* No silver bullet to boost liquidity
* Step-by-step approach to joining with west
By Michael Kahn
VIENNA, April 11 (Reuters) - Central and south-eastern European spot power exchanges are attracting more liquidity, but future growth will be slow and require better coordination among merging fragmented markets, traders told a conference on Monday.
The establishment of spot exchanges in each central European nation has marked an important step in increasing liquidity, though development of the forward physical market has lagged, they added. "It is a slow process, and you really need small steps," Lehel Szarapka, head of CEE trading & Services at Swiss-based Alpiq, said on the sidelines of an energy trading conference in Vienna. "You won't have a silver bullet."
Cross-border power trading is needed for efficient markets, because it enables traders to arbitrage between cheap and expensive regions, allowing power to flow freely according to supply and demand.
In western Europe this happens, especially from northern and western Europe down to Italy, and the market is keen to fully develop similar possibilities in central and south-eastern Europe, which offers big potential growth and numerous borders.
Szarapka noted that in Germany -- Europe's biggest power market -- about 500 terrawatt-hours (TWh) were consumed in 2010, with about 19.5 TWh traded on day-ahead auctions.
That compared with consumption of about 470 TWh in central and south-eastern European countries, where about 3.3 TWh were traded on the day-ahead market.
"The projected six couplings within CEE are no solution," Marco Garbers of RWE Supply and Training told the conference. "A coordinated regional roadmap to participate on single price coupling is necessary."
Countries in central and south-eastern Europe have talked about coupling their fragmented markets as a goal, but so far only the Czechs and Slovaks have done so.
The goal is to connect nations in this region first and then join central Eurpopean power markets with those of western Europe as part of meeting the EU goal of one day connecting together the entire 27-member bloc.
For the CEE region to merge with western markets, this would probably require a two-step regional plan, with a concrete timetable for those ready to merge sooner and another for those ready later on, traders said.
"The feasible solution seems to be step by step to add central European countries to the central west European countries," CEZ's Head of Front Office Ludek Horn said. (Reporting by Michael Kahn, Editing by Jane Baird)