Electricity

Balkan countries warn of region-wide electricity price crisis

Balkan countries warn of region wide electricity price crisis

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Published

September 16, 2024

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Published:

September 16, 2024

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Prime Minister of Greece Kyriakos Mitsotakis wrote to European Commission President Ursula von der Leyen, requesting the establishment of an EU-wide regulator for electricity and a push for more cross-border capacity. A regional electricity crisis grasped Southeastern Europe, with a huge price disparity against the rest of the continent, as interconnections were congested. Among the other factors are heat and drought, outages and Ukraine becoming a net power importer, so several countries are urging for measures to ease the pressure.

Greece, Romania and Bulgaria are preparing a proposal for an intervention mechanism that would be triggered any time electricity prices turn extremely high in Southeastern Europe, when the region is cut off from the rest of the European energy market. In the meantime, Greek Prime Minister Kyriakos Mitsotakis sent a letter to European Commission President Ursula von der Leyen to propose a set of measures.

Separately, North Macedonia urged Energy Community Secretariat Director Artur Lorkowski to initiate the examination of the reasons for the huge price disparity. The letter was signed by Minister of Energy, Mining and Minerals Sanja Božinovska and President of the Energy, Water Services and Municipal Waste Management Services Regulatory Commission (ERC or RKE) Marko Bislimoski.

A reduction in flows amid major works on some interconnections, combined with coal power plant overhauls and reconstruction, record heat in the summer, low hydropower output and Ukraine turning into a net electricity importer contributed to the split between the Balkans and Hungary on one side and Central and Western Europe on the other.

Algorithm cutting off Europe’s southeast, turning it into energy island

One major point is also the way that the electricity market works. Balkan countries trade according to the net transfer capacity (NTC) mechanism for determining available capacities, while the markets in the central and western part of the continent are connected via a flow-based market coupling (FBMC) system. The latter’s algorithm seems to slash or completely eliminate available capacity at times from Germany and Austria toward Hungary, according to an analysis in Euro2day.gr.

Hungary is the main supplier of electricity to Ukraine. So the war-torn country turns south for its electricity demand, bolstering prices. It essentially makes the southeast an energy island.

Mitsotakis: The disconnect between a highly successful energy transition and extreme power price spikes requires a political response

Wholesale electricity prices in Greece have more than doubled from EUR 60 per MWh in April to EUR 130 per MWh in August, Mitsotakis pointed out in the letter and stressed: “This is a regional crisis.” Relative to last summer, the country’s production of electricity from wind and solar increased by 25%, while output from lignite fell 27%, he noted.

“This disconnect between an energy transition that is highly successful, and electricity prices which jump suddenly to extreme levels requires a political response. Left unaddressed, it threatens our citizens and our competitiveness. It could undermine support for our EU Green Deal,” the Greek prime minister stated.

Incomprehensible black box

At one point, the price of electricity in Hungary reached EUR 940 per MWh while in neighboring Austria it was just EUR 61 per MWh or 15 times less for the same product at the same time across an internal EU border, Mitsotakis underscored. It undermines the spirit and purpose of the internal market, in his view.

Moreover, the spread between the highest and lowest price in the region exceeded EUR 100 per MWh for 395 hours in the summer, compared to 35 hours from January to May.

“The system is so complex and opaque that is virtually impossible to understand precisely what is driving prices at any given point and time. We have created an incomprehensible black box – even to experts. And we cannot explain convincingly to our citizens why the price they pay is rising so suddenly. This is politically unacceptable,” Mitsotakis warned.

Greece wants EU electricity regulator, joint planning

As the European Commission is getting a new lineup, Greece is set to advocate for the completion of the single energy market.

Mitsotakis said the EU needs stronger governance – a system that allows it more input into decisions made by individual countries that could have regional effects, such as planned outages. His second request is for more EU regulatory oversight. “We need an EU-wide regulator for electricity that can look at multiple markets at once – and reassure consumers that there is no foul play,” he said.

As for exports to Ukraine, their impact is felt only by some countries without sufficient electricity transfers within the EU, Mitsotakis added. He pointed to the new electricity market design for options for Greece to “claw back windfall profits from producers and protect consumers during this shock.”

Greece, Bulgaria and Romania reportedly want interconnection projects to be funded from profits from the wholesale electricity markets

The country already charges a windfall tax on energy companies and directs the proceeds in the form of subsidies to vulnerable consumers. At the moment, the EU allows market interventions after a prolonged period of high prices. Greece, Romania and Bulgaria are set to request the possibility of reacting immediately to spikes.

Mitsotakis said the EU must push for electricity interconnectors. When price disparities between countries reach extreme levels, the cost-benefit of interconnection propositions is much stronger, he explained.

In particular, according to Naftemporiki.gr, the three Balkan countries want part of the revenues from electricity markets to be directed to grids and the development of cross-border capacities.

Different challenges ahead after extreme heat as one reactor in Kozloduy is down for maintenance

It should be noted that Greece is also struggling internally with market distortions. In addition, Eurelectric highlighted the role of a drop in power exports from France in the price disparity as well as the rise in the prices of natural gas.

While the surge in electricity prices has lately subsided amid a cold spell and heavy rain, more challenges are ahead. Coal-fired power plants in the region are mostly old and unreliable. More outages for overhauls and maintenance are ahead.

In particular, the Kozloduy nuclear power plant in Bulgaria took one of its two reactors offline until November 30. It means 1 GW less in the regional system. Again, much depends on the weather and especially how cold the winter will be.

Romania to seek compensation for price disparity

Romanian Minister of Energy Sebastian Burduja said last week that his country would ask the EU for compensation for the high price difference between Eastern and Western Europe.

“Of course, we are talking about a dry year, lower hydropower production, we are talking about problems in the interconnection area, maintenance on certain lines in Hungary. We are talking about a reduced capacity in Austria, the transfer-exports of cheaper electricity from Western Europe to Eastern Europe. We are also talking about support that we are very happy to extend to Moldova, but also to Ukraine – which creates pressure on prices in Romania, something that we note, but we cannot accept indefinitely. If we are still in a single European energy market, it can’t be that only some people can pay the bill and we can endlessly tolerate prices that are two or three times higher than in the rest of Europe,” Burduja stressed, as quoted by Agerpres.

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