Household and business electricity expenses are skyrocketing – and it will get worse. In addition to the market price of electricity, the costs of maintaining balance in the network are also rising. ČEPS’s costs for the purchase of these services were around 7 billion crowns in previous years, this year it will be three times as much – roughly 20 billion. The increased costs will be reflected in electricity prices with a certain delay.
Maintaining balance in the electrical system is not an easy task. ČEPS, in its role as system operator, must monitor the positive and negative deviation between production and consumption, the correct frequency, and also maintain a backup in case of an unplanned outage of a large resource. Previously, the term support services was used, today ČEPS collectively calls these services power balance services (SVR).
For many years, the cost of SVR, which is part of the regulated component of the electricity price, has been stable. Specifically, it was about 100 crowns for each delivered megawatt hour (without VAT). From the beginning of next year it will be more, maybe up to 300 crowns. It may seem like a detail (the market component of electricity on the exchanges has become more expensive from 2,000 to 8,000 crowns per MWh over the last year), but it is another inconvenience.
More like price regulation than hard regulation
ČEPS must purchase energy on the market to stabilize the network. Suppliers mainly include owners of coal-fired or gas-fired power plants and heating plants. Logically, they do not want to lose out on deals with ČEPS, so they adjusted their prices to the new conditions on the energy market. The growth here was even higher, which prompted the Energy Regulatory Office (ERÚ) to intervene. With effect from the beginning of August, the SVR will begin to regulate prices. In fact, this is a milder form of price regulation.
“If we do not act now, the costs of support services will continue to rise as a result of the behavior of their providers. That’s why we decided on a regulatory intervention, which will be carried out in accordance with the latest amendment of the Energy Act and which consists in capping the price of these services,” said Stanislav Trávníček, chairman of the ERÚ Council, regarding the intervention.
As ČEPS spokeswoman Jana Klímová stated, thanks to the regulatory intervention, the growth of SVR prices will slow down. The expected cost reduction is to be in the billions of crowns compared to the situation without intervention. However, this only applies under the condition that electricity prices on the stock exchanges do not continue to rise.
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Market sources point to the fact that there is relatively little competition in the SVR market. The number of providers is decreasing; this year, Sokolovská uhelná is missing among them, for example, which supplied up to 11 percent of these services in previous years. In the SVR market, it somewhat smacks of an oligopoly of three large power plant groups. According to data on the ČEPS website, this year’s share of the ČEZ group in support services reaches 40.2 percent, Sev.en Energy has a share of 20.2 percent, and EPH, including Plzeňská teplárenská, 20.4 percent.
More competition as part of the solution
According to spokesperson Klímová, ČEPS is trying to reduce the impact of price increases by gradually expanding the portfolio of suppliers and optimizing the structure and volume of procured services. Last year amendment of the Transmission System Code reduced the threshold for providing services to 1 MW. Smaller sources can thus be involved, including battery systems for energy storage. With effect from April this year, the possibilities for cross-border sharing of regulatory energy have been expanded.
Further amendments to the code are now under consideration by the regulator. “The currently proposed modifications facilitate the inclusion of flexibility units in aggregation blocks, bring simpler conditions for small sources and consumers providing these services, and also simplify the evaluation of the quality of the services provided,” adds Jana Klímová.
David Tramba
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