Electricity: Ukraine and Europe May 1 - 5, 2023

Ukrainian Energy Exchange: bilateral contracts market

During the past week, 11 auctions for the purchase/sale of electricity were held at the UEEX in the one-way auction mode, of which 3 were in commercial sections and 8 were in specialized sections. Among the initiators were represented: Ukrhydroenergo, Centerenergo, Guaranteed Buyer, companies of the DTEK group, USP and DSO, etc.

During the review period, an auction was initiated by a Guaranteed Buyer, offering block positions of daytime hours with delivery in May. According to the results, the company sold 975 MWh by block positions at a weighted average price of UAH 2,650/MWh.

Last week, Ukrhydroenergo was offered electricity with supply for May. The company was able to sold 14,432 MWh of block positions of maximum load at prices in the range of UAH 2,900 - 3,771.92/MWh, 17,600 MWh of block positions of minimum load at a weighted average price of UAH 1,809.15/MWh.

During the review period, Centerenergo initiated auctions where it offered block positions and base load with delivery in May. According to their results, the company was managed to sold 2480 MWh of block positions (24-7) at prices in the range of 1,610 – 1,854 UAH/MWh, 15,230 MW.y. block positions (8-23; 8-20) at prices in the range of 2,829.64 - 3,100 UAH/MWh, 1,200 MWh at the weighted average price of UAH 2,730/MWh.

The companies DTEK Kurakhivska TPP, Dniproenergo and Zahidenergo initiated auctions in accordance with Article 66 of the Law of Ukraine "On the electricity market", where block positions with supply for May were offered. Companies weremanaged to sell a total of 182,545 thousand MWh, at prices in the range of UAH 1,490 - 2,826.78/MWh.

In the commercial sections of the company, electricity was mainly purchased by the load of an individual profile.

As of May 5, prices were formed for the most frequently used types of sales charts presented on the chart.

Market operator: day-ahead market and intraday market

During the review period, the prices were dynamic, being in the range of 2484.12 - 2907.64 UAH/MWh, within ± 8% of the deviation relative to the average weekly value. In general, the average value of the weighted average price for the last week increased relative to the similar indicator of the previous week and amounted to UAH 2,684.82/MWh (+12.1%). A total of 403.5 thousand MWh was realized at the DAM during the review period (+48.5%).

During the review period, prices were stable on the IDM. Average weighted prices varied in the range of 2776.29 - 3190.19 MWh, and the average value of weighted average prices for the review period increased by 12.1% relative to the similar indicator of the previous period and amounted to UAH 3005.67/MWh. The total volume of sales during the review period amounted to 12.7 thousand MWh.

European market

Over the last week, in general, electricity prices on European markets have decreased compared to the previous week. Falling gas demand and prices, as well as solar power generation contributed to lower prices on electricity markets compared to March 2023 and April 2022. At the end of the month of April, if we compare the average prices of April with the prices recorded in the same month in 2022, prices have also decreased in all markets. The largest declines occurred on the Portuguese and Spanish markets, by 60% and 62% respectively. On the remaining markets, the decline ranged from 39% on the German market to 54% on the French market. In Germany, France, Italy, Belgium and the Netherlands, the April price was the lowest since August 2021.

In April, solar photovoltaic generation reached its highest level on the markets of Spain, France, Italy and Portugal. However, the largest, 5369 GWh, was achieved on the German market. In annual terms, the largest increase occurred in Portugal (55%).

On the other hand, wind energy generation in April decreased on all analyzed European markets compared to the previous month. The smallest decrease - by 12% in the Italian market. In the remaining markets, the decline ranged from 21% in the Portuguese market to 30% in the French and Spanish markets. Wind power generation in Europe in the first four days of this month provided 14.1% of the region’s needs, according to the WindEurope association.

As for demand, according to April 2023, electricity demand in the Netherlands was the lowest since January 2015. The Spanish and Italian markets recorded their lowest values since April and May 2020, respectively. The drop in demand for electricity in the first days of May, compared to the previous month, was influenced by a slight increase in the average temperature.

As of May 5, the basic electricity price in France was EUR 97.73/MWh, in Hungary - EUR 96.96/MWh, in Poland - EUR 104.13/MWh. As of June 2023, in the above-mentioned countries, electricity was traded at prices in the range of EUR 92-118/MWh.

Monthly futures for July 2023 on electricity increased by an average of 7.7% in the analyzed countries. As of August 2023, prices in Hungary increased by 5%, in France they decreased by 3%.

Prices of futures contracts, EUR/MWh, 05/04/2023

According to the results of April, EUA and UKA registered a loss for the second month in a row. The April average price of CO2 right futures on the EEX market for the benchmark contract since December 2023 was EUR 92.47/t, up 0.4% from the previous month’s average of EUR 92.08/t. The highest estimated price for the month in the amount of EUR 97.44/t was reached on April 11.

Last week, European carbon prices fell to a new three-month low last Thursday, May 4, as market sentiment weakened after the European Commission announced that no more EUAs would be added to market supply this year. According to information from the European Commission, additional sales of EU permits from the Innovation Fund for the REPowerEU block plan will only start in 2024 after the auctioning rule is updated at the end of this year. CO 2 futures prices on the EEX market for benchmark December 2023 contracts reached 4 May 2023 estimated price in the amount of EUR 84.67/t. EU member states transferred a total of USD 56 million industrials over the past two weeks, bringing total output to just over 87% of this year’s high, with only Finland and Ireland yet to start output.

EU member states transferred a total of USD 56 million to industrials over the past two weeks, bringing total output to just over 87% of this year’s high, with only Finland and Ireland yet to start output.

According to the results of April, 95% of imported electricity came from Slovakia, the rest - from Moldova. Last week, Russian aggressors attacked energy facilities in Kherson, Sumy, Dnipropetrovsk, Zaporizhia, Chernihiv, Kharkiv and Donetsk regions.

Public procurement

Over 40 tenders for the purchase of electricity by customers were held last week. The sold volume of the 10 largest contracts is 44.12 million kWh for the total cost of UAH 163.06 million excluding VAT. In general, the average price was UAH 3.75 per kWh excluding VAT. The largest contract was awarded to "Ukrainskyi Strum" LLC, which will supply 34 million kWh of electricity to Vinnytsia Transport Company at the initial price of UAH 3.72 per kWh excluding VAT. Other tenders are shown in the graph below. Prices ranged from UAH 2.90 to UAH 4.60/kWh excluding VAT.

News of the wholesale electricity market

Europe’s oil and gas producers will have to help store 50 million tonnes of CO2 a year by 2030 in the proposed Net Zero Industry Law (NZIA) last week. The NZIA proposal recognizes that a cross-border single market approach is needed to ensure carbon storage could be an effective solution for industries in all member states. It is time to put more pressure on the oil and gas sector to take responsibility and play its part in meeting Europe’s emissions targets. On the back of record profits in 2022, the sector has the experience, assets and more than enough resources to ensure sufficient CO 2 storage capacity in the region.

The power transmission line between Ukraine and Poland has been put into operation after modernization. Specialists of "Ukrenergo" and their Polish colleagues from the PSE company quickly carried out all the work. And European partners provided about a thousand pieces of equipment. The line has been operating since April 27. It successfully passed the three-day test period. Due to the sale of electricity, we accumulate resources for energy recovery before the new heating season. And if necessary, we activate imports and issue emergency assistance from neighbors. Ukrainians will be with light, despite enemy missile and drone attacks.