Report: Energy Community countries’ shift in day-ahead markets development

The Western Balkans 6 (WB6) countries shifted from activities to develop national day-ahead markets towards finding an efficient solution that will secure rapid introduction of day-ahead market processes and coupling with neighboring markets, the Energy Community (EnC) Secretariat said in its latest WB6 report on electricity.

However, overall the report sees very limited progress since last report in November 2017.

“The Contracting Parties achieved poor progress during the latest monitoring period despite the renewed interest in the implementation of regional solutions for day-ahead market processes and coupling,” the Secretariat noted.

According to the report, the electricity connectivity reform measures in WB6 countries largely depends on major institutional changes at the national level, such as finalizing the unbundling of transmission and distribution system operators and appointing day-ahead market operators.

The Secretariat noted that development during the reporting period was overshadowed by deviations in the ENTSO-E electricity system originating from the Serbian transmission system operator (TSO) Elektromreža Srbije (EMS) – Kosovo* TSO KOSTT dispute, the most serious obstacle to regional electricity market operation.

In 2015 the six EnC states Albania, Bosnia and Herzegovina, former Yugoslav Republic of Macedonia, Montenegro, Kosovo*, Serbia together with EU states Austria, France, Germany, Italy, and the UK decided to take steps to improve energy connectivity in the region.

The WB6 report monitors implementation of the soft measures such as Spot Market Development, Cross-border Balancing, Regional Capacity Allocation, and Cross-cutting measures.

Spot Market Development – shift

According to the report, the majority of the parties were initially opting for establishing their own national day-ahead market, but now the focus has shifted towards finding an efficient solution through partnerships that will ensure swift implementation of day-ahead market processes and coupling with neighboring markets.

Outsourcing of the trading and clearing functions is considered as the most efficient way to put into operation the day-ahead market in BiH while the power exchange company in Montenegro BELEN is finalizing documents for a tender to find a strategic partner, expected to be launched in the second quarter of 2018.

The TSO of Albania OST invited the TSOs of Kosovo*, FYRM and Montenegro to consider participation in Albanian power exchange (APEX) as shareholders.

The power exchange SEEPEX in Serbia entered into negotiations with the Hungarian power exchange (HUPX) on merging their business processes.

Cross-border Balancing – Albania leader

The most notable progress in the reporting period was made in Albania, where transitional balancing rules, developed with technical support under the WB6 regional energy market connectivity programme, were adopted and implemented as of 1 January 2018.

Now, FYRM remains the only WB6 party where an exemption for regulated energy companies from imbalance settlement is still in force.

Development of a truly regional balancing market is crucial for boosting competition.

Regional Capacity Allocation – largest obstacle

There was also no progress in implementing the bilateral agreements between the TSOs of Kosovo* and Serbia, EMS, and KOSTT. The report sees the lack of progress with respect to the entry into force of the Connection Agreement between KOSTT and ENTSO-E as the single largest obstacle to regional cooperation in the WB6.

Cross-cutting measures – no alternative suppliers

According to report, lack of progress in this area was notable, especially with regard to the further opening of the wholesale and retail market.

At a retail level, none of the WB6 Governments undertook activities to appoint the universal supplier in a non-discriminatory and transparent procedure. In practice, small and household customers continue to be supplied at regulated prices by the incumbent suppliers.

The regulated prices continue to be at a level that does not provide an incentive to alternative suppliers to enter the market.