The current overview of the development of the electricity prices in 2017 in Bulgaria and in Central and South Eastern Europe (CSEE) is based on the quarterly reports published by the Market Observatory for Energy of the European Commission. The reports provide information about the electricity prices on the European energy exchanges and describe the factors that influence those prices. The reports prepared by the Market Observatory for Energy of the European Commission aim at enhancing public access to information about prices of electricity in the Members States of the European Union. The 2017 overview below focuses on the price development on the Bulgarian power market in the context of the regional power market, which include the following countries – Romania, Greece, Serbia, Czech Republic, Hungary and Slovenia. Due to the interconnections between the countries and cross-border trading the electricity prices achieved on those markets are closely related and have a direct influence on the power market in Bulgaria.
In order to better understand the presented data, it should be noted that Bulgaria is the only country in Europe applying export fee for the electricity for export. The fee consists of fee for access to the grid plus the fee for transmission. In 2017 the export fee was 4.32 €/MWh, later in the year it was increased to 4.72 €/MWh. When electricity is exported from Bulgaria the exporting party should pay not only the price of the electricity itself, but also the export fee and the price for cross-border capacity. Thus, when there is a surplus of electricity in the country, in order to export it traders have to pay higher price due to the export fee plus cross-border capacity. To offset the difference from the export fee and the cross-border capacity fee, the price of the electricity originating from Bulgaria should be significantly lower to be competitive on the neighboring markets. Bulgaria is a net exporter and the main local producers kept their electricity prices lower than the average in the region to provide opportunities for export from the country.
First quarter 2017 (Q1)
The regional monthly average baseload price in Central and Eastern Europe (CEE) showed a significant increase in January 2017 and reached 62 €/MWh, while the monthly average peakload contract rose to 81 €/MWh, both even being above the monthly averages observed during the February 2012 cold spell event. Similarly to the other regions in Europe, high prices measured in January started to decrease and by March 2017 the regional monthly baseload and peakload averages fell back to 35 €/MWh and to 42 €/MWh. In the South East European region the weather was also very cold during January 2017, and this significantly impacted the wholesale electricity prices in Greece and in Bulgaria. Baseload in Greece went from 51 €/MWh to 75 €/MWh, while at the same time the monthly average peakload went up from 54 €/MWh to 93 €/MWh. In Bulgaria the monthly average baseload price went up from 43 €/MWh to 54 €/MWh. During Q1 in 2017 the daily wholesale electricity price in Bulgaria peaked at 126 €/MWh on 10 January. On the demand side low temperatures resulted in increasing demand for heating needs, as in Bulgaria heating in the residential sector is highly electricity dependent. On the supply side of the electricity market, low temperatures reduced the availability of hydro generation sources, and in the consequence of freezing temperatures lignite stocks were not able to be used for electricity generation (both because of transport problems amid wintry weather conditions, and of the frozen lignite stocks)
Low hydro availability impacted the general wholesale price level in Romania as well, and on the top of this low renewable generation also added to the upward pressure on the Romanian market prices. In consequence only modest flows were reported from Romania to the neighbouring Bulgaria during the days preceding the introduction of export ban in Bulgaria. In Bulgaria electricity export restrictions were imposed in order to protect the domestic market customers. The Ministry of Energy has approved an effective export ban of electricity (which did not impact the cross-border flows through Bulgaria, only exports from Bulgarian generation sources) between 13 January and 8 February 2017. In consequence of the export ban day-ahead prices fell below the prices in the neighbouring Greece and Romania. Further measures were taken in order to shift power volumes to the regulated electricity market (assuring the supply for the residential sector) from the liberalised market.
The export ban was not the best solution from an internal market point of view, as in this case the cooperation between the countries in the region was not effective and cross border emergency agreements were cancelled or disregarded. Unilateral export bans have undermined the confidence and had spill over effects on the neighbouring markets, and on the top of this electricity generators in Bulgaria have lost an estimated € 27 million owing to nongenerated electricity, relating to the export ban.
Figure 1. Monthly electricity prices in the Balkan region for 2017 and the effect of the export ban
The export ban and the sudden shift of volumes from IBEX to the regulated market in January 2017 had a significant negative impact on the market in Bulgaria and put in risk the traders operating on the liberalized market to carry on the supplies to their customers. In specific days the price differences between the Bulgarian and the neighboring markets reached 50 €/MWh. Due to the export ban main producers in the country limited their production and lost income. Furthermore, traders who had forecasted correctly and had bought in advance volumes of electricity and cross border capacities were not able to export and accumulated substantial financial losses. The restrictive acts from January 2017 undermined the trust in the Bulgarian power market and were a prerequisite for accumulation of deficits in the system and a reason for withdraw of companies from Bulgaria.
