In Bulgaria, freely negotiated electricity deals are conducted via the platform of the Independent Bulgarian Electricity Exchange (IBEX). In 2019, the total delivered energy, traded in various IBEX segments, amounted to 25.3 TWh, which represents a growth of 8.9% compared to 2018. This is indicated by the data compiled in 2019 EWRC Activity Report, submitted to the Energy Committee of the Bulgarian National Assembly. The reason for this increase is attributed to the larger quantities that passed via the day-ahead market (DAM) segments, via Auction – the centralised bilateral contracts market and via the intraday market (IDM), respectively, +38%, +4% and +109%.
Average prices of DAM segments and bilateral contracts increased by BGN 12-18/MWh against 2018. In IDM, prices went down by about BGN 14/MWh.
Centralized Market for Bilateral Contracts
IBEX Centralized Market for Bilateral Contracts (CMBC) operates via two screen modes, namely, CMBC Auction screen and CMBC Continuous Trading screen.
Over the years, the first mode, CMBC Auction screen has been the preferred one for bilateral deals. The total electricity volume, realized through it for delivery in 2019, amounted to 16.4 TWh, whilst via CMBC Continuous Trading it was only 0.07 ТWh. In 2019 its volume shrunk by 16 times when compared to 2018.
The average price of delivered energy at CMBC Auction was BGN 90.66/MWh in 2019 or 5% lower than the average at DAM for the same year. Comparison with 2018 figures shows +8%, while with 2017, it is -13%.
The most expensive proved to be CMBC Continuous Trading, where the 2019 average price of delivered energy was BGN 97.14/MWh.
Day-Ahead Market
In 2019, IBEX day-ahead market showed sustainable growth by volume, adding some new 2.3 TWh and achieving a total of 8.4 TWh traded energy. Nonetheless, quantities traded in this segment remained substantially less than those at exchanges in the region.
Average DAM price increased by BGN 12.29/MWh, proving to be the highest average price reached since launching DAM in 2016.
The largest growth against the same month of previous years was in:
- January, when the price reached BGN 134.08 (76% ↑),
- July, when it was BGN 111.4 (64% ↑) и
- April – BGN 84.62 (46% ↑).
Regardless of this IBEX DAM price increase, prices remained competitive on the markets in the region, with price spreads between IBEX and exchanges in Romania, Hungary and Greece allowing for price arbitrations. As a whole, in 2019, DAM in Turkey had the lowest prices in the region.
In view of the anticipated integration of DAM with the unified market of Hungary, Romania, Slovakia and the Czech Republic, EWRC has drawn up a comparative analysis between IBEX (Bulgaria) and the respective exchanges in these countries – OPCOM (Romania), HUPX (Hungary), PXE (Czech) and OKTE (Slovakia)) – regarding average baseload monthly prices of DAM quantities traded in 2019. The conclusions indicate that Bulgarian DAM prices are susceptible to sharp fluctuations and strong volatility. In the future such volatility can be contained, if Bulgaria unites its market with that of the neighbouring countries. This will remove the barriers before competition in the national market and expand free trade within the regional market, thus enabling traders and customers in the Bulgarian market to have more choice options for electricity supplies. Also, risks of employing manipulative market practices that lead to market price distortions will be limited.
Intraday market
In 2019, the proportion of intraday market in IBEX total traded volume was 1.4%. In fact this segment succeeded in doubling the quantities traded last year.
As mentioned earlier, it was only the average price of this segment that showed a downturn against 2018, from BGN 84/MWh to BGN 70.66/MWh, and it was the lowest average price of electricity delivered via IBEX segments in 2019.
Daily average prices of both IBEX market segments, DAM and IDM, correlate relatively well (ρ = 0.73), as noted in EWRC Activity Report. IDM average annual prices were by BGN 12/MWh lower than DAM prices.
Balancing market
Bulgarian balancing market is administered by the Electricity System Operator, which balances the electricity system under technical and economic criteria, based on offers and bids submitted to the balancing market.
In 2019, the total energy shortage was 624 727 MWh compared to 1 040 648 MWh in 2018, a decrease by approximately 40%. The 2019 total energy surplus was 984 771 MWh against 814 628 MWh in 2018, an increase by approximately 21%.
EWRC defines a price cap for the balancing energy market deals on annual basis.
In practice, so far EWRC has approved two price caps, namely, a price cap for balancing energy market deals to provide a system service for upregulation and a price cap for balancing energy market deals to provide a system service for downregulation.
Price cap for upregulation is linked to the price achieved at DAM, so that both markets are bound together and arbitrations are avoided. Such a measure ensures proportionality of balancing cost for market players depending on the hourly market prices. The DAM price achieved operates as the minimum price of offers for upregulation. This makes sure that the price of imbalances is always less favourable that the DAM price, thus giving an incentive to market players to participate also in the balancing energy market with their capacity reserves.
From the end of December 2019, EWRC started applying a more balanced pricing model, according to which the price cap for balancing energy market deals for upregulation was determined to amount the DAM price + an add-on of BGN 100.MWh, where DAM price was equal to the IBEX DAM price for the respective hour. A lower add-on would have hardly covered the variable costs of power stations providing this service to ESO EAD. Expectations are that under this approach, price caps for upregulation, respectively, shortage costs of market players will decrease.
The price cap for balancing energy market deals for downregulation was BGN 0.00 (zero)/MWh in 2019. It is expected to remain the same in the next calendar year.
