CEE Energy Trading – the land of big opportunities (and even bigger challenges)

27. May 2015. / SEE Energy News

Jozsef Balogh to present cross-border trading opportunities:
“Whether Ukraine defaults or not, it is important to maintain the Ukraine to Hungary electricity flow.  Traders and regulators must work together to keep Ukraine exporting electricity to CEE.”

While the CEE electricity markets have matured significantly during the last few years, gas trading is currently offering the best opportunity in CEE. Cross-border arbitrage, importing gas from CEE to Ukraine, booking gas storages are examples, according to Jozsef Balogh, Senior Business Developer, Axpo, who will be speaking at ETCSEE2015.

Opportunities in CEE energy trading come with challenges. Mr. Balogh highlights two problem areas: Administrative and regulatory barriers to trading still exist in the CEE. For example, licensing for whole-sale only energy traders (i.e. no sale to final customers) should have been abolished a long time ago; and data publication remains an issue. Electricity and gas grid companies have (or should have) online data about generation, demand, cross-border flows, etc. “However, some of this data is not made available to traders at all, while other data is published ex post only. There is no logical explanation for withholding information from traders.” he argues.

Mr. Balogh’s presentation will cover cross-border electricity trading in Ukraine.
Cross-border auctions were introduced in 2009. One single entity took control of the Ukrainian export business and hence the area of Practical Monopoly started (2009 – 2014). This company owned coal mines and generators: the Practical Monopoly reflected this vertical value change. Some transparency was introduced and competition was de iure possible.

From 2014 onwards, we have the period of ‘Zigzag’ Regulation. The intention, on paper, is to increase transparency in cross-border electricity trading. “Reality is slightly different, though.” Mr. Balogh notes. For example, cross-border auction procedures have changed very little during the last six years; and also important price regulatory decisions are announced only two/three days before the start of the new regulatory period.

According to Mr. Balogh, Ukrainian electricity exports will remain a price driver in the CEE region: “Whether Ukraine defaults or not, it is important to maintain the Ukraine to Hungary electricity flow. Traders and regulators must work together to keep Ukraine exporting electricity to CEE.”

Mr. Balogh adds that the CEE to Ukraine gas business got off the ground only in 2013, yet there are great opportunities in this sector. He is quick to note that the gas export business is politically over-charged and there are some administrative challenges. “Compared to an EFET confirmation, managing a Ukrainian gas contract takes more time and more back-office resources. The Gas Market Law was passed in mid April 2015 and this should help to bring Ukrainian gas trading standards in line with EFET.”

Mr. Balogh will be discussing in detail the story behind Ukrainian cross-border energy trading in his presentation at ETCSEE2015, the annual gathering for energy trading in the CEE and SEE region, which will be held on 17-18 June in Budapest. www.energytradingcsee.com

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