of wholesale electricity.

In addition, more rational offers by producers have also contributed to the normalization of balancing market prices.

Balancing market prices down for third successive week

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Balancing market price levels have fallen considerably for a third consecutive week, between December 21 and 27, latest figures published by power grid operator IPTO have shown.

According to this data, the balancing market price averaged 7.18 euros per MWh for the seven-day period, considerably lower than levels of about 10.5 euros per MWh registered a week earlier.

RAE, the Regulatory Authority for Energy, is making an effort to normalize the target model’s new markets, launched two months ago.

Balancing market prices rose sharply during the first few weeks of the launch, especially troubling non-vertically integrated suppliers and forcing the authority to prepare a price ceiling for producer offers.

The recent downward trajectory in balancing market prices has been interpreted as an effort for price restraint by producers.

RAE now considers that it should wait before imposing tough restrictions on producer offers.

 

 

New minister, just appointed, has issues to resolve in 2021

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Kostas Skrekas, just appointed new energy minister as part of the government’s cabinet reshuffle, in place of Costis Hatzidakis, who has headed the ministry for a constructive year and a half, faces a series of pending energy-sector matters that remained unresolved in 2020. They need to be addressed as soon as possible. Developments and conditions this year will be pivotal for these matters.

Skrekas was previously deputy minister for agricultural development and food.

Also in 2021, a year during which takeovers and mergers are seen occurring in the retail electricity and gas markets, rivals will continue battling for market share gains. The target model’s launch two months ago has brought about new conditions, strengthening the positions of vertically integrated suppliers.

The need for a normalization of the target model’s new markets stands as the energy ministry’s most pressing task at present. A sharp rise in wholesale electricity prices as a result of soaring balancing market costs has deeply unsettled the market, impacting the standings of non-vertically integrated suppliers, as well as industrial enterprises and consumers, who face rising bills.

Market coupling with Bulgaria’s day-ahead market, scheduled to take place within the first three months of the new year, is the next step of the target model, a procedure designed to harmonize EU energy markets and promote competition.

New energy-intensive industrial tariffs also need to be set soon. Though essentially a matter concerning state-controlled power utility PPC and Greece’s industrial players, the cost of industrial energy is crucial for Greek industry, carrying particular political and economic weight.

Also, Greece has little time left in its negotiations with Brussels for a framework to offer third parties access to PPC’s lignite-based generation. This issue is no longer as crucial as it once was because the country’s lignite output has been drastically reduced. Even so, it remains important for independent suppliers.

A number of energy-sector privatizations could be completed this year. Gas utility DEPA’s two new entities, DEPA Infrastructure and DEPA Commercial, electricity distribution network operator DEDDIE/HEDNO, and a tender for a tender for the development of an underground natural gas storage facility (UGS) in the almost depleted natural gas field of “South Kavala” in northern Greece are all on this year’s privatization list.

In renewable energy, the ministry needs to take decisions within the first few months to clarify terms regulating the sector. RES investment interest is currently high. Steps still need to be taken in an ongoing effort to simplify RES licensing procedures, while a legal framework must be established for energy storage, offshore wind farms and hydrogen use.

 

Zenith, Fysiko Aerio, Watt+Volt want lower price ceiling for producers

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Three non-vertically integrated electricity suppliers, Zenith, Fysiko Aerio (Attiki GSC) and Watt+Volt, have called for a further reduction to an upper limit proposed by RAE, the Regulatory Authority for Energy, for producer offers in the balancing market.

The three suppliers expressed their common view through a joint letter forwarded to a public consultation procedure staged by RAE on the matter.

Balancing market costs have soared since the launch of the target model’s new markets several weeks ago, placing non-vertically integrated suppliers under great pressure.

In other proposals, Zenith, Fysiko Aerio and Watt+Volts also called for retroactive implementation of the price ceiling proposal, from November 1.

The trio described the balancing cost surge of the past few weeks as a “brutal transfer of wealth”, warning that retroactive enforcement of the measures proposed for the restoration of a smooth-operating balancing market, from its very first day, represents the last resort to avoid legal disputes between parties involved.

