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Split-zone Austrian-German power spreads seen averaging Eur2-3/MWh: regulators

Highlights

First ever spot auction settled below Eur2/MWh, Tue above Eur7

Price zone split means border capacity constraints since Oct 1

At least 4.9 GW long-term with additional short-term capacity

London — Regulators expect the price spread between the newly split German and Austrian power markets to average Eur2-3/MWh on an annual basis, according to a joint statement Monday.

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On Sunday the first ever split-zone spot auction for Monday delivery settled with a Eur1.95/MWh spread, while the spread for Tuesday widening to Eur7.41/MWh, data from spot exchange Epex Spot shows. Austria was the premium market in both cases.

These day-ahead spreads compare to an Eur0.88/MWh premium for Austria in the first ever split-zone monthly auction for October transmission capacity from Germany into Austria held September 12, JAO data showed.

"On an annual basis, a difference of Eur2-3/MWh seems most likely," regulators BNetzA and e-control said. The spread would depend on how gas and CO2 prices developed, it added. Hydro-heavy Austria is a considerably less CO2-intensive system than that of coal-heavy Germany.

"It seems that the spreads need to stabilize first," the co-head of Austrian regulator e-control, Wolfgang Urbantschitsch said. E-control initially opposed the split, arguing it would push prices up in Austria.

So far there were few reliable indicators for the spread mainly due to a lack of liquidity in Austrian power trading futures, the regulators said.

Overall the impact of the split on consumer and industrial power prices would be limited with recent sharp gains due to rising fuel and carbon prices across all European markets, they said.

ADDITIONAL SHORT-TERM CAPACITIES, NEW LINES

Germany's BNetzA and Austria's e-control decided in 2017 to split the price zone following debate about loop flows through Eastern European grids.

The measures will curb unlimited power trading between the two nations.

"However, electricity trading between the traditionally well-integrated markets will continue to be possible on a large scale with at least 4,900 MW of electricity available, backed by long-term capacity," the regulators said. "Depending on the network situation, additional capacity will be available short term," it said with those capacities allocated under the flow-based market coupling for the CWE region.

The restriction of unlimited trade is offset by the positive effect on the management of power flows for grid operators by adjusting commercial trading volumes to the physical grid situation, it said.

Grid security for both countries will continue to be supported by redispatch services by Austrian power plants, the statement added.

In addition, new planned power cables could boost cross-border transmission capacity in the future with the first part of the St. Peter-Hart interconnector expected in 2022 with full commissioning of the line across the Alps set for 2024, the statement said.

--Andreas Franke, andreas.franke@spglobal.com

--Edited by Maurice Geller, maurice.geller@spglobal.com