REKK annual spring workshop

The participants were able to learn about the regional and domestic developments of the past year, their impact on electricity demand and supply and the prices paid by different consumer groups from the presentations of András Mezősi and András Vékony, REKK’s senior research staff, and Ágnes Csermely, head of the department of the Hungarian Energy and Public Utility Regulatory Authority. In a panel discussion after the presentations, representatives of electricity suppliers and traders discussed how they are coping with this turbulent period. 

Focusing on European and regional markets, András Mezősi described the dramatic wholesale electricity price increases that occured between Q1 and Q4 2021, the factors behind them and the impact of each factor on power plants using different energy sources. While weather-dependent renewable generation continues to grow, last year’s price changes have led to a decrease in natural gas and an increase in coal-based electricity generation in the EU electricity mix (gas-to-coal switch). 

Ágnes Csermely analysed trends in the domestic electricity market. Over the past two years, domestic electricity demand has grown faster than GDP. Further demand growth is expected due to energy-intensive industrial development, which poses security of supply and grid development challenges. Contrary to the international trend, Hungary has seen an increase in gas-fired and a decrease in coal-fired electricity generation in the last year. Overall, with a low share of renewable electricity, the country has the highest share of PV-based electricity generation in the EU in the electricity mix, so it would be appropriate to rely on a wider range of renewable energy technologies. The price increases seen in the balancing markets last year indicate a scarcity of balancing capacity. 

András Vékony showed that high prices have reached the non-residential retail sector. Over the past year, the average price increase in the non-residential sector was 55%, with large consumers facing a three-fold increase in prices by the end of the year. Price increases will continue this year. But demand is not yet sensitive to prices, which are likely to weigh more on traders than consumers. Electricity demand in the residential market has grown rapidly, especially in the summer months. 

In the round table discussion following the presentations, Balázs Felsmann (REKK) asked Tamás Hiezl (CEZ Magyarország Kft.), Tibor Fejes (Audax Renewables Kft.) and Gábor Hiezl (MVM Next Energiakereskedelmi Zrt.) about the last year and future developments of the domestic electricity market. The roundtable participants agreed that in this turbulent period, customers need to take on some of the market risks, e.g. by adapting contracts to their own operations, shortening payment terms. The proportion of 2-3 year contracts is significant, so many consumers will face high prices even after this period, which could jeopardise their operations. Companies need to be prepared for energy costs to become an important and unpredictable cost element. 

The presentations (in Hungarian) can be downloaded from our website.