 

IPTO to cover balancing costs if its discrepancies are hefty

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The projection of required system reserves has been identified as one of the problems increasing balancing market costs, RAE, the Regulatory Authority for Energy, seeking to resolve the issue for properly functioning target model markets, and power grid operator IPTO, responsible for the balancing market, have both determined.

The reserve amount is directly linked to IPTO forecasts on the grid’s needs, at high and low levels. Either way, producers are compensated for adding or removing energy from the system.

Responding to the sharp rise in balancing costs since the target model launch of new markets several weeks ago, RAE, the Regulatory Authority for Energy, is preparing to make a change to the current framework by adopting a formula that would offer IPTO an incentive for forecasts that are as accurate as possible so as to avoid large discrepancies.

The authority is looking to impose a discrepancy limit, which, if exceeded, either at low or high levels, will require IPTO, not electricity suppliers, to cover resulting costs.

RAE has also forwarded for public consultation another revision entailing special discrepancy charges for the Peloponnesian grid until a 400-KV transmission line begins operating in the area.

 

 

Target model decision needed in 2021, Elpedison chief points out

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The new year will demand a decision from authorities and market participants on whether a true target model for the electricity market is desired, Nikos Zahariadis, chief executive at Elpedison, has pointed out in an article published by energypress as part of a feature on 2021 prospects.

The market was caught by surprise during the launch of the new electricity market in the final weeks of 2020, the official pointed out. Balancing market costs rose sharply during this period.

Most authorities and participants were expecting a different development, including a solution for the market’s chronic “missing money” problem, as well as a drop in retail electricity prices, Zahariadis noted, expressing belief that the new year will present an opportunity, even for the unprepared, to adjust to the new conditions that will ultimately enable the new energy market to operate without restrictions and showcase its advantages.

However, the new market, even when it has matured and stabilized, will still pose threats, especially for players seeking to keep distinctly separate retail and production portfolios, as protection against price manipulation has stopped functioning since the launch of the target model, he pointed out.

Looking towards the future, a gradual prevalence of the RES sector is discernible, as long as economically feasible energy storage technology is developed, Zahariadis projected. Until then, the grid will rely on natural gas-fueled power stations, the only flexible solution available at present, he added.

As for the natural gas sector, two unrelated events late in 2018, the first being an expansion at the Revythoussa LNG terminal facilities that enables bigger tankers to dock, and the second, a drop in LNG prices, have brought about permanent change in the Greek market, the Elpedison official noted.

Market players responded swiftly with LNG imports, prompting gas price reductions along with concurrent electricity price reductions. Also, the first steps were taken towards the establishment of a Balkan hub for transboundary LNG sales, Zahariadis noted.

More gas market opportunities will be offered in 2021 through the TAP project’s functioning, the company official pointed out.

Elpedison has played a leading role in sector developments, capitalizing on opportunities by importing significant LNG amounts and capturing a key position in the wholesale gas market, Zahariadis added.

The completion of equipment procurement tenders for a new 800-MW combined cycle power station, a project that will enable Elpedison to double its production as of 2023 and gradually increase sales to higher levels, stands as the company’s biggest challenge in the new year, he noted.

Suppliers want lower price limits for producers, retroactive returns

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Electricity suppliers are demanding a further reduction to a price ceiling proposed by RAE, the Regulatory Authority for Energy, for balancing market offers by gas-fueled producers, and, in addition, also want an upper limit of 3.5 euros per MWh imposed on compensation for this service.

This 3.5-euro compensation rate per MWh, which reaches approximately 5 euros per MWh when system-loss charges are added, is one of the highest in Europe, suppliers contend.

Suppliers also want electricity and balancing market cost limits to apply retroactively as of November 1, 2020 with returns of resulting amounts owed by the end of this accounting year.

Non-vertically integrated electricity suppliers have reacted strongly against sharply increased balancing market costs and far higher wholesale electricity prices since the launch of the target model’s new markets several weeks ago.

