Publications / Hungarian Energy Market Report
REKK Hungarian Energy Market Report 2011 Q1Published: 1 of March, 2011
On the justified size of strategic natural gas reserves | Cost developments of operating reserves and pricing strategy of regulating power plants in recent years | A new EU regulation on gas supply security has come into force

Table of contents

On the justified size of strategic natural gas reserves

The end of 2010 brought along a number of substantial regulatory changes within the gas sector, generating serious turmoil within the industry due to their foreseen impact. Of these the reduction of strategic gas reserves received possibly the least attention, even though this regulatory amendment may considerably impact several gas market segments. According to the new regulation, the strategic reserve of natural gas is reduced from the former “at least 1200 ,cm working gas reserve” to “at least 600 mcm and at most 1200 mcm working gas reserve”, with the actual annual value being set by a ministerial decree by 15 January each year. And while Decree 2/2011. (I. 14.) of the Ministry of National Development (MND) published this year did not make use of the opportunity offered by the amendment of the act, leaving the former capacity of 1200 mcm untouched, the regulatory door is now open, and policy makers can – among others – reduce the costs of strategic storage and, consequently, the related fees contained by the retail gas price. This new development therefore prompted us to take a closer look at the volume of strategic gas reserve, i.e. what is the value that based on the peak daily capacity of the gas system and the consumption data of recent years would be considered justifiable.

Author: Pálma Szolnoki
Cost developments of operating reserves and pricing strategy of regulating power plants in recent years

In spite of general electricity market trends, prices for ancillary services have continuously increased in the Hungarian electricity sector. End consumers today are charged nearly 2 HUF for ancillary services by each unit of kWh consumed, totalling 67.5 billion HUF in 2010. In the first part of our article, we briefly summarize the volume, structure and total cost changes of operating reserves procured by MAVIR. The second part analyzes whether the increasing cost of reserves can be attributed to the pricing behaviour of some major generation companies.

A new EU regulation on gas supply security has come into force

On 2 nd December 2010 a new EU Directive aiming to improve the security of gas supply within the community came into force [Regulation (EU) No 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC]. The new regulation can be viewed as a significant part of the EU’s answer to the January 2009 gas crisis, and its implementation may considerably alter Hungary’s security of supply as well as its gas market position. The regulation is legally binding, transposition by Member States is not needed. It strives to attain its goal firstly through prescribing minimum requirements for the gas infrastructure and specific priority services, and secondly through the gradual introduction of a member state specific, but centrally coordinated planning system for crisis prevention and management. After a short summary of the infrastructure related requirements of the regulation we are going to use simple indicators to examine the status of selected countries from the region – including Hungary – concerning the degree to which they currently meet the minimum regulatory requirements on security of supply. We will also consider which regional partners may be best suited for Hungary when it comes to joint development of crisis prevention and management plans.

Authors: Péter Kaderják, Kornél Andzsans-Balogh