“I can fire all my employees and still won’t get the price the electricity is selling for right now,” says Laurentiu Ciurel, general manager of Complexul Energetic Oltenia (Oltenia Energy Complex), which is currently employing 18,600 people and owns the largest lignite-fired thermoelectric power plants in Romania, as well as lignite mines.
This is the second warning coming from a major power producer after Daniela Lulache, general manager of nuclear power producer Nuclearelectrica (SNN.RO), said not long ago that the lack of appetite for long-term electricity contracts on the part of consumers had become ‘frightening’.
The end of the year was a period when major power producers usually secured their revenue for the coming year by signing long-term contracts. That is no longer the case in 2014.
On October 17-20, CE Oltenia tried to sell about EUR63 million worth of power via 20 auctions on the bilateral contracts market of the OPCOM energy exchange, deliverable under one-year contracts at 170 lei to 199 lei (EUR38.4 to EUR45) per megawatt. It found no buyers.
“This is really serious,” Laurentiu Ciurel says. “Suppliers have banded together to buy power from the spot market only. There has been power sold for as little as one leu on this market and no one regulates that. Romania doesn’t need coal any more at this moment.”
Nuclearelectrica, too, tried to find buyers for EUR42 million worth of power via 29 auctions on October 21-22, and only 11 ended in a sale. Most of its contracts were four-month contracts.
On the other hand, suppliers like Electrica and Enel announce auction sessions to buy power under three-month contracts and again no bidders. Hidroelectrica is the only major power producer that still manages to sell electricity under two or six-month contracts at prices lower than its competition.
What is happening here? Clean energy producers go and sell their power on the spot market, to collect the money from the green power support scheme.
“Even with the subsidy cut, there’s still enough money for them to afford to offer lower prices on the market. We expect the price to plummet further,” CE Oltenia’s Ciurel said.
At the current prices on the energy exchange, CE Oltenia should sell its coal for EUR8/ton.
“I’ve got an offer for EUR10.5 to EUR18/ton from Serbia. If Romania doesn’t need our coal any more, I’m going to Serbia. The only time someone remembers Romania has got coal is the four months of winter. We’re practically non-existent for the rest of the time.”
Nuclearelectrica’s Daniela Lulache says the regulatory framework discourages long-term contracts at the moment.
“The energy exchange no longer allows long-term contracts that include adjustment formulas. The regulatory framework discourages any long-term contract. The industry was consulted on the Order 78 and everyone explained it would produce negative effects. However, it is still in force.”
Order 78 is an order published in the Official Gazette this summer stipulating that only firm price and amount offers are allowed on the bilateral contract market.
The price of power has constantly declined since 2008, from EUR51.2 to EUR32 on the spot market in the first nine months. On the bilateral contract market the electricity price fell from EUR49.5 per megawatt to EUR37.2 in the first nine months of the year. Most major producers believe the trend will continue into 2015.
(English version by Loredana Fratila-Cristescu)