Krasimir Zhivacki, AETB: The probability that high prices will dominate the next 2 years is high. It is good for business to prepare

Marinela Arabadzhieva

In the last two months, a noticeable drop in consumption has been observed in Bulgaria, dictated both by the high prices in July, August and September, and by the deteriorating economic situation. This was explained by Krasimir Zivachki, executive secretary of the Association of Electricity Traders in Bulgaria (AETB), in an interview for dir.bg and 3e-news.net (with abbreviations). According to him, investing in RES for self-consumption and energy efficiency is profitable, given the fact that even with state support, electricity prices turn out to be unbearable for some businesses. Non-household consumers, businesses should prepare themselves, because the probability that high prices will dominate the markets in the next 2 years is high, the expert believes.

Mr. Zivachki, after a short period of decline, electricity prices in Europe are once again returning to higher levels. What is happening in the electricity market?

On the electricity market, we are beginning to observe the normal seasonal increase in prices. With the drop in temperatures for a longer period, the increase in consumption also began. This is valid both for Bulgaria and for the rest of the European countries. For example, in our country, the peak load of the system was around 5,000 MW, while the ESO forecasts for the end of the month are for it to reach nearly 6,000 MW.

How can we explain the difference in price levels between the markets of Western Europe and those of South-Eastern Europe? In this regard, could you explain the meaning and influence of the so-called "Bottlenecks" on prices?

This difference is dictated by several factors. The good weather conditions in Western Europe with relatively high temperatures for the season combined with high production from wind farms and the return of a number of production facilities to operation after completed repair programs contribute to prices being lower compared to the Central and South Eastern Europe region, where Bulgaria falls. Western Europe is connected to countries with cheap electricity production such as Poland, Norway, Sweden and Denmark (during periods of high wind production). The reduced demand for electricity in the markets of Western Europe is also noticeable due to the limitation or even complete cessation of consumption by various industrial and commercial consumers.

In our country, the weather also had a favorable effect on the prices, that's why the price in October was more than 2 times lower than in August, and that's for the 6th unit of the Kozloduy NPP in planned annual maintenance. Unlike Western Europe, our region is surrounded by a highly deficient country, i.e. traditional importers - such are Greece, Serbia, North Macedonia, Hungary, and recently also Romania, especially after the problems with the supply of electricity from Ukraine to Moldova and Romania, dictated by military action. Simply put, the demand for electricity in our neighboring markets contributes to price growth in Bulgaria as well. We have a significantly increased export capacity within the "Day Ahead" market association, with over 700 MW for Greece and over 1,800 MW for Romania. It should be noted, however, that on certain days and times, especially in the mid-afternoon, we have imports. It comes from both Greece and Romania, when RES production in these countries is high.

Should the Bulgarian economy prepare for higher price levels?

The recent actions of the National Assembly guarantee, simply put, a "ceiling" on the price (although this is not a very precise definition, that's why I put it in quotes) of BGN 200/MWh for the whole of 2023. This "ceiling" will apply to all consumers, and for large industrial ones there are certain requirements, which, however, in all probability will be dropped and they will be able to fully benefit from the fixed "ceiling".

A similar "ceiling" for the last 6 months of 2022 was BGN 250/MWh. For some businesses, however, even this cost proved prohibitive and they severely limited or even stopped their electricity consumption. As a result, for the last two months in Bulgaria, we observed a noticeable drop in consumption, dictated both by the high prices in July, August and September and by the deteriorating economic situation.

Even with the price protection provided by the state against high electricity prices, it is profitable for the majority of non-household consumers to invest in energy efficiency improvement measures and RES projects for their own consumption. So in my opinion the bottom line is, yes, businesses need to prepare because the likelihood that the next 2 years of high prices will dominate the markets is high.

Mr. Zivachki, after reducing the demand for gas by 15%, the European Commission also recommended a reduction in the demand for electricity, as well as a reduction in consumption during peak hours. How should this be interpreted and what does it mean for the Bulgarian economy?

At the moment, it means nothing for the Bulgarian economy, because such a measure is not intended to be applied in Bulgaria. I personally do not see the will to make such a decision, which would most likely harm some of the non-domestic electricity consumers.

How does the EU's request to tackle high electricity prices affect traders, given the fact that you are an important part of the supply chain?

At the moment, the concern of all market participants - producers, end customers, network operators and electricity traders - is how the Regulation (EU) 2022/1854 on emergency intervention to deal with high energy prices will be implemented. Unfortunately, we already have a negative example from Romania, where electricity and gas traders were taxed, which led to many adverse consequences for the Romanian market. A number of ATEB members active in this market have ceased operations there, traders are giving up their clients, no long-term deals have been carried out since September, the traded quantities on the spot market have decreased significantly and many other consequences that have not only national, but also a regional reflection.