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PATRES: Balancing market electricity prices excessively high compared to day-ahead market
Electricity prices in the balancing market have become excessively high compared to those in the day-ahead market, even unbearable for producers in the renewable sector, especially for the small, deregulated ones, as well as for other market participants, cautions the Employers' Organization of Romania's Energy Producers from Renewable Sources (PATRES).
In a release on Monday, the industry's umbrella organization expresses concern over the alarming situation in the balancing market throughout the year 2024, and over the negative impact it has on renewable energy producers and the National Energy System.
According to the release, the major imbalances faced by renewable energy producers, along with the non-transparent price formation mechanism, revenue limitation and the just partial recognition of imbalances, trigger ever higher costs, that hit even unbearable peaks. Practically, the balancing costs are so high that they can take any electricity purchase contract out of the profitability zone, the PATRES members argue.
"With the exception of large adjustable producers, all actors stand do lose, namely suppliers, who cannot adjust because they do not have access to real-time data; the producers of energy from renewable sources, which are volatile by default; and industrial consumers. For small-sized, deregulated renewable energy producers, balancing costs are almost as high as their monthly revenues. And the larger producers are forced to voluntarily limit production almost every day," said PATRES first vice-president Martin Moise.
"On October 17, for a certain hourly interval, the price in the energy balancing market reached the exorbitant amount of RON 187,614 per MWh, shows data on the platform of the European Network of Transmission System Operators, ENTSO-E. Unbelievable, but it happens in Romania's balancing market! And the authorities refuse to provide explanations and take measures to stop this situation. One month after Transelectrica justified an exorbitant price in the energy balancing market as being caused by a technical malfunction, the situation repeats itself, but in a much more serious way. The balancing price recorded on October 17 exceeded by far RON 100,000 per MWh, it was almost double the values registered a month ago, in the apparently same 'exceptional' context. In September, Transelectrica claimed that the price of RON 102,000 per MWh was caused by an error of the DAMAS II market management platform. One month later, the situation is escalating again, and we have no concrete explanations for these anomalies," the release notes.
PATRES draws attention to the fact that the repeated occurrence of such incidents calls into question the integrity of the balancing process and the transparency of the energy market, affecting not only market participants, but also consumers, who, in the end, bear the costs.
"The balancing market should be competitive, based on an order of merit. There is a high degree of concentration in the market, with just one actor, the state, which is majority stakeholder. It's not healthy, and Romania keeps postponing the coupling of the balancing markets. It is imperative that authorities act quickly to correct this situation and to ensure a fairer and more sustainable environment for renewable energy producers and other market participants," said PATRES president Viorel Lefter, as cited in the release.
PATRES announced having sent notes to all responsible institutions and put forward a set of proposals for a correct management of the balancing market for the benefit of all actors and consumers, as well as the National Energy System.
The proposals include: the opening, by the Competition Council, of an investigation into the way of bidding and price formation, but also into the existence of a potential concentration on the balancing market; the full recognition of costs with imbalances in the calculation of capping and compensation for producers and suppliers; establishing a price-formation mechanism based on the 'pay as bid' and not 'pay as cleared' principle, as proposed by the National Energy Regulatory Authority in the first version of the amendment to the order regarding the balancing market, even if this means a deviation from European regulations; setting a maximum price for services specific to the balancing market (this measure can be implemented immediately and applied temporarily, considering the critical situation of renewable energy suppliers and producers); the publication of balancing prices and final offers (under total transparency regarding the mechanisms for the formation of balancing prices and the regular publication of data according to legal requirements).
The Employers' Organization of Romania's Energy Producers from Renewable Sources, counting 119 members - producers of energy from renewable sources, with a total installed capacity of approximately 3,000 MW - represents investments in the Romanian energy sector of approximately 4.5 billion euros.