Second quarter 2017 (Q2)
The regional monthly average baseload price in Central and Eastern Europe (CEE) slightly rose in the second quarter of 2017 and reached 40 €/MWh in June 2017, while the monthly average peakload contract rose from 41 €/MWh to 48 €/MWh in the same period. In the last week of June 2017 the average prices in Hungary and Romania were above 50 €/MWh, being the highest since the end of February 2017. The monthly average baseload price in Greece rose between April and June 2017 from 45 €/MWh to 51 €/MWh, while at the same time the monthly average peakload went up from 46 €/MWh to 53 €/MWh. In Bulgaria the monthly average baseload price remained stable in a narrow range of 35-36 €/MWh during Q2 2017. Compared to regional peers, Greek wholesale electricity market prices were the highest in the second quarter of 2017, whereas Romanian prices were lower during most of the time and the lowest wholesale prices observed in Bulgaria. In the last week of June 2017, due to high temperatures across the region, both Greek and Bulgarian prices rose to the highest since mid-February 2017.
Hydro availability across the CEE region started to improve in the second quarter of 2017; however, the amount of electricity generated from hydro grew slower than the reservoir levels, being in a need for refill after the long and dry wintry period. This provided for limited power export opportunities from the Balkans to Hungary
Third quarter 2017 (Q3)
The regional monthly average price in Central and Eastern Europe (CEE) reached the highest in August 2017. In this month the average baseload was 48 €/MWh, while the peakload increased to 61 €/MWh. In September 2017 both baseload and peakload averages fell back close to their values measured in June 2017 (respectively 40 €/MWh and 47 €/MWh). In Greece the monthly average baseload price fluctuated in a narrow range of 51 €/MWh and 53 €/MWh between July and September 2017, while at the same time peakload contracts varied between 51 €/MWh and 55 €/MWh. In Bulgaria the monthly average baseload price remained stable in a narrow range of 38-42 €/MWh during Q3 2017.
The southern part of the CEE region depends on hydro-based electricity imports from the Balkans, and during dry and hot periods imports are limited. At the same time the northern part (Czech Republic, Poland) has better access to competitive electricity imports from Western Europe.
During almost all of Q3 2017 wholesale electricity prices were the highest in Romania in the whole CEE region, primary owing to lower than usual hydro and nuclear electricity generation in the country, even making the traditionally electricity supplier country in the whole CEE region net importer of power in some periods. As of the second half of September 2017, as the summer hot weather was over and hydro availability improved, prices across the CEE region recoupled and price divergences practically disappeared.
Fourth quarter 2017 (Q4)
The regional monthly average price in Central and Eastern Europe (CEE) rose from 40 €/MWh to 50 €/MWh between September and November 2017, however, in December it fell back to 39 €/MWh. At the same time peakload contracts reached 69 €/MWh in November 2017 on average, being the highest since January, and in the last month of 2017 they also fell back to 50 €/MWh. Wholesale electricity prices in Greece rose significantly in the fourth quarter of 2017: Compared to September 2017, when the average baseload stood at 53 €/MWh and the average peakload was 54 €/MWh, in November they reached 70 €/MWh and 79 €/MWh respectively. Then in December the baseload fell back to 56 €/MWh and the peakload to 60 €/MWh, as it can be followed on Figure 36. At the same time the monthly average baseload price in Bulgaria fluctuated in a narrow range of 38-42 €/MWh during Q4 2017. The baseload contracts in Serbia and Romania were well aligned during Q4 2017, showing a discount to Greek prices, but the cheapest were the price in Bulgaria, being around 40 €/MWh during most of the quarter and dropping below 30 €/MWh at the end of the year.
With the exception of some short-lived cold spells in early and late November and before Christmas, the weather was generally milder than usual, putting a lid on demand for heating and regional wholesale electricity prices.
Hydro availability during the fourth quarter of 2017 was generally lower in Central and Eastern Europe and in the Balkans compared to the last quarter of 2016. In Romania for example, hydro electricity generation in Q4 2017 was 3.6 TWh, being almost 20% lower than a year before. Lower level of hydro reservoir in the Balkans resulted in less competitive import opportunities, upwardly impacting wholesale electricity prices in Hungary and Slovenia.
Figure 2. Monthly electricity prices in Central and Eastern Europe for the period 2014 – 2017
Figure 3. Monthly electricity prices in Bulgaria and Greece
Electricity prices in the region rose compared to the levels from 2016. The same trend was observed in Bulgaria. The average price of baseload on IBEX for 2017 was 76.90 BGN/MWh, which is an increase of 11% compared to 2016, when the average price was 69.29 BGN/MWh. More significant is the price surge of the peakload (8-20, Mon. to Fri.) – in 2017 the average price was 104 BGN/MWh, compared to 76.27 BGN/MWh in 2016. The prices for peakload went up by 36% in 2017. It is worth mentioning that on the Bulgarian power market there was a lack of offered forward contracts for peak energy, hence the traders and the large industrial consumers were forced to purchase all the needed peakload through the day-ahead market on IBEX, where we observed high volatility and a significant increase of the prices by 36% on yearly basis. That led to rise of the prices on the liberalized market in Bulgaria affecting the local business consumers. Despite this situation in the last quarter of 2017 electricity prices for the business consumers in Bulgaria remained one of lowest among the European countries at 7.82 euro cents per kWh – 33% lower than the average in Europe for the same period – 11.67 euro cents per kWh.
Figure 4. Electricity prices for industrial consumers for the fourth quarter of 2017
Source: Electricity market reports of the Market Observatory for Energy of the European Commission