Table of contents

In connection with the Ukrainian-Russian gas dispute of January 2009 the transit pipeline leading to Central Europe was turned off for a few days, instantly bringing the security of supply related exposure of the former Socialist countries to spotlight. Since then it has been expressed on many occasions, that the gas dependency from the Russian partner carries serious risks, that can be eased through the diversification of sources, strengthening the infrastructural connection to the Western European gas network, establishing physical connections among Central European countries, and developing existing pipelines to be bi-directional. In part, these are made compulsory by the 2010 security of gas supply regulation of the EU, while the 10 year network development plans contain the proposed investments of Member States on the development of cross-border and storage capacities. In addition to security of supply considerations, another noteworthy benefit generated by network development is that the natural gas wholesale purchase price of the region comes closer to Western European prices (represented by the spot prices of the Dutch exchange [TTF prices] in our model), which, for recent years, have been substantially lower than the wholesale prices of the Danube Region (the markets of which are heavily influenced by TOP contracts).

Based on its modelling work REKK set out to identify the infrastructural projects, or combinations of projects that could reduce the annual gas bill of the whole region by the largest proportion, and also examined in which case would the incorporation of new sources generate the most saving for the region.

In one of our previous articles we have already analysed the short term impacts of the closure of the German nuclear power plants – in particular, how electricity prices, foreign trade and the Hungarian electricity market are affected. More than a year has passed since then, making it possible to review the impacts made on the German and the regional electricity markets, now with a longer data set. Moreover, using the results of the European Electricity Market Model developed by REKK, we can also inspect the implications on an extended time horizon. The model is capable of simulating the electricity markets of 36 European countries. Hence, the article will first review the new developments within the German electricity market since the middle of last year, also covering those analyses that addressed the questions surrounding the reduction of nuclear capacities. The evaluation of modelling results will come afterwards

For the last two years the difference between the price of baseload and peak products (peak spread) quoted on electricity exchanges has substantially narrowed for several European countries, including Germany and Spain – and this trend seems intact in 2012 as well. The key explanation for this phenomenon is the soaring photovoltaic (PV) production: solar PV plants can generate abundant energy during the daylight peak hours, and the feed-in-tariff scheme brings about significant additional supply, suppressing the price of peak load energy. In the article we explore the price lowering impact of the PV plants, primarily in the case of Germany, and we also inspect the influence that lower spreads may make on the generating mix and hence the longer term development of the electricity market.

The long term Take-or-pay (TOP) contract that was signed between Gazprom and MOL in 1996, and which even today serves as the backbone of the supply side of the domestic natural gas market, will expire in 2014-15, opening up the opportunity to meaningfully reorganise the structure of the gas wholesale market. The current article raises a number of vital questions concerning the future structure of the Hungarian natural gas sector, essential from the perspective of the competitiveness of domestic power plants and the economic position of the households. First and foremost, we inspect if it is reasonable to make a new TOP contract – similar to the current one – specifically for the Hungarian market, considering the expected domestic and regional gas market developments.