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1

Competition in CEE electricity markets? Lessons learned from the

Czech and Austrian point-of-view

Reinhard Haas 1)

Christian Redl 1)

Jaroslav Knapek 2)

1) EEG, Vienna University of Technology, Austria 2) Czech Technical University in Prague, Czech Republic




2

SURVEY 1. Introduction 2. European electricity sub-markets

8. Conclusions

4. How market prices come about3. Background: electricity consumption

6. Future perspectives 7. How many generators are required for competition ?

5. Market power and market extention




4

• Intentions of the EC directive: Competitive markets Free choice of supplier lower electricity prices

1. INTRODUCTION




5

1. UK & Ireland2. Nordic countries3. Iberian peninsula4. Italy5. Western Europe6. Eastern Europe7. South-Eastern Europe

6

7

5

2. EUROPEAN ELECTRICITY SUB-MARKETS




6

PREISUNTERSCHIEDE UND NETZENGPÄSSE IN EUROPA

Average wholesale electricity price 2006 [€/MWh]

5151

5858

5050

7575

31315858

NetzengpässeNetzengpässeMarkttrennung Markttrennung

3030

5151 3434

6262

4747




8




9

Electricity Net Exports in Continental Europe (1998-2004)

France France FranceFrance

France

France France

Czeh.Rep.

Czeh.Rep. Czeh.Rep.

Czeh.Rep.

Czeh.Rep.

Czeh.Rep.Czeh.Rep.

Poland

Poland

Poland

Poland

Poland

PolandPoland

Germany

Germany

Germany

Germany

Germany

Switzerland

Switzerland

Switzerland

Switzerland

Switzerland

AustriaAustria

Switzerland

Switzerland

Austria

0

10

20

30

40

50

60

70

80

90

100

110

1998 1999 2000 2001 2002 2003 2004

[TW

h]

Austria

Switzerland

Slovenia

Slovakia

Germany

Belgium

Poland

Czeh.Rep.

France

NET EXPORTS

(To be updated to 2006)




10

Electricity Net Imports in Continental Europe (1998-2004)

Italy Italy ItalyItaly Italy

Italy Italy

Netherlands

NetherlandsNetherlands Netherlands

Netherlands

NetherlandsNetherlandsBelgium

Belgium

Belgium Belgium Belgium

Belgium Belgium

HungaryHungary Hungary

Hungary

Hungary

Portugal

PortugalPortugal

Luxembourg

Luxembourg

Luxembourg LuxembourgLuxembourg

Luxembourg Luxembourg

Spain

Spain

Spain SpainSpain

SpainAustria

Austria

Austria

Austria

0

10

20

30

40

50

60

70

80

90

100

1998 1999 2000 2001 2002 2003 2004

[TW

h]

Austria

Spain

Luxembourg

Portugal

Switzerland

Slovenia

Hungary

Germany

Belgium

Netherlands

Italy


NET IMPORTS




11

3. BACKGROUND ELECTRICITY

CONSUMPTION




12

ELECTRICTY CONSUMPTION Electricity consumption

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

Jän.

99

Mai

.99

Sep

.99

Jän.

00

Mai

.00

Sep

.00

Jän.

01

Mai

.01

Sep

.01

Jän.

02

Mai

.02

Sep

.02

Jän.

03

Mai

.03

Sep

.03

Jän.

04

Mai

.04

Sep

.04

Jän.

05

Mai

.05

Sep

.05

Jän.

06

Mai

.06

Sep

.06

Jän.

07

[GW

h]

DE

FR

PL

AT

CZ

CH




15

COMPARISON CZ-ATTotal electricity consumption

40

45

50

55

60

65

70

1995 2000 2005 2010

TWh

CZ

AT

Austria

Czech Republic

historical data forecast




16

Short term marginal costs?

Long term marginal costs?

Average costs

Pric

e, c

osts

(EU

RO

/MW

h)

time

Strategic or monopoly prices ?

