Home > novice > intervjuji > preparations for establishing power exchange in serbia ever

Preparations for establishing power exchange in Serbia ever more obvious, the latter to become a regional exchange later on

Date: March 8^th 2010 Author: Dragan Obradović, Belgrade Category: Articles
Topic: Electricity

Serbia’s electricity market has been open for some years now. Trading on the market is bilateral among retailers who are – judging by the number of licensed retailers and the volumes of electricity they trade – extremely successful. EPS takes part in the trading process as well, selling surplus of the electricity produced. Nevertheless, Serbian electricity market remains unorganised. There is no energy exchange and certainly not enough transparency. Yet everyone seems to have different views and the issue is spoken of with caution. Some believe that Belgrade should take the initiative and form an exchange for trading with electricity in the region. According to others, Serbia has insufficient capacities either in terms of production or finance to carry out the transaction.

The management of EPS has been thinking of the exchange with great caution. They believe that prior to joining the exchange EPS should first strengthen its financial basis, as such an establishment needs cash in order to be able to offer it. This view is shared also by those who argue that Serbia and EPS do not need an initiative to establish the exchange in question and should let others in the region to undertake this, not only because this is a profitable business. One of the key arguments that comes up is that Serbia is the only country in South Eastern Europe with eight internally linked ‘cross-border’ connections and a power utility that could perform the role of sponsor or market maker within the exchange.

PHOTO: Alenka Žumbar

EPS currently finds itself in a position which the company EdF experienced 10 years ago, prior to the opening of the French power exchange. What they should begin with is day-ahead spot trading which is something one has to prepare for in advance. Vuk Stancic, a Belgrade economy expert who has been engaged in electricity trading in France for years reminded of the situation in Serbia, saying that next to the advantages such as the country’s geographical position and its cross-border capacities, there were also two major weaknesses. The first one is lack of a legislative framework for a power exchange and the other was frequent ‘suppressions’ in the inter-connected grid. As for market makers, the latter are – to put it plainly – those participants (sellers/buyers) on the exchange who guarantee to daily supply – over a specific period of time – the buyers with preset minimum volumes of electricity within a specified price range. In turn, market maker normally pays lower fees for their exchange transactions, yet their primary role – according to Stancic – is to support electricity market liquidity and its stability.

In a sense, EPS already is a market maker, as the company is a sort of sponsor in ensuring stability of the existing bilateral market, though unorganised, with compulsory reserves within the power system and ensuring electricity to balance and carry out the transmission. The only difference is that EPS generates lower rather than higher revenues, as it sells electricity at regulated prices below the market prices, doing itself a disservice due to poor legal regulation.

Dragan Vlaisavljevic, Director of Electricity Trade Department at EPS said that internal electricity market in Serbia (the one for end buyers) did not benefit any if EPS became a market maker unless qualified buyers were acquainted with buying electricity on the exchange. He further said that what they presently had was a free market which in reality was just bilateral, yet none of the qualified buyers was to purchase their electricity in that way. EPS currently introduces as much electricity on the market as it can but if it became a market maker it would have to introduce specific volumes of electricity for exchange trading on a daily basis. This energy would then be bought by retailers and introduced (domestic qualified buyers excluded) on the markets of neighbouring countries, which would make electricity for end users on those markets cheaper, Vlaisavljevic believes. It is for this reason that when preparing to open an exchange, it is inevitable that prequalified buyers in Serbia shift to the open market or the exchange. This could be accomplished either by means of a proper tariff system or an Energy Act, Vlaisavljevic said, adding that this kind of solutions were possible and accepted in other countries. Providing that large industrial, service or shopping centres could still choose among a qualified and a tariff buyer – whereby tariff price should be below the market one – EPS would be forced as a market maker to sell part of its daily produced quotas in the exchange almost exclusively to the benefit of retailers, Vlaisavljevic added.

top