Serbia: Balance electricity market in the period 2013-2014-2015

2. July 2015. / News Serbia Energy

In order to maintain balance of the electric power system of Serbia towards the rest of the interconnection, TSO grid network company PE EMS, as of January 2013, did the purchase and sale of electricity on the balance market, according to market conditions, and at a price formed depending on the needs of the system at that point, based on the submitted offers in the balance mechanism.

Although it is defined by market rules that on the balance market the following parties can participate: Balance entities (production units within control area of PE ЕМS), Electricity suppliers and Neighbouring transmission system operators, during 2013 and 2014, PE ЕМS has not implemented organized purchase of the balance power form the suppliers.

Shown in percentage, approximately 98.5% of balance energy has been engaged by balance entities, while the rest represented engaged emergency power from the operators of neighboring transmission systems under the conditions defined by the bilateral agreements. On the basis of these agreements, in 2013 and 2014, PE EMS, based on the principle of minimum costs, engaged emergency energy in two ways. The first way was taking and returning the subsistence emergency power. In this case, the engagement and return of emergency power between operators of neighboring transmission systems was carried out without financial costs. The second method involved the engaging emergency power, based on commercial conditions defined in the bilateral agreements. Offers made by neighboring TSO in this case ranged from 90-250 € / MWh. Since subsistence emergency power was included in the calculation of the settlement price, the value of subsistence emergency energy was for this purpose, defined by the regulation of the Energy Agency of the Republic of Serbia, and the price was € 20.17 / MWh (2013) and € 30,152 / MWh (2014 ). Both figures are the result of weighted hourly values ​​of settlement price at an annual level.

As already mentioned, the balance of the electricity system in the past two years was done by PE EMS largely by purchasing and selling balance energy on the national balance market, and/or byengaging balance entities to work in secondary and tertiary regulation.

Looking only at the values of engaged balance energy, concrete conclusions cannot be made on the functioning of the balance market in the past two years. If this information is added to the information on the movement of the average settlement prices, it can be concluded that the balance market with regards to prices stabilized in early 2014. The reason for this market behavior lies, inter alia, in the structure of the market participants i.e. the structure of the balance responsible parties that by their deviations initiated the operation of the balance mechanism directly. In 2013, in a market area of ​​PE EMS, only two balance groups were formed, i.e. there was a very small percentage of consumers who have been out of balance group of the dominant market participant. In early 2014, by a large number of buyers on middle and low voltage entering the market, new balance groups were formed. The number of buyers who have changed suppliers and left balance group of the dominant participant has progressively increased towards the end of 2014, which was properly followed by the upward trend of the settlement prices in 2014 and reaching their realistic market value. However, from the aspect of analysis of the balancemarket operation, the most important fact is the presence of only one participant in the balance market – a dominant participant. In view of the above, in 2013, the fluctuations of the values of settlement prices can be interpreted as an attempt of the dominant participant to find the optimal operation mode, on one hand as the greatest cause for deviations, and on the other hand as the only participant in the balance market. In 2014, a certain number of consumers entering the free market and the formation of another balance group lead to moderate stabilization of the balance market and approaching realistic value of the prices of engaged balance energy, and thus the settlement prices.

Although PE EMS, by Rules on electricity market operation, through the introduction of a series of restrictions on the balance market (scope of balance energy engagement of -100MWh to + 100MWh, pricing must be in the range of 30 €, the maximum value of the offer is 500 € / MWh …) as well as by the methodology of calculating deviations of balance groups (defining POB, the coefficients K1 and K2) has done everything to reduce the influence of the dominant participant, it still must be noted that the dominant participant by its action on the market has created a general state on the electricity market in the Republic of Serbia in the observed periood.

The existence of a dominant participant or absence of competition on the balance market can be represented as the biggest flaw in the current work of the electricity market in the Republic of Serbia. Significant changes cannot be expected without the emergence of new, independent power producers and the establishment of healthy competition.

The establishment of cross-border balance mechanism by pooling more control areas into a single one is one of the most important European projects at the moment. The implementation of cross-border balance mechanism, first within control block of Serbia, Macedonia and Montenegro, and later on the possibility of linking with other control blocks in the region, would be a significant step forward in establishing a stable balance market, whereby the real prices of engaging balance energy and settlement prices would be established. From the aspect of transmission system operator organizing balance market in this way would have a positive impact on the safety of the management system, while optimizing the engagement of production units for the purposes of the system balancing.

Based on experiences in establishing the electricity market in the region, in particular by analyzing market development in the European Union, it is concluded that there is no universal model of the electricity market establishment. Well organized relations among market participants through appropriate laws and regulations, transparency of key market data, as well as the timely development of information infrastructure in the form of support to market processes, are certainly an indicator of an efficient and successfully established electricity market.

Well organized relations among participants on the market, through the implementation of balance responsibility, resulted in the emergence of a large number of participants in the wholesale electricity market in the Republic of Serbia. Taking into account the increasing number of suppliers of end buyers and the formation of new balance groups one can talk about the gradual establishment of competition in the electricity market in Serbia. However, the insufficiently competitive balance electricity market still represents a major challenge in the further development of the national balance market, not only in our country but also in the entire region. Considering the fact that in the near future one cannot expect the emergence of independent power producers, at least not sufficiently to make this market competitive, the only solution can be the establishment of cross-border balance market of electricity.

By adoption of the new Energy Law on December 29, 2014 the compliance of national legislation with the EU regulations was finalized. So, the energy sector is now prepared for the full implementation of the Third Energy Package thus continuing liberalization and market development in the Republic of Serbia. The establishment of an organized day-ahead electricity market in 2015, establishing regional cooperation on the issue of balance market and establishing the process of issuing guarantees of origin of electricity in the market area of ​​Serbia are sure signs that Serbia is on a good track towards the integration of the national into the single European electricity market. , transmits Serbia-energy.eu

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