4 HOW PRICES COME ABOUT (SOME THEORY)




17

Cos

ts,P

rice

MWh

Supply curve

Demand D2

BASIC PRINCIPLE OF COMPETITION:

PRICE = MARGINAL COSTS

Price = „System“-marginal costs

A (e.g. Hydro)

C (e.g. Coal new)

D (e.g. Coal old)

DemandD1

B (e.g. Nuclear)




18

PRICES UNDER COMPETITION

costs, price

MWh

Supply curve

Demand

Price = system marginal costs

PRODUCER SURPLUS




21

0

10

20

30

40

50

60

70

80

90

Jun.0

0

Okt.00

Feb.01

Jun.0

1

Okt.01

Feb.02

Jun.0

2

Okt.02

Feb.03

Jun.0

3

Okt.03

Feb.04

Jun.0

4

Okt.04

Feb.05

Jun.0

5

Okt.05

Feb.06

Jun.0

6

Okt.06

[EU

R/M

Wh]

EXAA EEX Powernext

Germany, France and Austria: one market




22

Do prices convergence?

0

10

20

30

40

50

60

70

80

1999 2000 2001 2002 2003 2004 2005 2006

[EU

R/M

Wh]

Nord Pool AT-DE-FR PL ES IT NL UK

Czech Republic




23

5. ANALYZING MARKET POWER AND THE EFFECT OF MARKET EXTENTION




24

BASEPRICE VS SRMC (EEX)SRMC Baseload AT+CH+DE+FR

0

10

20

30

40

50

60

70

80

Jän.

99

Mai

.99

Sep.

99

Jän.

00

Mai

.00

Sep.

00

Jän.

01

Mai

.01

Sep.

01

Jän.

02

Mai

.02

Sep.

02

Jän.

03

Mai

.03

Sep.

03

Jän.

04

Mai

.04

Sep.

04

Jän.

05

Mai

.05

Sep.

05

Jän.

06

Mai

.06

Sep.

06

Jän.

07

[EU

R/M

Wh]

Phelix_Base

System SRMC




25

SRMC Peak load AT+CH+DE+FR

0

20

40

60

80

100

120

Jän.

99

Mai

.99

Sep.

99

Jän.

00

Mai

.00

Sep.

00

Jän.

01

Mai

.01

Sep.

01

Jän.

02

Mai

.02

Sep.

02

Jän.

03

Mai

.03

Sep.

03

Jän.

04

Mai

.04

Sep.

04

Jän.

05

Mai

.05

Sep.

05

Jän.

06

Mai

.06

Sep.

06

Jän.

07

[EU

R/M

Wh]

Phelix_Peak

System SRMC

PEAK-PRICE VS SRMC (EEX)




26

Price = MC-A

PRICE IN AREA A (DE+FR+CH+AT)

Coal or Natural gas




27

Price = MC-A

ADDING A „SHORT“ COUNTRY (e.g. Hungary)

Price = MC-B PRICE INCREASES!




30

POWER PLANT CAPACITIES Power plant capacities

-

20 000

40 000

60 000

80 000

100 000

120 000

AT CH DE FR CZ PL

Net

cap

acity

[MW

]

Hydro

Gas

Oil

Lignite

Coal

Nuclear




31

GENERATION AT+CH+FR+DEElectricity generation AT+CH+DE+FR

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

Jän.9

9Ju

l.99

Jän.0

0Ju

l.00

Jän.0

1Ju

l.01

Jän.0

2Ju

l.02

Jän.0

3Ju

l.03

Jän.0

4Ju

l.04

Jän.0

5Ju

l.05

Jän.0

6Ju

l.06

Jän.0

7

[GW

h]

New RES

Fossil

Nuclear

Hydro




32

GENERATION AT+CH+FR+DE+CZ+PL

Electricity generation AT+CH+DE+FR+CZ+PL

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

Jän.9

9Ju

l.99

Jän.0

0Ju

l.00

Jän.0

1Ju

l.01

Jän.0

2Ju

l.02

Jän.0

3Ju

l.03

Jän.0

4Ju

l.04

Jän.0

5Ju

l.05

Jän.0

6Ju

l.06

Jän.0

7

[GW

h]

New RES

Fossil

Nuclear

Hydro




33

METHOD OF APPROACH:Merit Order Curves AT+CH+DE+FR

0

20

40

60

80

100

120

0 20 000 40 000 60 000 80 000 100 000 120 000 140 000

Generation [GWh]

