IMPACTS OF NEW SK-HU TIE-LINES ON HUNGARIAN, SLOVAK, CZECH AND SEE MARKETSIMPACTS OF NEW SK-HU TIE-LINES ON HUNGARIAN, SLOVAK, CZECH AND SEE MARKETS

New Slovak-Hungarian tie-lines were put in commercial operation as of 05.04.2021. The resulting maximal SK>HU NTC increased from 1,300 MW on 2,100 MW. The increase of the SK>HU NTC was higher than many traders expected.

In this document, we analyse possible impacts of those new SK-HU tie-lines on Czech, Slovak, Hungarian and all SEE markets. We hope you find this simplified analysis interesting and easy to read.

Main conclusions of this mini analysis

• Hungarian market traders could overestimate the impact of the new SK>HU line.

• The new SK-HU power line does not help HUPX if CZ does not have enough energy or if DE>CZ capacity

is low.

• Congestions will more frequently happen on CZ>SK border and less frequently on SK>HU border.

• The increased SK>HU capacity does not have strong impact on reduction of HUPX-EPEX(DE) spread.

• The increased SK>HU capacity has high impact on increasing of CZ-DE spread.

• Without the increase of CZ>SK capacity, the practical impact of the increased SK>HU NTC increase on

HUPX is not more than 50% of the additional NTC value.

• SEE and HUPX region risks are now transferred on the Czech market.

• Czech market price and SEE markets prices will come closer to each other.

• Slovak Market should most of the time be equal to HUPX and SEE markets.

Table of content

1. SK>HU flow comes from Czech Republic not from Slovakia!

2. Czech Market is not as long as it used to be

3. Slovakia is a short country

4. Impact of DE>CZ capacity is extremely important for HUPX.

5. How often will CZ>SK limited capacity constrain CZ>SK>HU flow?

6. What happened in the first 10 days after commercial operation of new SK-HU tie-lines?

7. What to expect till the end of May 2021

Balkan Energy AG, SwitzerlandTel: 41 44 586 98 55www.BalkanEnergy.com office@balkanenergy.com

DAY and WEEK AHEAD PRICE FORECASTS | MONTH AHEAD PRICE FORECASTS | SEE Energy News | POWER DATA | COUNTRY REPORTS

2

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

1. SK>HU flow comes from Czech Republic not from Slovakia!

• Slovakia is a short country.

• Energy for deliveries scheduled on SK>HU border originates from Czech Republic.

• If Hungarian market imports 1,000-1,300 MW from Slovakia (marked square on the diagram), then Slova-kia needs to import 1,000-2,000 MW from Czech Republic.

• All of the additional flow on the new SK>HU line will need to come from Czech Republic.

0

200

400

600

800

1000

1200

1400

0 500 1000 1500 2000

SK>H

U m

onth

ly b

ase

(MW

)

CZ>SK monthly base (MW)

SK>HU flow vs. CZ>SK flow, monthly base

2017

2018

2019

2020

0

200

400

600

800

1000

1200

1400

0 500 1000 1500 2000 2500

SK>H

U b

ase

(MW

)

CZ>SK base (MW)

SK>HU flow vs. CZ>SK flow, daily base

2018

2019

2020

Linear (2018)

Linear (2019)

Linear (2020)

3

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

• If SK>HU capacity is increased by 500 MW and there is no increase of CZ>SK capacity, then Slovakia will not have sufficient energy to deliver to Hungary in roughly 50% of timestamps when Hungarian market needs this additional 500 MW.

Only 50% of the SK>HU capacity increase will bring a practical benefit for Hungarian market. Remaining 50% of capacity increase will be useless since Slovakia will not have sufficient energy to deliver to Hungary with-out an increase of CZ>SK capacity.

• If SK>HU capacity is increased by 800 MW (on 2,100 MW), in order to nominate 1,800-2,100 MW from Slovakia to Hungary then Slovak market will need to import 1,900-2,900 MW from Czech Republic which is not possible due to limited CZ>SK capacity.

0

200

400

600

800

1000

1200

1400

1600

1800

2000

0 500 1000 1500 2000 2500 3000

SK>H

U b

ase

(MW

)

CZ>SK base (MW)

SK>HU flow vs. CZ>SK flow, daily base

2018

2019

2020

Linear (2018)

Linear (2019)

Linear (2020)

+800

MW

+800 MW

CZ>S

K N

TC

0

200

400

600

800

1000

1200

1400

1600

1800

2000

0 500 1000 1500 2000 2500 3000

SK>H

U b

ase

(MW

)

CZ>SK base (MW)

SK>HU flow vs. CZ>SK flow, daily base

2018

2019

2020

Linear (2018)

Linear (2019)

Linear (2020)

+500

MW

+500 MW

CZ>S

K N

TC

4

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

2. Czech Market is not as long as it used to be

• There is a coal phase out happening in Czech Republic.

