Next NOME auction crucial for electricity retail market in 2018

The price levels to be shaped at next Wednesday’s major NOME auction, the year’s final session offering 718 MWH/h, well above previous amounts, are seen as crucial for the retail electricity market in 2018.

These prices will determine how much leeway independent suppliers will have to pursue aggressive pricing policies, the market’s level of competition, and, subsequently, the extent of the shift of consumers from the still-dominant main power utility PPC to independent suppliers.

Pundits have already noted that if the auction turns out being a repeat of the previous auction in July, when price levels soared to 43.05 euros per MWh, primarily as a result of the smaller electricity amount offered, then any retail market changes in 2018 will, at best, occur at a very slow pace.

The significant increase in the electricity amount to be offered at next week’s auction should prevent fierce bidding and high prices as a result of the abundant electricity amount offered; plenty for all.

Also, restrictive measures imposed for the first time will sideline two traders – possessing supply licenses – who purchased electricity amounts at previous NOME auctions only to export to foreign markets offering higher prices.

Also, incentives have been set for participants to avoid electricity exports. Bidders will not be able to take part in the next auction if they have not supplied at least 50 percent of their NOME-obtained electricity amounts to the Greek market.

Despite the measures, concerns of high prices have not fully subsided. An increase in the number of bidders, boosted by new entries, including gas companies aiming to also become active in the electricity market, is one such concern, as the greater number of bidders could push prices higher.

Also, electricity prices abroad are currently extremely elevated, meaning that imports by suppliers for partial coverage of their low-cost electricity needs, as was the case last year, is not feasible at current price levels. Forecasts expect an energy shortage and even higer prices in Europe this coming winter.

In addition, System Marginal Price (SMP) calculations made by supply firms for the Greek market next year indicate that electricity prices will be elevated.

Moreover, continual revisions concerning NOME terms and electricity amounts offered is generated uncertainty for the future and providing an incentive for participants to stock up now.

On the other hand, independent suppliers may instinctively keep the upcoming session’s prices subdued to safeguard the NOME process, the only existing tool offered to support their retail electricity market share gain aspirations. Pundits believe suppliers would much rather acquire smaller-than-planned amounts at lower prices than engage in bidding wars.

One company official estimated that for every one-euro rise, at the NOME auctions, independent suppliers are deprived of approximately 10 million euros.

NOME auctions were introduced a year ago to offer independent suppliers access to PPC’s lower-cost lignite and hydropower sources.