September 25, 2018 / 12:05 PM / 21 days ago

Breaking up not hard to do, Austria finds as power zone splits from Germany

* Power flows to be capped at 4.9 GW from Oct. 1

* Regulators, bourses, grids, utilities on board

* Austrian prices at small premiums

By Kirsti Knolle and Vera Eckert

VIENNA/FRANKFURT, Sept 25 (Reuters) - Austria’s energy industry says it is prepared for more grid management and expects price increases resulting from a split of its joint power trading zone with neighbouring Germany next month to be in low single digits.

Austria’s national energy regulator E-Control has reorganised network and trading operations ahead of the move, that aims at curbing excessive and volatile exports of Germany’s renewable production.

“Price-wise,...the impact will be in a low single-digit area,” said managing director Wolfgang Urbantschitsch. This is significantly lower than initially feared.

The delinking of the power zones is aimed at preventing German power travelling in so-called loop flows through Poland, the Czech Republic and Austria back into Germany, which the industry came to find costly and disruptive.

The unusual transport route resulted from the fact that transmission lines to deliver power from northern German wind parks to industrial consumers in south Germany are years behind implementation.

German Economy Minister Peter Altmaier wants plans for firm permits to be in place by the end of 2021, so that the new lines can go into service by the middle of the next decade.

Austria has benefited from the loop flows, as it was able to buy surplus German power at low prices, store it in its pumped-storage plants and resell it at higher prices when supply was tight.

But after Polish and Czech complaints about the network congestion, the European Union’s regulatory authority ACER decided in 2016 that the power zone must be split.

SMALL PREMIUM

From Oct. 1, cross-border shipments between Germany and Austria are restricted at 4.9 gigawatts (GW), equivalent to about half of Austria’s consumption during peak periods.

Austria’s grid operator APG in the last few weeks has been signing up power stations to offset any stability problems that the cap on German imports might cause, Urbantschitsch said.

“The process is still underway,” he said. Investments in new power lines were also needed to guarantee the long-term security of supplies.

A north-south expansion of the high-voltage grid called the Salzburg Line was crucial but has been held up by opposition from environmentalists. A court has yet to decide whether it can be built.

The market, however, is ready for the new system, said Germany’s EEX bourse, that since April 2017 had to delink previously successful binational power futures products.

Austrian long-term prices had a “comparatively small” 2.5 to three euros premium over German counterparts recently, said Robert Slovacek, head of trading at Austria’s leading utility Verbund.

After the price zone split, Verbund sees fewer opportunities to use its pumped-storage plants, which can store power and release it during tight supply as lucrative flexibility products, Slovacek said.

“The bottom line is that this is an (economic) disadvantage for us,” Slovacek said.

Reporting by Kirsti Knolle in Vienna and Vera Eckert in Frankfurt, editing by Emelia Sithole-Matarise

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