Three of the country’s non-vertically integrated electricity suppliers took part in public consultation staged by RAE, the Regulatory Authority for Energy, to present their objections and proposals, energypress sources informed. The procedure ended yesterday.

 

EVIKEN requests balancing market restrictions for at least 6 months

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EVIKEN, the Association of Industrial Energy Consumers, wants a price ceiling imposed for at least six months in the balancing market, warning producers are seeking to elevate industrial electricity tariffs despite the absence of any corresponding production cost increases.

Restrictive measures for a three-month duration, as proposed by RAE, the Regulatory Authority for Energy, in its related public consultation procedure would not suffice, EVIKEN warned.

The association, in a letter submitted to the public consultation procedure, also requested retroactive implementation of a price ceiling in the balancing market, beginning November 1, 2020.

Balancing market costs have risen sharply since the launch of new target model markets six weeks ago, pushing up wholesale and retail electricity prices.

The electricity market’s current structure enables oligopolistic practices that are not subject to monitoring, EVIKEN noted in its letter.

RAE consultation on balancing market restrictions ends today

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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.

 

 

RAE discusses balancing market ceiling with producers

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RAE, the Regulatory Authority for Energy, is staging a series of meetings today with major-scale electricity producers to discuss its proposal, forwarded for public consultation last Thursday, for the imposition of a price ceiling on offers made by producers in the balancing market. Its price levels have risen sharply since a launch several weeks ago as part of the target model’s new markets.

Representatives of three electricity producers, power utility PPC, Protergia and Elpedison, all vertically integrated, have been invited by the authority to separately present their views on its price-ceiling proposal before they submit their official views to the matter’s public consultation procedure by tomorrow morning’s 11am deadline.

Producers operating gas-fueled power stations are generally believed to oppose the prospect of a price ceiling on their offers, as they consider the balancing market to be a useful tool measuring supply and demand in the electricity market, as is the case around Europe.

RAE has attached a three-month limit on the duration of its price-ceiling proposal. Restrictive measures such as the authority’s proposal are generally not embraced by the European Commission, as RAE chief executive Thanassis Dagoumas has admitted.

Non vertically integrated electricity suppliers, hit hard by price rises in the wholesale electricity market, of which the balancing market is a component, have called for the restrictive measure to take retroactive effect. This is considered an unlikely prospect by market officials.

Many critics of the target model preparation procedure had warned that its new markets should not begin operating unless a RAE monitoring mechanism is in full working order.

Latest market data published by power grid operator IPTO showed a mild de-escalation of balancing market price levels to between 12 and 13 euros per MWh for December 7 to 13, the new target model’s sixth week, but these levels are still regarded as being excessive.

Market restrictions on the way for electricity cost reduction

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Energy minister Costis Hatzidakis’ recommendations to gas-fueled electricity producers for price restraint in the market have proven to be just partially effective, prompting RAE, the Regulatory Authority for Energy, to forward for public consultation restrictive measures, which, when legislated, will limit the levels of offers by producers in the balancing market.

Balancing market costs have risen sharply over the past six weeks, since the launch of target model markets, leading to elevated wholesale electricity prices that are now being passed on to the retail market, affecting consumers in the mid and low-voltage categories – households and businesses.

Sixth week target model market data made briefly available yesterday by power grid operator IPTO before being swiftly removed from the company website admittedly showed a de-escalation of price levels compared to unrealistically high levels reached in recent weeks, but, on average, these latest levels remained considerably high.

Taking this latest data into consideration, along with sharp price hikes recorded in the day-ahead market, the energy ministry is fully aware of the fact that electricity market prices could spin out of control if action is not taken.

The package of measures forwarded by RAE for public consultation is intended to restore market rationalization. It remains to be seen if these measures will prove effective.

Non vertically integrated electricity suppliers, hit hard by the increase in wholesale prices, are pushing for retroactive implementation of these upcoming restrictions.

 

EVIKEN chief warns of wholesale market crisis impact on industrial sector

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The head official of EVIKEN, Greece’s Association of Industrial Energy Consumers, has warned of dangers faced by the industrial sector as a result of higher wholesale electricity prices and serious balancing market issues.

