Publications / Hungarian Energy Market Report
REKK Hungarian Energy Market Report 2016 Q1Published: 2 of June, 2016
Gripped by loops I Managing the market and financing risks of ongoing and planned nuclear investments in Europe I Capacity allocation developments in the gas market I The Commission’s vision for LNG, storage and security: Complete the market

Table of contents

Gripped by loops

The simmering discontent of countries suffering from unintended physical flows through their electricity interconnections and within their internal network reached a tipping point for Poland in December 2014. At this time, Polish energy regulator (URE) made a formal request for ACER to form an opinion on the compliance of the current methods of allocation of cross-border transmission capacities in the CEE region with the provisions of Regulation 714/2009. ACER issued its legally non-binding opinion on this matter in September 2015, requesting the regulators and TSOs in the CEE region to come up with a timeframe for implementing coordinated capacity allocation at the German-Austrian border. ACER supports URE’s claim that the absence of cross-border capacity allocation for commercial transactions at the DE-AT border results in significant power flows across the transmission system of neighbouring countries, notably the German- Polish, German-Czech and Czech-Austrian border resulting in structural congestion that threatens network security and crowds out commercial trade. As a consequence, the DE-AT border must be defined as structurally congested and – following the provisions of the Regulation – needs to be the subject of a transparent and non-discriminatory capacity allocation procedure, i.e. the splitting of the German-Austrian single price zone. The Austrian regulator, E-Control, challenged ACER over the proposed market-splitting of the German-Austrian single electricity price zone before the European Court of Justice and filed an appeal with ACER’s Board of Appeal. However, only appeals directed against individual ACER decisions or measures having legal effects can be admitted by the Board of Appeal. Since ACER’s request for the implementation of a capacity allocation procedure did not qualify for a binding measure with direct legal effects, ACER has dismissed the appeal as inadmissible.

Authors: András Mezősi, Zsuzsanna Pató
Managing the market and financing risks of ongoing and planned nuclear investments in Europe

In recent months three anticipated documents were published, each drawing the attention of investors in new electricity generating facilities in Europe. On 4 April the European Commission revealed a detailed analysis titled the “Nuclear Illustrative Programme”, providing an overview of the full vertical chain of nuclear technology - from mining through power plants to waste management - and covering the main economic features of new potential nuclear investments. The Commission’s state aid sector inquiry into electricity capacity mechanisms was then published on 13 April. Lastly, the February publication of the International Energy Agency (IEA), "Re-powering Markets" is also informative. Its subtitle aptly reflects the opinion of the agency on the most critical challenges of the forthcoming period: "Market design and regulation during the transition to low-carbon power systems".

Capacity allocation developments in the gas market - facts and opinions

The European Network of Transmission System Operators plays a major role in creating uniform European markets for both electricity (ENTSOE) and gas (ENTSOG). Since its foundation in 2011 ACER (Agency for the Cooperation of Energy Regulators) has provided substantial assistance in accordance with its mandate to facilitate the cooperation of energy market regulators. The initial conceptualization of the framework guidelines and network codes for sub-themes started with the collaboration of the above organisations following regulations 714/2009/EC and 715/2009/EC of the European Parliament and the European Council. This article will first describe the most important changes (adopted 1 October 2015 for the most part) in connection with the above regulations and then elaborate as to their impact on the Hungarian transmission system, specificallywith regard to capacity sales in the gas market.

The Commission's vision for LNG, storage and security: Complete the market

In February of this year, following a four month consultation period in 2015, the European Commission released a package of communications that include a concrete proposal for the revision of security of supply Regulation 994 and the outline of a strategy for LNG and storage. Together they are aimed at improving natural gas security of supply and competitiveness with the reinforcement of regional solidarity and integration. The term strategy is somewhat misleading with respect to the LNG and storage communications, as the Commission provides more of a suggestive assessment highlighting challenges and potential. Similar to its outlook on security of supply, it prescribes market-based solutions that are dependent on the full implementation of the Third Energy Package. In Central and Southeast Europe (CSEE) the Commission must oversee more market development for these solutions to be feasible, particularly with respect to infrastructure. Here it defers to processes underway, the Central and South-Eastern Gas Connectivity (CESEC) initiative identifying critical projects that are supported with the Connecting Europe Facility (CEF) and cross-border cost allocation (CBCA) overseen by the Agency for the Cooperation of Energy Regulators (ACER). Meanwhile, the security of supply revision seeks to institutionalize shared emergency planning and response measures. As logical as the Commission’s observations and intentions are regarding the improvement of security of supply, the recommendations are quite ambitious and unlikely to be implemented as currently envisioned.

Author: Nolan Theisen