The shortage of affordable electricity on Hungary’s soon-to-be fully liberalised electricity market is mostly due to the shortage of generation capacities all over the region, market participants said during an industry conference in Budapest on December 4. “There is a shortage of available capacities in the region, as there are no market incentives to build power plants, therefore countries in the region such as Poland, Slovakia or Bulgaria are cutting down (on exports),” Mihaly Bacsko, strategy director at state-held Hungarian power wholesaler MVM Trade, said at a power industry conference organised by the Institute for International Research (IIR), Interfax reported.
Bacsko noted that the relative shortage of regional capacities is the main reason behind a sharp fall in cross-border electricity trade in some directions, questioning the view of Hungarian government officials who have put hopes in more vibrant regional electricity trade to break the hold of domestic incumbent power companies on the market. Bacsko added that capacity bottlenecks are caused mostly by the decommissioning of older power plants, as well as reluctance to build new ones mainly due to uncertainties over CO2 emission allocations and quota prices.
Speaking on behalf of Hungarian electricity traders, Otto Toth, managing director at E.ON Energiakereskedo, said that because of the shortage, price increase projections next year of less than 10 percent for household users and around 30 percent for industrial consumers may be too optimistic and prices may end up rising at a steeper rate. “We find it increasingly difficult to buy electricity,” Toth said. “It is very difficult to compete (with prices) on a market where there is short supply, and as a trader I view the price increase projections out there as unsustainable.”
Representing electricity consumers, Pal Kovacs, procurement director of Hungary’s dominant oil group MOL, told the conference that the company has seen a jump in prices and a decline in the number of competitive offers in the past year. This reversed earlier positive experience when MOL first entered the liberalised market in mid-2003, at the time open only to large industrial consumers. Kovacs noted that in 2003, the company received competing offers amounting to three times the capacity MOL actually needed. By contrast, when tendering suppliers in 2006 for 2007, the company did not receive a single full offer for all of its electricity needs, only a handful of offers for 10 megawatts each, at prices more than double 2003 levels and roughly on par with “public market levels.”
Kovacs said this raised the question whether MOL should opt out of the liberalised market and return to the public market, but the company decided to stay on the open market. “It’s a sellers’ market and there are problems, but we believe in competition,” Kovacs said.