Futures for settlement in the fourth quarter of 2022 indicate an electricity price in Southeastern Europe of EUR 500 per MWh, Director of Serbia’s power exchange SEEPEX Miloš Mladenović said. He noted that market participants can buy such financial derivatives to shield themselves from price volatility.
The average price of electricity from the beginning of the year reached EUR 250 per MWh on SEEPEX, compared to EUR 390 so far for August alone, and the upward trend is constant, the Serbian exchange’s Director Miloš Mladenović said. “It is not just here, but the situation is like that on all surrounding exchanges. And not only in the region, but all over Europe, he told public broadcaster RTS.
As a matter of fact, he warned, the conditions in the market show that electricity would cost EUR 500 per MWh in the fourth quarter. Mladenović explained it is evident from the prices in the futures market. Futures are financial derivatives. He added the level climbs to EUR 400 per MWh or EUR 450 per MWh.
Electricity for the delivery from November to February in France is holding above EUR 1,000 per MWh
The benchmark baseload electricity prices for one year in advance in France and Germany topped EUR 600 per MWh and EUR 450 per MWh, respectively, for the first time. Moreover, monthly contracts in France for the delivery from November until February are holding above EUR 1,000 per MWh.
After a series of outages in nuclear power plants last winter, the country is now facing an increase in water temperature in rivers. Nuclear plant output had to be reduced as they can’t be cooled sufficiently.
Forecasts weren’t pessimistic enough
The trend will surely continue next year, and there are forecasts that it would be maintained for two or three years, Mladenović estimated. He pointed out that producers and consumers in Serbia aren’t using futures enough, adding they are a protection mechanism for the domestic and Hungarian markets. They are available since 2019, when SEEPEX introduced them in cooperation with the EEX exchange, and they are listed in Germany.
Those that bought futures last September secured a price of EUR 100 per MWh for entire 2022
The role of futures is to provide insurance against sharp changes in the prices of goods, or electricity in this case. Namely, market participants that bought the instruments last September secured electricity for entire 2022 at EUR 100 per MWh, Mladenović stressed. In December, prices already reached EUR 250 per MWh.
“But we see that the forecasts weren’t pessimistic enough even then,” the head of SEEPEX asserted. Mladenović said that early this year the price for 2023 was at EUR 200 per MWh. Asked about the reasons for the spike in power prices that was never seen before, he also pointed to poor hydrology in Europe but also the rapid recovery of the Asian economy and the rise in gas prices registered even before the war in Ukraine started.
Exchange is perfect mirror
“One of the major advantages and basic purpose of a power exchange is that in conditions like this, when there is really an issue with supply, you have a trading point where you can find energy. However, it must be said, the price itself depends on the situation. The exchange is a perfect mirror that shows the situation as it is,” Mladenović said.
SEEPEX is the licensed operator for the organized power market in Serbia. The firm is jointly owned by the country’s transmission system operator Elektromreža Srbije (EMS) and European power exchange EPEX Spot. The Government of Serbia gave SEEPEX the status of the nominated electricity market operator (NEMO) in June.