Balancing market costs have spun out of control amid the pandemic, whilst the market, as currently structured, enables players to achieve windfall profits by differentiating their offers in the day-ahead and balancing markets, Antonis Kontoleon, the EVIKEN chief, pointed out in comments to energypress.

Players are overstating grid needs or understating RES output projections, or doing both, a tactic that further increases the need for far greater energy quantities and leads to higher energy prices, Kontoleon warned.

 

Suppliers, alarmed by higher balancing market cost, respond

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Non-vertically integrated electricity suppliers, badly hit by sharply increased balancing market prices, as much as five times higher than pre-target model levels, will hold a virtual meeting today with officials at the European Commission’s Directorate-General for Competition to point out the target model’s negative impact on electricity market competition.

Power grid operator IPTO and RAE, the Regulatory Authority for Energy, have taken action and market officials are awaiting results.

Last Friday, RAE’s leadership held a series of meetings with supply company representatives.

Some non-vertically integrated suppliers have already taken legal action while others are expected to follow suit.

RAE had initially received requests by suppliers for temporary measures entailing an immediate suspension of their balancing market financial obligations. The authority did not respond, prompting suppliers to lodge a complaint with RAE against IPTO for a breach of obligations.

Suppliers, through their complaint, are demanding revisions from IPTO, with retroactive effect, as well as the imposition of a fine on the operator that corresponds to the losses incurred by non-vertically integrated suppliers since the target model’s launch of new markets over a month ago.

 

Target model balancing cost skyrockets, suppliers on edge

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Balancing costs in the electricity market have exceeded rational limits, skyrocketing to 57 million euros in the fifth week of the target model after totaling 71 million euros during the model’s first four weeks of operation.

Stubbornly high price levels in the wholesale electricity market have created perilous conditions that could lead non-vertically integrated suppliers to bankruptcy, while consumers, beginning with the mid-voltage category, now face tariff hikes as a consequence.

Balancing market costs between November 30 and December 6 doubled compared to a week earlier.

Despite energy minister Costis Hatzidakis’ warning of intervention to producers, whose overinflated offers have prompted this ascent, balancing market costs on December 5 and 6 exceeded 20 euros per MWh, well over levels of between 3 and 4 euros per MWh prior to the target model.

The target model, designed to ultimately homogenize EU energy markets into a single unified market, has been pitched by the Greek government as a price-reducing tool.

Though authorities have played down the price ascent of recent weeks, describing it as a nascent target model abnormality that will settle into place and not prompt consumer tariff hikes, suppliers, under severe pressure as a result of sharp cost increases, have called for immediate measures.

Suppliers have warned they will take legal action against all responsible parties in letters forwarded to the RAE, the Regulatory Authority for Energy, the energy ministry and power grid operator IPTO.

RAE held a meeting yesterday with major-scale producers, who defended their actions, according to sources. The authority limited its reaction to proposals, the sources added.

IPTO, Terna plan Greek-Italian link boost of up to 1,000 MW

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Power grid operator IPTO is taking initiatives to upgrade Greece’s interconnections with neighboring countries, acknowledging transboundary grid link insufficiencies are having a negative impact whose consequences include market functional disorders and higher electricity prices.

The operator has formed working groups with all of Greece’s neighboring countries to examine the prospect of constructing or reinforcing existing interconnections.

These associations include cooperation with Italian operator Terna. The two sides, prepared to consider both an upgrade of the existing system or the development of a new one, estimate that the Greek-Italian grid interconnection requires a capacity increase of between 500 and 1,000 MW.

According to sources, IPTO and Terna have agreed to proceed with related studies for an optimal solution as soon as possible. The operators intend to reach a decision within the next few months. Any selection will need to be approved by the Greek and Italian regulatory authorities of energy.

IPTO intends to include this project in its ten-year development plan covering 2022 to 2031, expected to be presented at the end of the year.

