- Theodor Livinschi
How much will DAM be in January, if month was traded bulky on last minute at lei 335/MWh?
Articol disponibil si in limba romana: https://www.partnerg-i.com/post/cat-va-fi-pzu-in-ianuarie-daca-luna-s-a-tranzactionat-masiv-pe-ultima-suta-de-metri-la-335-lei-mwh.
Leaving aside the functional purpose of the Day-Ahead Market for adjusting volumes in the energy market, this is also a suitable option for indexing the price of active power for industrial consumers.
In this way, industrial consumers - those which are flexible in terms of industrial processes, those which index their own selling prices to those of commodities or those which simply have a higher risk appetite - can dose their daily production activity, respectively the power consumption depending on the level of the DAM or they can simply try to take advantage of some price conditions estimated to be more advantageous.
In principle, without going into details or calculations, the consumer decides to buy a consumption share of X% indexing the price at DAM, only if the sum between the estimated price for DAM and the cost of the supplier is less than the fixed price for the non-indexed share at DAM (100-X%).
If we estimate a generic average price, at which industrial consumers bought power for 2021, at a rounded value of lei 245/MWh, following the principle stated above, industrial consumers expect the average price resulting from indexing to DAM to be less than lei 245/MWh.
Clearly, industrial consumers should not perform this check of profitability at very short intervals and be aware that certain periods are characterized by a higher DAM price, such as including January 2021.
But still how big for January?
Considering the market volatility and the DAM specific lack of visibility, we consider that a month with higher usual values of DAM should not exceed by 20-25% the DAM price target, especially for a contracting period of one year. Rounding in the context of our estimation, it should not exceed lei 300/MWh for January 2021.
However, on last minute (28.12.2020), January 2021 was traded intensely (28 transactions) and bulky (163 MW) at an average price of lei 335.56/MWh.
Considering the intensity and size of trading, we conclude that the supllier's estimations of (at least of those which traded) for the average price of DAM in January 2021 exceeded lei 335.56/MWh.
We wonder how many of the suppliers (at least of those which traded) announced their industrial consumers with exposure in DAM about their own estimations and the current reality of the market for January 2021, more specifically to communicate to consumers that their costs optimization in DAM plans no longer seem feasible - at least for now?
However, let us not lose sight of the fact that the object of the contracts concluded by the suppliers with the industrial consumers is the supply of power and that the suppliers have as objective the optimization of their own power procurement. The information falls to the consultants. Here we can help you.
But what should the point of this communication be, if in the power supply contract the industrial consumer did not configure an alternative option to close the open positions? Also here we can help you.
Now, January 2021 is no longer traded "by month", but the situation has not changed, there are transactions for weeks of January 2021 at prices of lei 305-385/MWh.