On the day ahead market (DAM) there are no dominant participants and the interconnected operation has virtually eliminated the possibilities of manipulation of this market, say the officials of the regulatory body for the market, ANRE, in an analysis upon the unjustified increase of the energy price in January.
The authority thus says that is not because of the market “manipulation” that the energy price has reached a record quota in January on the stock exchange run by the electricity and gas market operator (OPCOM). According to the report performed by the ANRE officials, they argue that the real reasons are related to a number of factors, including the termination of agreements, player behavior, and the lack of stocks.
“At the price increase on the DAM the inadequate management of suppliers also contributed”, it is shown in the ANRE analysis.
“At DAM (the day ahead market, spot market – n.r.) there are no dominant participants and the interconnected operation, virtually eliminated the manipulation possibilities for this market.”
A price increase of almost 40%
In the beginning of January there have been significant increases of the price from the DAM, the average price calculated as the arithmetic average of the price of the closing market (IPP)s recorded in the analyzed hourly intervals remained with about 3.49% below the European average of 51.69 Euro/MWh for the period 01-08.01.2017 and registered a growth of 17.99% above the European average of 59.04 Euro/MWh for the period 09-15.01.2017.
Between January 9-15th, compared to the period January 1-8th, “the volume of transactions did nt record variations from one week to another, however, there is an increase in the average closing price with 38.83%”, says the institution.
Then, during the period January 16-22nd the 12.12% increase in the average price on the DAM is registered; compared to the previous week, the average price is calculated with 10.45% above the European average of 70.71 Euro/MWh during the same period. Given that a decrease of the takeover bids as well as of the tenders for sale was recorded, the transactions volume has increased by approx. 2.94%.
“After January 23rd, there is an increase of the purchase offers on the DAM, due to the fact that on January 20th, a provider notified the partners of transactions that it terminates its agreements as of January 24th, 2017”, shows the report.
“Given the fact that the Provider (analyzed – no) had concluded supply agreements with two large consumers, as well as the fact they performed a lot of trading with a significant number of participants in the wholesale market for electricity, a new stage of access for the DAM, as a source of electricity purchase for its partners. Following the notifications received from the provider, other providers have terminated, in turn, the agreements on the PCSU (Centralized Market for the Universal Service – n.r.)”, explain the ANRE representatives.
The report recalls that the purchase offers were higher than sales offers and the price climbed ever more from day to day. Also, lack of skills of the participants in creating more elaborate tendering strategies was another cause of the prices increase.
“The provider invoked a general motivation, with references to the energy crisis in Romania and Europe caused by the low temperatures recorded in the recent period, in conjunction with the prolonged unavailability of the important production plants, without exposing the concrete implications upon its activities on the wholesale market in Romania”, reads the report of ANRE.
The closing prices on the DAM showed large variations from day to day, pointing out that in the period January 24-31st, even if that there were recorded declining values for the energy consumption, the closing prices were maintained at values above 600 lei/MWh (up to 653.68 lei/MWh on 31.01.2017, interval 10) between the 9-22 intervals.
The main reasons
According to the ANRE representatives, the price increase was caused mainly by the artificial decrease of the PIP (the closing market price – n.r.) in 2015 and 2016, due to the low price offers introduced by the producers from renewable sources. Thus, some providers have gradually increased the share acquisition from the DAM in the portfolio, which affected the whole sale market by reducing the sale offer and increasing the one for DAM purchasing, as well as through the diminishing of the availability on the balancing market (PE).
Other factors were the reduction of the hydro resources, the fact that some producers from renewable sources have established strategies for bidding on the electricity market throughout which the sales on the centralized markets of agreements administered by OPCOM is at the level of the installed capacity, and the differences between the contracted and the delivered energy is acquired by DAM and the intermittent operation of the lignite power plants and thus the reduction of the fuel stocks.
“A manufacturer has cited difficulties in meeting the expanding of the coal mining and of its railway transport due to the improper land expropriations made in court and of the failure to provide the income for performing the activity, due to the low prices on the OPCOM centralized markets”.
Another reason was suspending some of the “agreements in progress who attracted other suspensions, evidence of irresponsibility in the compliance with the regulatory framework of the energy market – starting from license granting and associated financial security – to the guarantees of good performance of the agreements – and the penalties for failing to provide electricity”, says ANRE.
Finally, there were unavailabilities “in the functioning of the central classical dispatchable groups – from the analysis of the data published on the platform of transparency EMFIP, in accordance with the applicable EU regulations, results in a cumulative unavailability that exceeds in certain periods 3.000 MW.”
ANRE announced that it will separately analyze “the correct classification in the type of the declared unavailability” which can “be the subject of a separate analysis.”
At the same time, the ANRE analysis shows that to the price increase on the DAM the inadequate management of the providers also contributed.
“By analyzing how the provider has ensured its portfolio purchases on the wholesale market, it was found, that in the past two years, it registered long periods of time in which the main source of acquisition was represented by the DAM (in 2015 values between 20% and 78%, respectively in 2016 between 0% and 43%), a policy of high exposure to the price volatility on the DAM difficult to understand given that on 31.12.2016 it has supply agreements with a significant number of final consumers”, it is shown in the report.