GEN-I: Slow regulation weighs on SEE gas markets
What medium-term risks and challenges do you see for the electricity trading markets in Southeast Europe (SEE)?
The European wholesale electricity market has changed profoundly in recent years, with the increasing generation of electricity from renewables, with its volatile production pattern, multi-year low electricity prices on exchanges, and frequently negative short-term electricity prices as a consequence. Regulatory changes regarding subsidies for renewables, enormous growth in the latter in recent years and the stepwise introduction of capacity remunera- tion mechanism schemes are disturbing market principles, price signals are being distorted and based less and less on actual electricity market fundamentals.
Markets in SEE are not isolated from the effects of these changes and are developing in a similar manner. There are still major challenges in the development of common rules and mechanisms, which are affecting and limiting market liquidity in some SEE countries.
What is your view of the state of development of the gas markets in SEE?
SEE is no stranger to changes, although they seem to be much slower than in Western Europe, lagging well behind developments on electricity markets. The main reasons for this slow progress is the dominant position of local incumbent gas suppliers trying to protect their existing market shares, together with sluggish regulatory changes and with, to a noticeable extent, a still-high percentage of long-term and oil indexed contracts. Based on its many years of experience and expertise in electricity supply, GEN-I recognised the potential of supplying gas to end customers at quite an early stage, and entered the Slovenian market as the first independent market supplier in late 2012, achieving a 19% market share of the Slovenian household natural gas market already in the first year. Since then, we have been expanding our gas trading and supply activities.
What are the implications from the region's economic outlook for the growth pattern of the consumption of gas and electricity in SEE?
The SEE region's industry has suffered significantly from the economic crisis, resulting in a substantial decrease in industrial consumption and an increased proportion of household consumption in the national consumption mix. In the context of a slow economic recovery and the EU Energy Efficiency Directive from 2012, we do not see significant medium-term growth. With operations on 18 electricity markets and five natural gas markets, GEN-I continues to reaffirm its position as one of the most advanced market players in Central Europe and SEE, and has proven itself as a flexible and customer-oriented partner. GEN-I offers portfolio management and various trading services to its partners and business customers, helping them to seize opportunities, create added value, and manage their energy costs and the price risks that arise from the market at any point of the day.
How is the planned launch of a power exchange in Serbia and Croatia expected to affect gas and electricity trading in the region?
Power and gas exchanges are a necessity for transparent pricing and a competitive market. The planned launch is therefore a welcome step. This shows that local energy regulators and governments are headed in right direction. However, the launch of an exchange is only one of the necessary steps for a liquid and efficient market. The fragmented markets are too small and the market concentration of typically preferred incumbent suppliers remains much too high.
How is GEN-I positioned to take advantage of growth opportunities on the gas and electricity trading markets in SEE?
GEN-I Group strives to maintain the right balance between global trading and local supply activities, complementing these with a fresh, flexible and innovative approach that represents the basis for a reliable partnership on wholesale and retail energy markets. Our presence on numerous wholesale energy markets enables us to generate synergies that are the result of our extensive market expertise, highly qualified trading personnel, efficient organization and business processes maintained at the highest standards. We also supply electricity and natural gas to small business and private households in Slovenia and Croatia, where we already have more than 120,000 consumers.
Gen-I Group’s core activities include international electricity trading, as well as the sale of electricity and gas to endcustomers. The Krsko-based group has subsidiaries in Austria, Italy, Germany, Hungary, Romania, Bulgaria, Serbia, Bosnia and Herzegovina, Montenegro, Macedonia, Kosovo, Albania, Greece and Turkey.