Gas spot market absence ‘key to higher wholesale electricity prices’

Greek gas market peculiarities and the non-existence of a spot market for natural gas were attributed as key reasons behind wholesale electricity market price differences between Greece and markets abroad, local electricity producers told RAE, the Regulatory Authority for Energy, following the authority’s request for explanations.

RAE held talks with representatives of power utility PPC, Mytilineos, Elpedison and Heron on the issue of wholesale electricity price levels.

The Greek gas market operates on a month-ahead model without the possibility for supply through spot markets, all four electricity companies told RAE.

At present, roughly half of the country’s electricity is generated by natural gas-fired power stations.

Energy exchange’s gas market trading details forwarded for public consultation

The Hellenic Energy Exchange has forwarded for public consultation a list of proposals it has submitted to RAE, the Regulatory Authority for Energy, concerning natural gas market details ahead of the prospective energy exchange trading of gas products.

Matters addressed include the procedure to be applied to determine energy exchange  participation rights, charges and commissions for gas product transactions, professional competence requirements as well as product specification rules.

According to one proposal, an annual subscription fee of 7,000 euros will be set for participants.

Also, daily commission fees of 0.005 per MWh for gas products traded in the day-ahead and intraday markets has been proposed.

The energy exchange’s public consultation procedure is planned to end August 31.

Energy exchange gas platform to be presented Monday

The energy exchange is nearing an expansion through the addition of a new trading platform for natural gas market products, scheduled to be presented by the Hellenic Energy Exchange and gas grid operator DESFA this coming Monday.

Related public consultation, already in progress, is planned to run until the end of August.

Until now, the Greek energy exchange has only facilitated electricity market trade.

The energy exchange, in association with DESFA, has been working on the new gas market platform since last year, the aim being to launch it within 2021.

The exchange’s new gas platform is expected to help establish Greece as a trading hub of geostrategic and geopolitical significance.

Gas market competition intensifies, TAP lowering prices

Competition has intensified in the country’s wholesale gas market at a time of changing conditions and negotiations for 2021 deals between importers and major-scale consumers, namely electricity producers and industrial enterprises.

Many gas supply contracts expired at the end of 2020, requiring a large number of players to renegotiate deals. Some of these big consumers have already reached new agreements with gas wholesalers.

Market conditions have changed considerably compared to a year earlier. Supply of Azeri gas through the new TAP route has already begun to Greece as well as Bulgaria, increasing overall supply, which has obliged, and permitted, gas utility DEPA to pursue a more aggressive pricing policy as the company pushes to absorb quantities it has committed to through clauses in existing contracts.

Also, the TAP-related increase of gas supply to Bulgaria, combined with this country’s inflow of Russian gas through oil-indexed price agreements, currently relatively cheaper, is now depriving Greek wholesale gas companies of entry into a neighboring market that was available for trading activity last year.

Furthermore, conditions have also been impacted by a competition committee decision no longer requiring DEPA to stage gas auctions to make available a share of its gas orders to rival traders. This measure was introduced and maintained to help liberalize Greece’s gas market.

The new conditions are pushing Greek traders towards more competitive pricing policies. They appear to have acknowledged that their profit margins will be narrower in 2021.

DEPA, helped by the fact that a sizeable proportion of its gas purchases is oil-indexed, is said to be playing a dominant role in the ongoing negotiations for new contracts with customers.

It should be pointed out that, unlike rival gas importers such as Mytilineos, Elpedison and Heron, all benefitting through self-consumption of a large part of their gas orders for gas-fired power stations they operate, DEPA does not self-consume.

Prometheus Gas, a member of the Copelouzos group, remains a formidable player, while the power utility PPC and petroleum company Motor Oil are less influential in the wholesale gas market.

Higher LNG prices, compared to pipeline gas, will decrease demand for LNG this year and weaken the interest of traders for LNG supply through gas grid operator DESFA’s Revythoussa terminal on the islet just off Athens. Last year, this facility was a hot spot of trading activity as a result of lower-priced LNG.

New market dry-run testing to end this week, target model launch on Nov. 1

The dry-run testing procedure for market systems ahead of the forthcoming target model launch, scheduled for November 1, will be finalized at the end of this week, RAE, the Regulatory Authority for Energy, the energy exchange and power grid operator IPTO have jointly decided.

Dry-run testing of the day-ahead, intraday and balancing markets began on August 3 to test their limits and operating ability ahead of the target model’s launch, aiming for market coupling, or harmonization of EU wholesale markets.

