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page 42 <strong>SEE</strong> TOP Industry Profiles EU’S THIRD LEGISLATIVE PACKAGE The successful implementation of an internal market of electricity demanded effective unbundling of the vertically-integrated companies in the <strong>SEE</strong> power sector. EU’s Directive 2003/54/EC significantly contributed to the separation of generation, distribution and supply activities, yet it created no provisions for the legal and functional independence of the transmission system operators. In July of 2009 the EU adopted Directive 2009/72/EC, repealing the old Directive 2003/54/EC, which paved the way for the unbundling of the TSOs by March 3, 2012. The new package of measures, aiming to establish “a truly competitive energy market”, is also known as the Third Energy Liberalisation Package. The proposed goals in the package also include: - to improve the effectiveness of national regulators; - to facilitate cross-border trade in energy; - to promote cross-border collaboration and investment; - to work for greater market transparency on network operation and supply. Current Situation of TSOs in Southeastern Europe Country TSO Status and Ownership Albania <strong>100</strong>% state-owned; legally unbundled Bosnia and Herzegovina <strong>100</strong>% state-owned; independent Bulgaria <strong>100</strong>% state-owned; legally unbundled Croatia <strong>100</strong>% state-owned; legally unbundled Kosovo <strong>100</strong>% state-owned; legally unbundled Macedonia <strong>100</strong>% state-owned; legally unbundled Montenegro functionally unbundled Romania <strong>100</strong>% state-owned; legally unbundled Serbia <strong>100</strong>% state-owned; legally unbundled Slovenia <strong>100</strong>% state-owned Source: Poyry Energy Consulting HEADING TOWARDS REGIONAL ELECTRICITY MARKET According to Roland Matous, electricity expert at ECRB, Southeastern Europe could set up an integrated electricity market in six to ten years from now. The main barriers, apart from political and regulatory issues, are the unharmonised congestion management schemes and the unrealistically low electricity prices for tariff consumers. National electricity markets in the majority of <strong>SEE</strong> countries are dominated by wholesale public suppliers, which leaves little room for free trade. Electricity deals, with the exception of the Romanian and Slovenian markets, are concluded under bilateral agreements and TSOs manage the cross-border trade. A Central East European Energy Exchange (CEEPEX) Workshop, held in April 2010 in Vienna, forecast that most of the <strong>SEE</strong> countries Planned <strong>SEE</strong> Wholesale Market Opening Phase Period Objective Phase I end of 2011 * Operational DAM Mandatory - Serbia; Romania Candidates - Croatia; Bulgaria; Slovenia; other countries prepared to join Phase II end of 2012 * Financial Forward Markets in Phase I Countries Phase III end of 2015 * All countries join regional DAM Source: Poyry Energy Consulting will stay outside the European market coupling initiatives until 2015 at least. Slovenia has the best chances to pool its interconnection capacities into the European power market by a proposed market coupling with Italy in 2012. Romania intends to link its market with Hungary and join the common market of electricity in the following year. The formation of a regional power market goes through several key stages, the first being the harmonisation of regulatory framework across <strong>SEE</strong> countries. As a second step comes the establishment of day-ahead market (DAM) that will coexist with bilateral trade and will bring state-owned generation units to the market. Besides, the DAM will foster market integration by TSOs putting up available transmission capacities for trade. The foundation of Coordinated Auction Office (CAO), as representative of the TSOs, is the next move intended to bring forth the regional market. The CAO will manage the cross-border capacity trade, carry out explicit auctions and provide the regional market with daily capacities for the implicit auction. Southeastern Europe would have to choose between two alternative models of regional markets – centralised and decentralised. The centralised design features the set up of a single regional market/ power exchange operator, while the decentralised model requires the existence of national market/power exchange operators in each country that will form a regional market by coupling. Presently, the decentralised model seems the most viable alternative for <strong>SEE</strong> national markets, especially those of Bulgaria, Macedonia and Serbia, with experts recommending either step-by-step expansion, or coupling with functionally developed markets of Romania and Slovenia. The major concern accompanying the establishment of a <strong>SEE</strong> electricity market is related to liquidity. CEEPEX Workshop data shows that from all national markets only the Romanian is capable of ensuring higher level of liquidity, 9.0% in 2008, due to its size and stage of development. The Slovenian power market, though established in 2008, also managed to achieve some liquidity - around 5.0%. However, the Slovenian power market has the ambitious goal to become the power exchange of Southeastern Europe, with electricity from Serbia already trading and intentions to develop trading infrastructure with Macedonian power producer ELEM AD that according to initial plans will bring to the market Macedonian power sometime in 2010. “Lost in Transition” - Energy and Utilities in Southeastern Europe The European vision of an efficiently operating and integrated energy landscape in <strong>SEE</strong> was once built on a clear rationale: sustainable economic growth could only be achieved if the highly fragmented energy players are cooperating on market rules. Except for several waves of regulatory initiatives, privatisations and divestments the region today is far away from being able to agree on and execute a joint master plan. The preservation of an integrated state-owned player in Croatia, the ongoing re-invention of a national champion in Bulgaria, the stop-and-go discussion of nuclear power relevance in the region are beside several delayed key infrastructure projects. But while the international market integration is not achieving the required progress, decision makers of key players in the industry claim that the limited reliability of the local market framework is creating additional burden on their agenda. Successful players are therefore searching for options to develop their current business models and value chain towards a setting that would allow sufficient flexibility. 42 <strong>SEE</strong> TOP Industry Profiles
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