Monday 19 January 2015

Price of electricity in 2013 and 2014: analysis

Urzad Regulacji Energetyki ( in short: URE; English: Energy Regulatory Office) published official statement on the prices of electricity (wholesale) in the last quarter of 2014. Thanks to this data, it is possible to compare the prices over the course of two years.

In the above calculation of prices that URE does, the price includes data on the implementation of contracts for the sale of electricity to trading companies entered into by the energy companies involved in electricity generation. Price does not include taxes (VAT, excise duties), charges related to the amount of electricity sold and the liabilities associated with certificates of origin. The price was calculated on the basis of data provided by the manufacturers and for the sale of electricity.

The graph below (graph 1) presents the evolution of price over the course of 2013 and 2014. It is important to notice that the vertical axis starts from 150 zloty/MWh, in order to better illustrate price volatility. Additionally to the graph, where prices are given in zloty, there is a table with rough estimation of the same price in euro ( with an assumption that 1 euro = 4.20 zloty ).

--> Click on the graph in order to see it in full size.

graph 1: price of electricity in 2013 and 2014
* I q 2013: first quarter of 2013

It is very difficult to draw conclusion upon the drop of the price of electricity over the course of two years, mainly due to the lack of publically available information. According to the report published by RWE, in 2013 the total installed capacity of wind power increased by 893 MW ( to 3,3903 MW) what definitely had an influence on the price. Furthermore, at the end of 2013 URE reported that the long term contracts ( contracts for electricity delivery for 1 year ) have not been executed as much as in previous years, therefore most of the trading will take place on the power exchange – the drop of prices was expected.

Another factor that most likely influenced the drop of price in 2014 was termination of yellow and red certificates mechanism. Certificates supported the development of cogeneration or combined cycle - more efficient way of generating electricity and heat in a single process. At the beginning of 2014 it has been estimated that the parliament will vote for the renewal of this mechanism, therefore introducing certificates in the second half of the year, what could cause increase of a price. The first “renewed” certificates were sold on the power exchange at the end of July and the price of electricity in fact reflected additional costs that electricity generators had to bear but the price was still lower than in 2013.

2014 has been revolutionary, as for the first time in years price of electricity, heat and gas had dropped. Before, it had been “a rule” that the prices of those services are increasing on the yearly basis.