Wind Farm Production Drags Electricity Prices Down 40%

04.10.2013 By Roxana Petrescu

The average electricity price dropped almost 40% in the first quarter of the year, and the trading price on the day-ahead (spot) market is now closer to the price in the similar period of 2009.

Back then the crisis caused Romania’s appetite for electricity to fall by about 10%, according to the national grid company Transelectrica (TEL.RO).

Spot transactions are becoming more and more important, as the amount traded is almost 25% higher than in the first three months of last year. Companies would rather take their chances now with day-ahead transactions than seek protection in form of long-term contracts at almost 30% higher prices. The main reason for this drop of electricity price is the introduction of the wind power into the system.

“Wind power [industry] is not interested to sell, is not interested in the actual electricity price, but is interested to generate it and benefit from the support scheme,” says Aurel Medintu, head of the energy division with the CE Oltenia, the company formed last year by a merger of the Turceni, Rovinari and Craiova thermoelectric power plants and the coal mines of the SNLO (National Lignite Company Oltenia).

The trend could be seen on a number of occasions this year when one megawatt/hour of electricity sold for 6 lei (EUR1.36) on the day-ahead market, something no one would have thought possible in the past.

“The average price of the electricity traded on the day-ahead market in the first quarter of 2013 is RON155.41/MWh or EUR35.4/MWh. The average price of the electricity traded on the day-ahead market in the first quarter of 2012 stood at RON249.54/MWh or EUR57/MWh,” according to the officials of the OPCOM power market.

The electricity generated by the wind farms, which produced more than the two reactors of the nuclear power plant in Cernavoda (SE Romania) at times is not the only factor that that caused the price to plummet.

Power consumption dropped in the first two months of the year, with demand for electricity in February down about 11% on the year-ago period. Moreover, hydropower production is picking up after two years of severe drought.

Under the circumstances, it has become more profitable to trade electricity on the day-ahead market instead of long-term contracts. While the average spot price was EUR35/MWh, the average price on the bilateral contract market stood at EUR45.6/MWh. The price on the latter went down, too, from an average of EUR48.6/MWh in January to EUR41.7/MWh in March.

As a result, many of those trading on the long-term (bilateral) contracts market have moved to the spot market, which accounted for 26% of Romania’s energy consumption in March from 17.8% in January.

The amount of power traded went up by almost 25% from 2.7 TWh in the first quarter of 2012 to 3.4 TWh in the first three months of the year.

(English version by Loredana Fratila-Cristescu)