The existing Greek-Italian electricity grid interconnection, a 163km subsea cable with a 500-MW capacity in operation since 2002, will be used to facilitate the target model’s next stage, market coupling, beginning on December 15 with the aim of harmonizing the energy markets of the two countries.

ENTSO-E, the European Network of Transmission System Operators for Electricity, has pointed out that a Greek-Italian grid interconnection boost will be needed for an effective bridging of prices between the two countries.

Greek-Italian market coupling, soon, target model’s next step

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Domestic market players and officials are eagerly awaiting to see how the target model’s next stage, Greek and Italian day-ahead market coupling, scheduled for December 15, will influence wholesale electricity prices.

Wholesale electricity prices in the day-ahead market and, especially, the balancing market, have escalated since the target model launch in Greece a month and a half ago.

Greece’s market coupling with Italy will be a crucial step as it promises to take Greece to the essence of the target model effort, namely gradual unification of national energy markets – electricity and gas – into one common European market.

Once market coupling is established between Greece and Italy, energy will flow from the country with lower energy prices to the higher-cost country – to the extent permitted by grid interconnection capacities – until price discrepancies have evened out.

All preliminary work for next week’s Greek-Italian market coupling launch has been successfully completed. An ongoing dry-run procedure involving simulated trading will continue until December 12.

The market coupling launch, three days later, is on schedule, the Greek energy exchange has informed RAE, the Regulatory Authority for Energy.

Market coupling of Greece and Italy’s balancing markets will take place at a latter date, while Greek-Bulgarian market coupling is planned for early in 2021.

RAE preparing to grant its first energy storage system licenses

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RAE, the Regulatory Authority for Energy, is preparing to grant its first ever licenses for battery energy storage systems following a related board decision last week.

The authority opted to base its decision on a rule from 2000 concerning electricity generation units as specific legal framework for installations of such energy storage systems does not exist.

RAE was prompted to move ahead with this licensing plan following interest by investors for installations of large-scale battery energy storage systems. Also, the new target model markets have shown a need for a flexible national grid.

“Markets are sending messages that illustrate a need for flexible units,” RAE president Thanassis Dagoumas pointed out.

The development of a new legal framework designed specifically for battery energy storage systems would have taken many months, the RAE chief noted, explaining the authority’s decision to move forward by utilizing the rule from two decades ago on electricity generation units.

“We analyzed avenues taken by regulatory authorities in other countries for the creation of their frameworks and determined that they have not addressed the subject in any uniform way,” Dagoumas said. “Some see these storage units from the perspective of production while others relate them to production and consumption.”

Target model markets showing signs of price de-escalation

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Price levels in new target model markets – the day-ahead market and the balancing market – are showing signs of de-escalation following sharp wholesale electricity price rises over the past month that have caused major unrest among suppliers.

Though balancing market prices over the weekend were at levels of around 20 euros per MWh, even higher than last Friday’s price level of 19 euros, market data indicates these levels will drop tomorrow.

Electricity producers have changed their pricing policy, lowering price offers submitted, which indicates that price reductions should be on the way.

The next few hours of trading will be pivotal in illustrating whether the balancing market price problem is a persisting one or not.

A reassessment of the situation will be made as of today before decisions are made, the energy ministry has announced. Last week, the ministry made clear it would not hesitate to intervene if wholesale prices remained elevated.

“The wholesale market price issue is a very significant one for the Greek economy and, under no circumstances, would we leave it unchecked,” a ministry official told energypress. “RAE [Regulatory Authority for Energy] is examining all available data and the government, too, has tools which it is prepared to use if the situation does not normalize,” the official added.

During the target model’s first month, the balancing market’s cost reached 36 percent of the equivalent cost for all of 2019, which had totaled approximately 200 million euros.

Ministry set to intervene if wholesale prices do not fall

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The energy ministry is seriously examining the prospect of imposing a price ceiling, next week, on wholesale electricity prices if they do not deescalate over the next three days.

Wholesale electricity prices have risen sharply since last month’s  launch of the target model, pitched by the government as a price-reducing tool.