• CEZ has shut down 1,000 MW in coal installed capacity in 2020.

• CEZ is aiming to cut its coal capacity in half by 2025, versus 2016 levels.

• Based on the CEZ’s plan from December 2020, additional closures of over 1,000 MW coal fired units is planned for 2021.

• Slovakian plan is to close coal generation till the end of 2023.

• Each year CZ market is less long

0

500

1000

1500

2000

2500

3000

1 2 3 4 5 6 7 8 9 10 11 12

CZ net position (monthly)

2017

2018

2019

2020

2021

5.82.9 2.4

0.9 0.9 0.7 0.5

0

2

4

6

8

10

12

14

16

2010 2019 2020 2021 2025 2030 2035

Expected development of CEZ installed capacity (GW)

Renewables

Hydro

Gas

Hard coal

Lignite (New/ upgraded)

Lignite

Nuclear

-2000

-1000

0

1000

2000

3000

4000

122

043

965

887

710

9613

1515

3417

5319

7221

9124

1026

2928

4830

6732

8635

0537

2439

4341

6243

8146

0048

1950

3852

5754

7656

9559

1461

3363

5265

7167

9070

0972

2874

4776

6678

8581

0483

2385

42

CZ net position (hourly)

2017

2018

2019

2020

2021

5

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

3. Slovakia is a short country

• If Slovakia is too short, then CZ>SK capacity is insufficient to cover Slovak needs and Hungarian needs for SK>HU imports.

• Slovakian average monthly NET position ranges from +200MW to -800 MW. Slovak net position will have a big impact on availability of CZ>SK capacity to be used for SK>HU flow.

• If Slovak market position is very short, then Slovak and Hungarian markets will couple at higher price level than Czech market!

-1000

-800

-600

-400

-200

0

200

400

1 2 3 4 5 6 7 8 9 10 11 12

SK net position (monthly)

2017

2018

2019

2020

2021

6

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

4. Impact of DE>CZ capacity is extremely important for HUPX

Czech market will be able to provide 2,000 MW of energy to Slovakia only if there is sufficient DE>CZ capacity. However, size of the DE>CZ capacity is very volatile and oscillates between 200 MW and 3,500 MW hour by hour.

• Daily DE>CZ capacity becomes a very important factor for HUPX price.

a) If DE>CZ capacity is low, then CZ, SK, HU markets will couple together and all together will have high price

b) If DE>CZ capacity is high, then CZ market will remain below SK and HU markets, while SK and HU markets will most probably couple.

It is very difficult to estimate DE>CZ capacity in 2021 on month ahead or week ahead basis:

• In 2021 DE>CZ capacity is on average the same as in previous years, but it is more volatile than it was before.

• It appears that DE>CZ capacity gets reduced frequently due to maintenances of quite distant German internal transmission lines and German lines which are relevant for DE>AT capacity.

• Forecasts of DE>CZ capacity reductions which are listed on Entso-e are insufficient since they cover only impacts of maintenances of DE-CZ tie-lines and transmission lines directly linked to those tie-lines. Be-sides announced reductions of DE>CZ capacity, experience shows that there are additional frequent re-ductions of DE>CZ capacity which are not announced in advance.

• DE>CZ capacity is one of the most important parameters for HUPX, CZ, SK and all SEE markets, yet it is very difficult to forecast it in advance.

0

500

1000

1500

2000

2500

3000

3500

4000

1 48 95 142

189

236

283

330

377

424

471

518

565

612

659

706

753

800

847

894

941

988

1035

1082

1129

1176

1223

1270

1317

1364

1411

1458

1505

1552

1599

1646

1693

1740

1787

1834

1881

1928

1975

2022

2069

2116

DE>CZ cross border capacity in Q1

Q1 2019 Q1 2020 Q1 2021

7

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

• Additionally, it appears that high wind generation in Germany results in lowered DE>CZ day-ahead NTC. Therefore, on windy days in Germany DE>CZ capacity will be lowered which will even more result in in-creased HU-DE, CZ-DE, SK-DE daily spreads due to the introduction of new SK-HU tie-lines.

• On days when German wind generation is above 30,000 MW, DE>CZ capacity should be reduced while SK>HU flow would be higher then before which will result in strong decoupling of all four DE/CZ/SK/HU markets from the German market.

5. How often will CZ>SK limited capacity constrain CZ>SK>HU flow?

Based on realised flows in last 4 years:

- If SK>HU capacity increase is 500 MW (from 1300 MW on 1800MW), Hungarian market would be able to use full addition of 500 MW for CZ>SK>HU flow only 50% of time.

- If SK>HU capacity increase is 800 MW (from 1300 MW on 2100 MW), Hungarian market would be able to use full addition of 800 MW for CZ>SK>HU flow only around 20% of time.

