Romania has been constantly importing electricity from Hungary, having been a net exporter for only three days in August

, SEE Energy News

Romania had the status of a net importer of electricity from Hungary in August as a result of a fall in hydro, nuclear and wind energy generation, which reached a monthly minimum this year, below 3,000 MW, according to data from the Hungarian market regulator (MEKH).

According to MEKH, Romania has only been in a position of net exporter over Hungary for three days in August.

In order to understand the price levels in Romania and Hungary and their volatility, the most important term is “residual demand”.

According to the models applied in the Western spot markets, the residual demand is demand that is not covered by RES generation or, more broadly, low-cost (including hydro and nuclear) generation. In other words, it is a demand that must be met on the basis of the production of emission certificate holders (hydrocarbons and coal) or imports.

Why is it important? Because, according to the data, the price curve in the spot market is identical to the residual demand curve in this market. In other words, the residual demand is the one that affects spot prices.

In the case of two interconnected markets, such as the Hungarian and Romanian markets, the position of net importer/exporter is determined by the Euphemia algorithm and depends on two elements: the share of cheap energy (hydro, nuclear and wind) in consumption and the relative cost of producing emission certificate holders.

The Hungarian regulatory agency notes that in August, as a result of reduced hydro and wind generation, residual demand in Romania grew in a manner characteristic of the winter, despite lower consumption during the summer months. The consequence is a higher DAM price and Romania’s position as a net importer compared to Hungary.

In addition, Romania is located in the Balkan region, which is characterized by a lack of generation capacity and is largely dependent on hydropower generation.

In August, hydroelectric generation in the Balkans was extremely low, twice as low as in May and June, and similar to October 2018. As a result, hydropower accounted for only 20% of regional consumption. By comparison, in May and June, hydropower accounted for 50% of the Balkans consumption.

In Romania, the situation in August was even more tense. The average monthly consumption was 4,900 GWh, and hydropower consumption was only 865 GWh. As a result, the share of hydropower is only 17.5%, which is below the regional average of 20%.