Creating of Regional Electricity Market in the Western Balkan – somewhere on the halfway

On 3 April 2017, the Energy Community (“EC”) published “WB6 Electricity Monitoring Report”. The aim of the report is to present the overall progress in creating the regional electricity market of Western Balkan countries. The report reveals that, although WB 6 countries are on the right track to meet the 2015 Vienna Summit targets for establishing a regional electricity market, individual progress of the observed countries is rather diverse and unbalanced.

Background

Improvement of mutual energy connectivity between Western Balkan countries was agreed at the Vienna summit back in 2015. The idea was that each of the WB6 countries implements a set of the agreed soft measures which endeavor regional and national dimensions. While the regional measures were intended to improve the activities of regional institutions and cooperation, the national were dedicated to eliminating individual difficulties which are preventing the formation of a regional electricity market.

The Paris Summit in 2016 represented an additional step forward, since it settled a path for setting the unique market of Western Balkans. In order to ensure that the entire process will be implemented properly, both institutionally and financially, the EC and the European Commission agreed to provide their technical assistance during the initial two-year period. One of the tasks which EC undertook was the preparation of monitoring reports, aiming to provide overall review on the implementation level, a part of which is this last Report for 2017.

Regional comparison

Speaking of spot market development, besides the Serbian day-ahead market launched with SEEPEX (South East European Power Exchange) back in 2016, Montenegro is also completing its activities pertaining to the establishment of a company which should set a day-ahead market and connect Montenegro with neighboring markets. It is expected that the new company will be registered in April 2017. However, the remaining WB6 countries need further “legal and institutional reforms” in order to provide the functioning of day-ahead markets.

Albania, Kosovo and FYR of Macedonia are behind other regional entities in respect to the national implementation of the non-discriminatory balancing mechanism, while the remaining countries which have set up a national balancing market improved their capacity with the further development of cross-border balancing cooperation.

Serbia is still the only of WB6 countries which is not a member of the regional allocation office – SEE CAO. Although Serbia submitted an application for joining, the decision has not been rendered yet. Further, an Inter-TSO Agreement on network and system operation management between the Serbia and Kosovo* is yet to be implemented.

Finally, “price deregulation and unbundling of system operators” were designated as the areas in which were made the most noticeable improvement recently in WB6 countries in general. Albania was underlined as the first of the Western Balkan countries whose TSO was certified in line with the Third Energy Package requirements.

Where is Serbia?

Situation in each particular member state was analyzed through several categories within the report.

The legal framework concerning the spot market development and operating of the organized electricity market and markets connection was considered as “in place”. It was outlined that the power exchange is operating, while the foreign companies are allowed to participate in the electricity market without a seat requirement. Out of the total 12 participants registered for trading at SEEPEX, 9 of them represents the foreign traders. SEEPEX has also expressed its interest in coupling with the markets of Hungary, Slovakia, Czech Republic and Romania (known as 4MMC) without a concrete respond yet.

Changes of the licensing regime and the VAT Law have formally allowed foreign companies to participate in the balancing market. However, the balancing market is currently operated with only one balancing service provider and the price of the balancing reserve regulated on the annual basis, although deregulation may be expected in the near future.

Legal unbundling between the distribution system operators and suppliers is completed and the level of functional unbundling should be the subject of the report to be prepared and presented by the compliance officer by 1st July.

Finally, efficiency of the national competition and State aid authorities was rated as “not satisfactory”. It was noted that independence of the Commission for State Aid Control should be secured through its separation from the Ministry of Finance.

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