Market coupling, to increase competition and lower wholesale energy prices, will ultimately lead to energy union, the EU strategy seeking to offer consumers secure, sustainable, competitive and lower-cost energy.

All domestic parties involved, as well as the energy ministry, have ascertained the Greek launch will take place on November 1 following previous delays.

Even during these final days of simulated testing, day-ahead market prices have, at times, continued to display discrepancies with Day-Ahead Schedule price levels.

This has been attributed to the absence, from dry-run testing, of many traders who participate in the Day-Ahead Schedule, meaning the price levels of the two situations are based on different data.

Though balancing market prices have improved considerably as the simulated testing has progressed, following discrepancies, conclusions cannot be made until actual market conditions come into effect.

Meanwhile, public consultation by RAE on a market monitoring mechanism and a market surveillance mechanism for the new markets is due to be completed next Monday.

The market monitoring mechanism will seek, through structural and performance indicators, to evaluate levels of concentration and the market power of each participant, while the market surveillance mechanism will focus on identifying and combating strategies detrimental to competition.

The next step, once the new markets are launched, will be to market couple, initially with the Italian market, by the end of the year, followed by the Bulgarian market, in the first quarter of 2021, Greek energy minister Costis Hatzidakis recently informed.

 

 

DEPA, rebounding in wholesale market, looks to capture 40%

Gas utility DEPA appears set to regain lost ground in the wholesale market as a result of reduced gas prices negotiated over the past few months with international suppliers.

Talks for new deals between the company’s administration and customers, primarily electricity producers and retail gas firms, have indicated DEPA’s market share will increase this year.

DEPA expects a market share rise to a level of approximately 40 percent, up from 33 percent at the end of 2019.

The Greek gas utility recently renegotiated improved supply deals with Russia’s Gazprom and Algeria’s Sonatrach, while a favorable verdict by the ICC (International Court of Arbitration) in an overcharging case against Botas, Turkey’s state-run crude oil and gas company, came as an added boost. DEPA should receive a retroactive amount of around 200 million euros, according to an initial estimate.

DEPA’s revised Gazprom supply deal limits oil-indexed gas pricing to 60 percent of the total order. The other 40 percent will be priced in accordance with the Dutch gas trading platform TTF, one of Europe’s biggest hubs, where prices are significantly lower.

In mid-January, TTF price levels for LNG shipments in February were 14 euros per MW/h, including Greek gas grid entry costs, compared to over 20.5 euros per MW/h for pipeline gas, a 45 percent difference.

DEPA is currently also renegotiating the terms of its take-or-pay clause with Gazprom, requiring the Greek utility to absorb at least 80 percent of its annual contracted amount of 2 billion cubic meters, or 1.6 bcm.

As for Sonatrach, supplying LNG to DEPA, the Greek utility is believed to have reduced amounts and also achieved a discount.

DEPA’s contract with Gazprom, the utility’s biggest in terms of volume, runs until the end of 2026 with an option for a 10-year extension. ICC

The Greek gas utility’s second-biggest contract is with Azerbaijan’s Socar, running until 2040 for one bcm per year and a minimum level of 0.9 bcm. The Turkish Botas contact is DEPA’s third biggest, securing 0.75 bcm, annually, until 2021.

Copelouzos, DEPA secure PPC gas supply deals for 4.5m MWh in 2020

The Copelouzos Group and gas utility DEPA have emerged as the winning bidders of a power utility PPC tender for gas supply to the latter in 2020 totaling 4.5 million MWh. The terms include an option for supply in 2021.

Besides the Copelouzos Group and DEPA, a third participant, Mytilineos, took part in the tender.

The Copelouzos Group has successfully bid to supply 2.5 million MWh of gas to PPC, while DEPA has taken on the other 2 million MWh needed by the power utility, energypress sources informed.

PPC is one of Greece’s biggest natural gas consumers. Its needs are expected to grow further as a result of the power company’s upcoming entry into Greece’s natural gas retail market, a move carrying ambitious targets. PPC also plans to enter the wholesale gas market.

PPC failed to secure capacity slots for 2020 at the Revythoussa LNG terminal, just off Athens, through a competitive procedure from November to earlier this month.

Success here would have enabled PPC to import LNG shipments in 2020, as the power utility had done in the previous year.

PPC now intends to bid for an LNG capacity at the prospective Alexandroupoli FSRU in northeastern Greece during a binding second-round market test expected following the festive season.