August can become an exciting month for traders in the SEE region. Recent precipitation forecasts have remained very dry. If these continue, there will be a further reduction in hydropower production and an additional upward pressure on spot-prices in the SEE-region. This is the conclusion gleaned from EQ’s new Pan European hydro model, which will be launched soon.The chart illustrates the status on hydrological balances at the beginning of August for Romania and Serbia.
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In this blog we focus on Romania and Serbia, the areas that cover about 70% of all hydropower in the SEE region. However, our coverage is of course for all countries. The aim is to support high-resolution production forecasts to quantify the contextual importance of hydrology.
Status one week into August
At the start of August, EQ’s new model indicates a significant 10 percent surplus in Romania while Serbia has a deficit of 4 percent of its seasonal normal. If the current trend continues we expect reservoirs to decline in August. Note the significant difference in the percentage filling one should expect between the two countries at the start of August.
Why care about water?
Covering 25% of hydropower supply is normally an essential physical price driver in the SEE region. Our new models indicate a noticeable decline in hydropower production across SEE during July. As a result, we have seen increasing spot levels towards the end of the month. Rising fuel-prices has also contributed, but not enough to explain the full price movement.
Romania and Serbia are the primary hydropower producers in the region. The two countries have built the Iron Gate power plants, the by far largest hydropower plants in the area, covering about 40%, and 65% of the power supply respectively in Romania and Serbia.
Hydropower statistics and July data
The production and reservoir charts for Romania show very clearly that the production increased sharply during May with strong water flow along the Danube (Iron Gate) and increased reservoir filling.
In July, output fell to less than 50% of the maximum level in June. For Serbia, we simulate a production profile very similar to the total Iron Gate profile, not surprisingly as their share of Iron Gate represents 65% of their total generation.
The content above is an extract from our hydro modelling project for the SEE area.
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