Futures contracts for settlement in the fourth quarter of 2022 indicate an electricity price in southeastern Europe of 500 euros per MWh, said the director of the Serbian power exchange SEEPEX, Miloš Mladenović. He noted that market participants can buy such financial derivatives to hedge against price volatility.

The average electricity price since the start of the year has reached 250 euros per MWh on SEEPEX, against 390 euros so far in August alone, and the upward trend is constant, said the Director of the Serbian Stock Exchange, Miloš Mladenović. “It’s not just here, but the situation is like that on all the surrounding exchanges. And not just in the region, but across Europe, he told public broadcaster RTS.

In fact, he warned, market conditions show electricity would cost 500 euros per MWh in the fourth quarter. Mladenović explained that this is evident from prices in the futures market. Futures contracts are financial derivatives. He added that the level climbs to 400 euros per MWh or 450 euros per MWh.

Electricity for November to February delivery in France remains above 1,000 euros per MWh

Year-ahead base electricity prices in France and Germany exceeded EUR 600 per MWh and EUR 450 per MWh, respectively, for the first time. Moreover, monthly contracts in France for delivery from November to February remain above EUR 1,000 per MWh.

After a series of nuclear power plant shutdowns last winter, the country is now facing rising water temperatures in rivers. The production of nuclear power plants had to be reduced because they cannot be sufficiently cooled.

The forecasts weren’t pessimistic enough

The trend will surely continue next year, and it is expected to continue for two or three years, Mladenović estimated. He pointed out that producers and consumers in Serbia do not use futures contracts enough, adding that they are a protection mechanism for the domestic and Hungarian markets. They have been available since 2019, when SEEPEX introduced them in cooperation with the EEX exchange, and they are listed in Germany.

Those who bought futures last September got a price of EUR 100 per MWh for the whole of 2022

The role of futures contracts is to provide insurance against large swings in the prices of goods, or electricity in this case. Namely, market participants who bought the instruments last September got electricity for the whole year 2022 at 100 euros per MWh, Mladenović pointed out. In December, prices already reached 250 euros per MWh.

“But we see that the forecasts were not yet pessimistic enough,” said the head of SEEPEX. Mladenović said that at the beginning of this year the price for 2023 was 200 euros per MWh. Asked about the reasons for the surge in electricity prices which had never been seen before, he also pointed to the poor hydrology in Europe but also the rapid recovery of the Asian economy and the increase in gas prices recorded before. even the beginning of the war in Ukraine.

Exchange is the perfect mirror

“One of the main benefits and fundamental purpose of a power exchange is that in conditions like this, when there really is a supply problem, you have a point of “exchange where you can find energy. However, it must be said, the price itself depends on the situation. The exchange is a perfect mirror that shows the situation as it is,” Mladenović said.

SEEPEX is the authorized operator for the organized electricity market in Serbia. The company is jointly owned by the country’s transmission system operator Elektromreža Srbije (EMS) and the European power exchange EPEX Spot. The government of Serbia granted SEEPEX Designated Electricity Market Operator (NEMO) status in June.

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