What’s happening on the electricity exchange and what it means for customers

Turbulent price developments on the electricity exchange for next year raise concerns about high electricity bills. While on Monday the price broke the threshold of one thousand euros per megawatt hour, on Tuesday it had practically halved. And in the next few days, it may rise sharply again. However, according to experts, threatening fluctuations do not mean a reason to panic. The current price on the stock exchange actually says little about the price of energy for next year. The situation is different with spot prices.

Electricity prices for delivery next year on the stock exchanges in the Czech Republic and Germany fell significantly, while only a day before they crossed the threshold of one thousand euros (roughly CZK 24,600) per megawatt hour. According to analysts, the reasons may be different, it may be a reaction to the announced effort to resolve the situation at the level of the European Union, especially then significantly low volumes of business may also cause instability. If there is only a small amount of supply and demand, it only takes a little to swing the price significantly in either direction.

According to analysts, it is equally possible that prices will skyrocket again in the coming days. A three-day shutdown of the Nord Stream gas pipeline began on Wednesday. If, for example, there was an unexpected extension of the shutdown, electricity prices could rise again. However, it is necessary to distinguish between the effects of prices on the exchange traded for next year and others, for example spot prices, where the payment depends on the current prices on the exchange, which, although high, are significantly lower compared to the energy exchange for next year.

According to energy analyst Jiří Gavor, the extreme price itself is not a problem, according to him, similar fluctuations in prices, even by tenfold, occurred regularly in the past, for example in the case of several very cold days, the important thing is in what volume is traded at such a price.

“If you take a trader who, from the point of view of risk management, would buy evenly, the same part every day, for his end clients, you can see that the extremes that prevail at the end of August will only be reflected in his part,” Jiří told Echo24 Gavor.

Crossing the 1,000-euro threshold also caused unnecessary concern, according to Natland analyst Petar Bartoņa. “It doesn’t mean that electricity will cost a thousand euros. It just means that someone added something to their portfolio for which they are now willing to pay a thousand euros. If it ends up being one thousandth in his portfolio, it will increase in price by one thousandth of a thousand euros. So the effect on supplies next year from this merchant will have the effect of a one-euro price increase,” Petr Bartoň told Echo24, adding that in reality, purchases for a merchant are usually much less than one thousandth of the portfolio, so the effect is even lower.

According to Jiří Gavor, the impact of these prices on the stock exchange for next year is mainly such that it is not worth it for traders to place a demand on the stock exchange, and at the same time the customer will not be able to pay it anyway. “It is too risky for the trader to try to buy a large volume and it is also unbearable for the customer to buy at such prices. So we probably have to wait for some sort of stabilization, even though time is running out, there is still relatively much time until the end of the year and good news may come. At the very least, it will start to blow, rain a little, and the French core will start to slowly start up again. This should strengthen the supply side,” Jiří Gavor added.

As long as the volume of purchases at high prices remains low for the next year, according to Petr Bartona, it will continue to be true that their effect on the overall price is minimal, even if they hold until the very end of the year. From the point of view of the offer, the significant burden of the requirement for hedging on the stock exchange plays a role, i.e. the depositing of advances (margins), which in the case of contracts for the next year mean significant amounts of money at current prices.

According to Petr Barton, the situation is different for “non-fixed” customers who buy electricity at spot prices, which, however, are currently at roughly half the values. “For example, the day-ahead price is now around four hundred euros per megawatt hour. The price for non-fixed customers depends on it. Some have it so that they pay the full spot price, some 80%, it depends on the supplier, but these are people who do not have a fixed price and are on the spot. However, the increase to one thousand euros does not apply to them. Not that the spot price is fundamentally cheap, but there is still a difference of four hundred versus a thousand,” added Petr Bartoň, adding that the difference in price also has an effect on the smaller risk of the aforementioned hedging on the stock exchange.

According to him, the price for next year will influence the fixing of prices in the next year, but again it depends on the volume in which the supplier purchased for such high amounts. “However, the vast majority of suppliers probably did not buy much at these prices. In that case, it absolutely does not concern them,” said Petr Bartoň.

According to Jiří Gavor, it is now time to try the “experiment” announced by Industry Minister Jozef Síkela (STAN), according to him, the union must separate gas prices from electricity prices. Síkela, as the representative of the country presiding over the EU Council, convened an extraordinary meeting of ministers responsible for energy on September 9. A proposal to determine the maximum gas price is also to be discussed.

The article is in Czech

Tags: Whats #happening electricity #exchange means #customers

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