Austria Bides Time as Ejection From Top EU Power Market Looms

  • EU grids to present price zone review after first quarter
  • Austrian regulator says unilateral market split ’questionable’

Austria is biding its time as it faces ejection from Europe’s biggest power market.

Europe will need to adhere to recommendations after a regulatory assessment of power price zones by the region’s grids, including the one between Austria and Germany, Wolfgang Urbantschitsch, executive director at Austrian energy regulator E-Control, said in an interview in Vienna. Those results aren’t expected before the second quarter of 2017, according to Claire Camus, a spokeswoman for Entso-E, the group of European electricity grid operators.

Germany is seeking to split the power market it has shared with Austria for the past 14 years to limit the costs of moving wind energy from its north to industrial demand centers in its south and Austria. Austria opposes the move, with top utility Verbund AG saying a split could cost 1 billion euros ($1.1 billion) a year.

"It isn’t good for competition to have a smaller market with less participants and less liquidity," Urbantschitsch said. "Sometimes, it is depicted very negatively that Austria is just profiting from the bigger market, but all of Europe would profit from more market integration."

The German grid regulator still supports the split of the common power market with Austria after the nations failed to agree on a proposal to limit the amount of traded capacity at the border in March, Bundesnetzagentur spokesman Olaf Peter Eul said by phone from Bonn. The country estimates that its consumers would save 280 million euros after a split, the government replied to a parliamentary inquiry in July. A breakup would also be possible without mutual consent even as Germany seeks to coordinate its actions with Austria and the European Commission, according to the government.

Network Capacity

As a European member state, Germany will face questions of restricting the free flow of goods if it prescribes a market split through its regulator and this is "highly questionable,” Urbantschitsch said. There is no need to restrict trading at the Austrian-German border as there is no "structural congestion" except in Germany, where rising electricity flows from renewables are restricted by a lack of network capacity, he said.

ACER Opinion

Austria’s bid to keep the common market also met opposition from European energy regulator ACER, which called for a split in a non-binding opinion in last year. The regulator is scheduled to rule on the breakup of the market in a binding decision by Nov. 17, spokesman David Merino said. Austria fought the opinion in the European Court and is prepared to do so again if the decision comes to the same conclusion, Urbantschitsch said.

Verbund, the country’s biggest utility, has started to prepare for a breakup by thinking about how to adjust pricing, hedge production and discussing individual contracts with its customers, Robert Slovacek, managing director of Verbund Trading, said Thursday at a conference in Vienna.

"As a trader you always prepare for the worst. If by miracle we have a border by January 2018, of course we would manage the problem," Slovacek said. "If you would split Germany from Austria, we would not have a futures market in Austria or if we had one it would be very, very illiquid."

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