SRM

C [E

UR/M

Wh]

January '06

February '06

March '06

April '06

May '06

June '06

July '06

August '06

September '06

October '06

November '06

December '06




34

METHOD OF APPROACH:Merit Order Curves AT+CH+DE+FR+CZ+PL

0

20

40

60

80

100

120

0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000

Generation [GWh]

SRM

C [E

UR/M

Wh]

January '06

February '06March '06

April '06

May '06June '06

July '06

August '06September '06

October '06

November '06December '06




35

METHOD OF APPROACH:System marginal costs baseload

0

10

20

30

40

50

60

Jän.0

5

Mär.05

Mai.05

Jul.0

5

Sep.05

Nov.05

Jän.0

6

Mär.06

Mai.06

Jul.0

6

Sep.06

Nov.06

Jän.0

7

Mär.07

[EUR

/MW

h] DE

AT+CH+DE+FR

AT+CH+DE+FR+CZ+PL




37

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

Jän.0

5

Mär.05

Mai.05

Jul.0

5

Sep.05

Nov.05

Jän.0

6

Mär.06

Mai.06

Jul.0

6

Sep.06

Nov.06

Jän.0

7

Mär.07

[EUR

/MW

h] SRMC_Base_MEU

SRMC_Base_MEEU

SRMC_Peak_MEU

SRMC_Peak_MEEU

SRMC MEU/MEEU




47

8. CONCLUSIONS

• In wholesale markets: strong suspictions regarding exertion of market power in every sub-market

• General lack of competition: in generation and supply in every country and sub-market




48

8. CONCLUSIONS

• conduct European-wide correct unbundling to avoid market power over the grid• to ensure prevailance of excess capacities resp. demand-side measures• avoid further mergers and cartelisation, divest capacities, provide incentives for

new generators?• harmonise (transboundary) conditions for access to the grid; • Enhance transparency;

To bring about effective competition it is necessary to …




50

8. CONCLUSIONS • The absolute litmus test for the liberalised

CE market will come when excess capacities in transmission and generation has disappeared;




51

LESSONS LEARNED FROM THE AUSTRIAN POINT-

OF-VIEW• Austria is well-connected to CH, DE, CZ• Austrian generators cannot influence the market prices in this market

currently. Competition must be triggered on a superior level in Europe • Decrease in plant capacity and increase in consumption led to the change

from a net electricity exporter in the 1990s to a net import country in recent years.




52

Homepage: eeg . tuwien . ac . at

E-Mail : Reinhard.Haas @ tuwien . ac . at

FURTHER INFORMATION:




53

APPENDIX




54

ELECTRICITY PRICES HOUSEHOLDS 2004

0 5 10 15 20

AT

BE

CZ

DE

FR

HU

IT

NL

LU

PL

PO

SL

SK

ES

CH

c/kWhEnergy price Energy tax Fees for RES, CHP, Stranded investments VAT + other taxes





55

Current household electricity prices(excl. Taxes)

0

0.02

0.04

0.06

0.08

0.1

0.12

1991 1993 1995 1997 1999 2001 2003 2005

EUR

/kW

h Czech Republic

Austria

EU-average




56

Electricity prices' components 2005

0 5 10 15 20

Austria

Czech Republic

cent/kWh

Energy price

Energy tax

Other fees

VAT




57

ELECTRICITY PRICES INDUSTRY 2004

0 2 4 6 8 10

AT

BE

CZ

DE

FR

HU

IT

NL

LU

PL

PO

SL

SK

ES

CH

c/kWhEnergy price Energy tax Fees for RES, CHP, Stranded investments

Sources: EUROSTAT, IEA

10.3





58

Network issues /Cross-border trade

0% 20% 40% 60% 80% 100%

AT - DE

FR – IT

FR – BE

PO-ES

DE - AT

FR-ES

DE – NL

CZ -AT

FR - DE

AT – IT

PL - CZ

CH - IT

CZ - DE

SK - HU

ES-PO

SLO - IT

% of congestion (Load flow/NTC)Winter Summer

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