* Volumes too low for so many CEE exchanges
* Next market coupling likely Czech Republic
* New Polish energy law needs changes
By Michael Kahn
PRAGUE, Dec 2 (Reuters) - Central and eastern European power
exchanges need to consolidate in order to create an efficient
electricity market in a region with low -- but growing --
liquidity, the head of Poland's POLPX said on Thursday.
Current volumes are too low to support so many exchanges in
a region where traders are keen to see truly liquid bourses
offering financial products, Grzegorz Onichimowski said in an
interview.
"It is a good question whether in the future there is room
for all these exchanges," he told Reuters. "There is not enough
liquidity for so many exchanges regionally."
"There is no doubt we need to consolidate, otherwise it
would be too difficult to create financial futures and other
products."
Hungary's HUPX and the Prague-based Power Exchange Central
Europe are also pushing to establish a foothold as the centre of
a regional power-trading hub in central and eastern Europe.
Romania also operates its own exchange.
But the Prague bourse, for example, has run into headwinds
in Hungary where HUPX has soaked up much of the volume due in
part to support from state-owned electricity company MVM.
This situation underscores problems these bourses face,
especially as more players look to tap into a potentially
lucrative trading market due to good grid connections and plenty
of capacity, Onichimowski said.
"Our main problem is threats from initiatives to set up
other exchanges," he said, citing a plan from the Warsaw stock
exchange to launch its own electricity market.
This sort of competition means POLPX will likely see volumes
limited to about 20 to 30 percent higher on the day-ahead market
and roughly the 2010 level on the forward market of about 30
TWh, Onichimowski said.
The expected market coupling with NordPool in mid-December
will help boost liquidity, though he predicted the full 600 MW
capacity on the cable linking the markets will not be used due
to technical limitations, he added.
"We would like to develop other market couplings,"
Onichimowski said. "From our perspective it is more important to
look next to the south because there are more trading
opportunities with the Czech Republic than Germany.
"In Germany there are technical problems with loop flows due
to substantial wind generation. It is quite difficult to use
those connections."
Poland's new energy law, which requires companies to trade
at least 15 percent of the power they generate either on POLPX
or other public platforms, has also driven liquidity since it
took effect in August.
Utility traders have said the measure could crimp
development of the market because it has translated into higher
costs and has thrown up some hurdles to trade -- issues
Onichimowski said needed to be dealt with.
He said POLPX would soon be changing the rules regarding its
clearing house IRGiT and would like to introduce new brokers
into the market to create more competition and lower prices.
POLPX is also working with lawmakers about other issues,
including the licensing system and a requirement for each
generation plant to have a licensed broker on site.
It would also make sense for traders on established markets
like EPEX to be able to easily trade on POLPX, something that is
not possible now, he added.
"The changes are taking place," he said. "A balance needs to
be found between transparency and a company's ability to do
business.
(Reporting by Michael Kahn, Editing by Alison Birrane)
