Miloš Mladenović, director of the Serbian Electricity Exchange, told RTS that for the last quarter, as far as our region is concerned, the estimate is that the price of electricity will be at the level of around 500 euros per megawatt-hour.
Along with the drought, energy stability in our country and in the world is also affected by the situation in Ukraine. The energy crisis has raised many issues, and the most important for every country is how to ensure security of supply.
This task is made difficult by the limited availability and overpriced energy and energy products. The prices of gas, coal, and especially electricity remained at a record high level throughout the summer. Only the price of oil is kept below 100 dollars.
The European electricity market has been literally red-hot for a year already, the electricity prices were over 400 euros per megawatt-hour in the past month.
Miloš Mladenović, director of the Serbian Electricity Exchange, said that there is no good news – that trend has continued. Until today’s trade, the average price on Sepex, since the beginning of the year, has already reached the level of 250 euros per megawatt-hour. From the beginning of August until today, the average price for the first ten days is 390 euros per megawatt-hour.
The constant upward trend is not only here, but also on the surrounding stock exchanges, in the region and in the whole of Europe, says Mladenović.
The situation in France is worrying, where they say that prices will be doubled. A figure of as much as 1,000 euros per megawatt-hour is mentioned.
“When we talk about price forecasts, we refer to the price from the futures market, financial derivatives market – for our market it is less known, but in 2019 we created a Serbian financial product, the first financial derivative in Serbia, and we have the situation for the last quarter, as far as of our region, the estimate is that the price will be around 500 euros,” said Mladenović.
According to his words, for next year, estimates are that the price will be at the level between 400 and 450 euros. However, he adds that the futures market has become volatile.
“In France, the situation is almost catastrophic, forecasts for the last quarter of this year and the first quarter of next year have reached the level of over 1,000 euros, and the biggest cause is the problem with nuclear power plants,” said the director of the Serbian Electricity Exchange.
The trend will continue until the end of this year, as well as next year, and forecasts are that it will be similar in the next two to three years, says Mladenović.
How to protect yourself
Speaking about the protection mechanism, Mladenović says that financial derivatives are linked to electricity as a commodity, their role is to provide insurance both on the producer’s side and on the buyer’s side against price volatility.
When you buy a futures annual product, you are sure that regardless of what the price is on the spot market, the final total price will be the one you concluded the insurance contract with, explained Mladenović.
It is not so well known and fully utilized by our domestic energy companies. All subjects already have a protection mechanism for the Serbian and Hungarian markets, he says.
“It is very important at what point you buy a futures product, in September 2021 the price of the annual futures for the whole of 2022 was around 100 euros per megawatt-hour, in December 2021 the price was around 250 euros per megawatt-hour, then the forecasts were not pessimistic enough”, says Mladenović.
We also have this year that now, at the beginning of the year, the price of futures for the following year was at the level of around 200 euros per megawatt-hour. Theoretically, whoever bought those futures would be safe for the year 2023, notes Mladenović.
One side of the story is financial trade, financial hedging, on the other side – you don’t go to the wedding party without a gift, it requires high collateralization.
“If we know that the futures price of around 400 euros was seen for next year, for one megawatt hour with which we would protect ourselves, the value of the contract is 3.5 million euros. If you protect yourself for 100 megawatt hours for the whole year, that is 350 million euros, those collaterals are in cash. Large European companies that have been dealing with the futures market for ten years, their collaterals are at the level of several billion euros in cash”, says Mladenović.
Speaking about the situation on the electricity exchanges, both regional and European, Mladenović points out that as soon as prices are this high, there are disproportions, we have a bad hydrological situation, there are other factors that started before the Ukrainian crisis, related to the recovery of the Asian economy, RTS writes.