Electricity market decreases kWh price - SEEPEX opens 2014

Set up of the efficiently organized electricity market will enable Serbia to formally position as the central place for electricity trading in the region. According to the Ministry of Energy, the Agency for Energy as well as PC Elektromreza Srbije (EMS), which is the project-owner, the market should be set up next year.

Milos Mladenovic, International and Regulatory Relations Corporate Manger at PC Elektromreza Srbije, in his interview for eKapija, presented a concept of the future electricity market in Serbia which will be called SEEPEX.

- In cooperation with potential partners, EMS will carry out all necessary activities in order to set up organized electricity market so that everything is fully operational by Q3 2014. The term of the organized electricity market primarily refers to setting up of “a day in advance market” which would in the beginning refer only to balance area of Serbia where later, through implicit auctions, i.e. merging of trade with transfer cross-border capacity and with potential participation in the ownership structure of respectable EU strategic partners, potential neighbors could join – Mladenovic says at the beginning of his interview.

Our collocutor points out that the suggested concept of market set up in Serbia is fully in line with the adopted European model of the market and the Action plan for regional electricity market set up in the Southeast Europe whose implementation has already started within the Energy Community of the Southeast Europe and ENTSO-E regional group.

SEEPEX importance

Successful implementation of the organized electricity market in Serbia and region could bring a number of advantages both for suppliers and buyers.

- The biggest advantage for wider community is certainly set up of reliable and referential market price which will present clear economical signal and thus the main condition for set up of incentive investment framework, not only in energy but in other fields as well.

When it comes to participants at the market and PC Electric Power Industry of Serbia (EPS) as a potential market maker which will actively participate at the organized market, SEEPEX will, as Mladenovic states, provide service of “efficient and consumer – oriented business infrastructure, enable simple access to the market region-wide, liquidity coupling and thus bigger financial security and risk reduction, significant cost reduction (less administration, modern technology and contractual risk reduction) as well as a wide range of portfolio of services of high quality at the electricity market”.

Terms for electricity market set up

Prerequisite for the market to start functioning is liberalization of the electricity market. Early this year, partial liberalization for high-voltage consumers has started, SMEs have been announced to start next year and as of 2015, households will be enabled to choose their electricity supplier.

Mladenovic explains that liberalization of the electricity market is essential but not enough condition to set up liquid organized market.

- The project feasibility depends on a number of risk factors and the most important ones are: internal limitations referring to technical solutions and market procedures as well as quality of managerial and operational staff, financial limitations referring to liquidity, pricing policy, portfolio and creditworthiness of participants, technical limitations in transferring sence which primarily refer to overload on cross-border capacities so that both foreign participants would be enables to participate at the organized market.

A collocutor of eKapija points out that many of these risk factors, first of all technical and political limitations related to regional expansion, can, with full engagement of experts which EMS has, be smoothened or completely be removed by setting up planned strategic partnership with some of the leading European markets in this area.

Connecting with European markets

Our collocutor reminded that EU adopted the so-called implicit auctions concept as the target model for “a day in advance market” of the cross-border capacities through “coupling markets in line with price and quantity" (Price Market Coupling).

Mladenovic says the essential prerequisite for the implementation of this model between two or three market areas is to set up organized “a day in advance” market in each one of them as well as the implementation of the harmonized market mechanism through which market areas, through available cross-border capacity, couple in a unique one. The available capacity is used in a way that offers of the market area with lower price "flow into" market area with higher price, up to the amount equal to available transfer capacity.

- Based on the relevant legislative defined in the so-called Third energy package of EU and this Target model, preparation of the obliging Network rules has been in progress and at the EU level and Southeast Europe level governed by the Contract on Energy Community set up, so-called Regional action plan for unique regional market set up SEE has been prepared on the same basis. Having all that in mind, SEEPEX further regional expansion and merge with neighboring markets was prepared.

After setting up SEEPEX and beginning of functioning of the organized electricity market in Serbia, it was planned, as soon as possible, to formalize activities with respect to merge of markets with neighboring ones in the region which has already started. Mladenovic says HUPX (Hungarian market) is the first potential partner.

Who would operate SEEPEX?

EMS is responsible for carrying out all necessary implementation activities in the final stage and according to the words of a collocutor of eKapija, the first following step which will enable set up of an operator of the market as an independent company would be that the Government of Serbia carries out specific steps in that direction, what has already started and which could be expected by the end of the year.

S.O.