Day-ahead market prices for today – based on offers made prior to on online meeting between energy minister Costis Hatzidakis and electricity producers – fell mildly to 77 euros per MWh from 90 euros per MWh on Thursday.

If current prices do not fall further, it is a matter of time before suppliers pass them on to the retail market. Prior to the target model, wholesale electricity price levels ranged between 55 and 60 euros per MWh.

Some suppliers are considering to activate cost-related clauses for their tariff prices, while others have done so already, sources informed.

Producers contend the ascent in wholesale electricity prices reflects actual market conditions, adding that their power stations were previously incurring operational losses under the preceding pricing system.

However, energy ministry officials believe producers are exploiting certain rules to artificially raise prices. Hatzidakis, the energy minister, has urged producers to heed the government’s call or face intervention as of Monday.

Wholesale prices surging with target model, ceiling considered

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The target model, pitched by the government as a price-reducing tool ahead of its recent launch one month ago, is developing into a major problem for the energy market as it has sparked a continual rise in wholesale electricity prices, which, if not brought under control, will eventually be rolled over to households and the industrial sector.

Mid-voltage tariffs are on an upward trajectory, while in the low-voltage category, many electricity suppliers are now reshaping clauses to incorporate increased costs.

The day-ahead market price for today reached 90 euros per MWh, up from 74 euros per MWh yesterday, and, prior to the target model, levels ranging between 55 and 60 euros per MWh.

This upward price surge has prompted strong concerns, even bankruptcy fears, among electricity suppliers who are not vertically integrated. Meanwhile, this worrying development has coincided with diminishing water levels at hydropower plant reservoirs.

The energy ministry has called for restraint from producers, warning it may need to intervene. The ministry’s secretary-general Alexcandra Sdoukou, in initial talks with producers yesterday, requested an end to overinflated prices, warning that a price ceiling may need to be imposed if the results are not satisfactory.

Whether such intervention could be implemented for an extended period remains unclear as measures of this nature are forbidden by the European Commission.

Elpedison’s Thessaloniki power station upgraded, target model-fit

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Elpedison’s power station in Thessaloniki, temporarily withdrawn on September 28 for a programmed upgrade, is set to start operating again at the end of this week.

The upgrade work, an investment worth approximately 20 million euros, was conducted to enhance the facility’s flexibility and performance, attributes that benefit in the target model’s new markets. The upgrade has also reduced the facility’s maintenance costs.

The power station’s increased flexibility enables operating level increase and decrease adjustments to be made with greater ease, while ignition emissions will now be far lower.

Elpedison has made clear its intent to invest in flexibility as demand for flexible units is expected to increase in the new target model framework.

The company’s Thessaloniki unit, a 400-MW facility constructed in 2006, had emerged as the first privately owned natural gas-fired power station in Greece.

Its development, including supplementary units needed to link the power station with the high-voltage and natural gas networks, cost a total of 250 million euros.

Balancing market cost hefty for suppliers, €27m in first 2 weeks

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Contrary to the satisfaction being expressed by natural gas-fueled electricity producers over the target model’s new markets launched three weeks ago, electricity suppliers, especially those not vertically integrated, find themselves having to pay considerably higher prices for their electricity purchases, which has raised sustainability concerns and could also lead to higher electricity costs for consumers.

Balancing market prices have more than quadrupled, reaching levels of as high as 15 euros per MWh, compared to approximately 3 euros per MWh in the market system used prior to the launch of the target model markets.

This drastic increase has raised concerns among suppliers, who fear the higher cost will eventually need to be rolled out to consumers.

The balancing market’s additional cost for suppliers totaled 27 million euros in the first fortnight of November.

The effort to balance the system is costing consumers millions more, overall, suppliers have warned, noting that, contrary to other European markets, initiatives taken to further liberalize the electricity market are raising rather than lowering price levels for consumers in Greece.

RAE, the Regulatory Authority for Energy, is closely monitoring the situation. The authority believes it is still too early to reach any safe conclusions on the balancing market. If, however, the current situation stabilizes into a permanent condition, RAE will intervene with corrective action, it has informed.