0

500

1000

1500

2000

2500

3000

3500

4000

0 5000 10000 15000 20000 25000 30000 35000 40000 45000

DE>C

Z av

erag

e da

ily N

TC

DE average daily wind generation

DE daily wind generation vs. DE>CZ daily NTC (Q1 2021)

% of Hours when additional 500 MW of SK>HU flow was possible

and needed by HU market

% of hours when additional 800 MW of SK>HU flow was possible

and needed on HU market

2017 53% 21%2018 42% 16%2019 43% 19%2020 57% 30%

8

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

6. What happened in the first 10 days after commercial operation of new SK-HU tie-lines?

• Nothing special, traders could not notice any important change on any market.

• More energy was flowing over SK>HU border, but also more energy was flowing over CZ>SK border. As expected, energy delivered from Slovakia to Hungary actually came from Czech Republic.

• Risk of SK-CZ decoupling increased due to limited CZ>SK capacity.

7. What to expect till the end of May 2021

• Traders must observe CZ, SK, HU and the whole SEE region together.

• Maintenance in Slovakia and in Czech Republic till the end of May is stronger than in 2019. Therefore, the risk of coupling of CZ and HU markets would increase because CZ market will not have enough energy for covering short Slovak position and increased SK>HU NTC.

• There are already announced reductions of DE>CZ capacity for May due to maintenance of DE-CZ tie-lines and lines close to tie-lines. However, there is increased risk of additional DE>CZ capacity reduction in May due to maintenances of internal German lines.

• Czech market has rather potential to go up towards HU market than down towards German market.

• God-Levice (SK-HU tie-line) goes out for maintenance in the period 10.05. - 14.05. Before, introduction of new SK-HU tie-lines, SK>HU border was reduced by 600 MW during this maintenance.

This is very inconvenient period for this maintenance because at the same time AT>SI border is reduced, NPP PAKS is out, NPP Cerna Voda goes out, UA-RO tie-line is in maintenance and many units go out for maintenance at the end of the week before (at the end of WK18)

0

500

1000

1500

2000

2500

0 500 1000 1500 2000 2500

SK>H

U F

low

(MW

)

CZ>SK Flow (MW)

Flows before and after connection of new SK-HU tie-lines

after 06.04.2021

20.03.2021- 04.04.2021

9

Impacts of new SK-HU tie-lines on Hungarian, Slovak, Czech and SEE markets.

Announced reductions of DE>CZ capacity for May:

Planned maintenances of larger units in Czech Republic and Slovakia in May:

-2000-1800-1600-1400-1200-1000

-800-600-400-200

01 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

MW May: Slovakia - Scheduled maintenences

Missing 2019Missing 2020Missing 2021

-4500

-4000

-3500

-3000

-2500

-2000

-1500

-1000

-500

01 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31

MW May: Czech Republic - Scheduled maintenences

Missing 2019

Missing 2020

Missing 2021

-2000-1800-1600-1400-1200-1000

-800-600-400-200

0

4/17

/202

14/

18/2

021

4/19

/202

14/

20/2

021

4/21

/202

14/

22/2

021

4/23

/202

14/

24/2

021

4/25

/202

14/

26/2

021

4/27

/202

14/

28/2

021

4/29

/202

14/

30/2

021

5/1/

2021

5/2/

2021

5/3/

2021

5/4/

2021

5/5/

2021

5/6/

2021

5/7/

2021

5/8/

2021

5/9/

2021

5/10

/202

15/

11/2

021

5/12

/202

15/

13/2

021

5/14

/202

15/

15/2

021

5/16

/202

15/

17/2

021

5/18

/202

15/

19/2

021

5/20

/202

15/

21/2

021

5/22

/202

15/

23/2

021

5/24

/202

15/

25/2

021

5/26

/202

15/

27/2

021

5/28

/202

15/

29/2

021

5/30

/202

15/

31/2

021

Potential reductions of DE>CZ capacity till the end of May

Announced reduction periods Potentialy risky days for additional reductions

-400-350-300-250-200-150-100

-500

4/17

/202

14/

18/2

021

4/19

/202

14/

20/2

021

4/21

/202

14/

22/2

021

4/23

/202

14/

24/2

021

4/25

/202

14/

26/2

021

4/27

/202

14/

28/2

021

4/29

/202

14/

30/2

021

5/1/

2021

5/2/

2021

5/3/

2021

5/4/

2021

5/5/

2021

5/6/

2021

5/7/

2021

5/8/

2021

5/9/

2021

5/10

/202

15/

11/2

021

5/12

/202

15/

13/2

021

5/14

/202

15/

15/2

021

5/16

/202

15/

17/2

021

5/18

/202

15/

19/2

021

5/20

/202

15/

21/2

021

5/22

/202

15/

23/2

021

5/24

/202

15/

25/2

021

5/26

/202

15/

27/2

021

5/28

/202

15/

29/2

021

5/30

/202

15/

31/2

021

Potential reductions of CZ>SK capacity till the end of May

Announced CZ>SK capacity reductions

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