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Energy sector environment

The development of business at EVN is influenced to a significant degree by external factors. Energy consumption by end customers – in the form of electricity, natural gas and heat – is influenced primarily by the weather. In contrast, the demand for energy by industrial customers is dependent mainly on the general business environment.

The reporting year was characterised by an unusually mild winter in 2013/14 throughout EVN’s entire supply region with temperatures that were substantially higher than in the previously warm winter season. Consequently, the heating degree total, which is used to determine energy requirements for comparative purposes, was lower than the prior year in all of EVN’s supply markets: the year-on-year decline equalled 20.6 percentage points in Austria, 7.6 percentage points in Bulgaria and 5.7 percentage points in Macedonia.

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Energy sector environment – Indicators		2013/14	2012/13	Change in %	2011/12
Temperature-related energy demand¹⁾	%
Austria		86.9	107.5	-20.6	99.0
Bulgaria		80.4	88.0	-7.6	108.2
Macedonia		89.4	95.1	-5.7	120.4
Primary energy and CO₂ emission certificates
Crude oil – Brent	EUR/bbll	79.7	82.9	-3.9	86.0
Natural gas – GIMP²⁾	EUR/MWh	22.1	26.9	-17.8	24.3
Coal – API#23)	EUR/t	59.5	63.1	-5.8	76.3
CO2 emission certificates (2^nd/3^rd period)	EUR/t	5.2	5.3	-1.5	7.9
Electricity – EEX forward market⁴⁾
Base load	EUR/MWh	38.6	47.5	-18.7	54.8
Peak load	EUR/MWh	49.2	58.8	-16.3	67.0
Electricity – EPEX spot market⁵⁾
Base load	EUR/MWh	33.5	38.8	-13.6	44.8
Peak load	EUR/MWh	42.2	49.9	-15.4	55.1
1) Calculated based on the heating degree total; in Austria the basis (100%) corresponds to the long-term average value from 1996 to 2010, in Bulgaria from 2004 to 2012 and in Macedonia from 2001 to 2010; changes reported in percentage points. 2) Net Connect Germany (NCG) – EEX (European Energy Exchange) stock exchange price for natural gas 3) ARA notation (Amsterdam, Rotterdam, Antwerp) 4) Average prices for the respective EEX quarterly forward market prices, beginning one year before the respective reporting period 5) EPEX spot – European Power Exchange

The prices for primary energy carriers such as crude oil, natural gas and coal continued to decline in 2013/14. Higher stocks due to the mild winter in 2013/14, the fracking boom in the USA and a weaker economic outlook were the decisive factors for this development. A reduction in the auction volume for CO₂ emission certificates by the European Union stabilised prices in year-on-year comparison, but the prices for these certificates remain at a very low level. This combination of low-priced CO₂ emission certificates and the continuing decline in coal prices is making electricity generation from coal-fired plants more economical, while state-of-the-art natural gas plants in many EU countries are being decommissioned because they have become unprofitable.

The reporting year also brought a further decline in forward and spot market prices on the European electricity exchanges. This trend is not expected to reverse over the short or medium term because of the current supply overhang, which is a direct result of the global economic stagnation and the continued expansion of electricity generation from renewable sources. Under these market conditions, the operation of conventional production facilities is frequently not profitable. The consequences include the shutdown of power plants, a trend that can already be observed on the market. A reduction in the overall supply, and a resulting possible risk to supply security, can therefore be expected over the medium term. Despite the increased use of renewable energy, the future availability of reserve capacity that can be quickly activated will be important to offset the volatility of energy generation from renewable sources, above all from solar and windpower plants. The solution of this dilemma represents the key challenge for the European energy policy in the coming years.