Elering is the backbone of the Estonian electricity system
Transmission System Operator Elering manages the Estonian electricity system in real time. Elering is responsible for the system’s operation and ensures the supply of high-quality electricity to consumers at all times. We create the conditions needed for the electricity market to function and we build cross-border electricity interconnections so that electricity can move freely between neighbouring systems and markets.
According to the agreement between Estonian and Latvian TSOs Elering and Augstprieguma tīkls (AST), the explicit allocation mechanism will be used for part of transmission capacity on the Estonian and Latvian border starting next year...
Market Participants will be Able to Hedge Risks between Price Areas Starting from 2014
According to the agreement between Estonian and Latvian TSOs Elering and Augstprieguma tīkls (AST), the explicit allocation mechanism will be used for part of transmission capacity on the Estonian and Latvian border starting next year and allowing market participants to further hedge the price risks between price areas.
The agreement has been reached between the TSOs and needs the approval of regulators to come into effect.
At the auction, Elering and AST will provide 50-150 MW of transmission capacity for each hour of the following month. The sale condition is that the bought capacity will need to be sold back to the TSOs who in turn will pay the market participants a fee for the repurchased transmission capacity, equivalent to the price difference between the NPS Estonian and Latvian price area in the corresponding period. Therefore, when using the capacity allocation mechanism, the price risk of a market participant active in two price areas will never be bigger than the price of the acquired transmission capacity.
The TSOs will give the transmission capacity repurchased from market participants to NPS to be allocated in the day-ahead market. Therefore the implemented distribution mechanism will not diminish the total transmission capacity volume given to the market by NPS.
The solution offered by Elering and AST is based on the EU regulation according to which market participants need to have a possibility to hedge price risks in case of structural congestion between two price areas. “With the final handover of the second Estonian-Finnish interconnection EstLink 2 to the market’s disposal in 2014, a structural congestion is expected to emerge on the Estonian-Latvian border. The implemented capacity allocation mechanism will enable the market participants to further hedge price risks between different areas. At the same time, it is a temporary solution until more effective risk hedging financial instruments will hopefully be introduced in Latvia and Lithuania,” Taavi Veskimägi CEO of Elering, noted.
Discussions with Nasdaq OMX for the latter to introduce a financial instrument allowing a price hedge in the market starting in the summer of next year, are ongoing. This, however, implies the prior implementation of the financial instrument Electricity Price Area Differential (EPAD) in Latvia and Lithuania, similar to the situation in Estonia.
In addition, trilateral discussions between the Baltic TSOs are continuing regarding the agreement on common trading rules for electricity from third countries.
The first transmission capacity auction will take place on December 13th when January’s transmission capacity as well the capacity sold for 2014, 50 MW for each hour, will be put up for sale.
EstLink 2 Commissioning Tests Ran Smoothly
System tests for the EstLink 2 direct current interconnection between Estonia and Finland were carried out between 22 October and 5 December 2013 by the transmission system operators Fingrid and Elering.
After successful system tests, the tests on EstLink 2 will continue with a trial operation period between 6 December 2013 and 6 February 2014 . During the trial operation period, EstLink 2's capacity will be available for use by the electricity markets. As the connection is still in the testing and fine-tuning phase, restrictions on the use of the link by electricity markets may have to be placed at short notice.
The opening of the EstLink 2 interconnection will have a significant effect on power transmission between the two countries and will also improve electricity markets' functionality and the security of electricity supply. After the commissioning of EstLink 2, the joint transmission capacity between the countries will increase from 350 megawatts to 1.000 megawatts from Estonia to Finland and 850 megawatts from Finland to Estonia. The restriction on transmission capacity to Estonia will remain in place until the reserve power plant in Kiisa is completed in September 2014.
During the autumn of 2013, Fingrid, Elering and Nordic Energy Link (N.E.L) completed negotiations about the ownership of the Estlink 1 interconnection. According to the agreement, the ownership of the link will be transferred to the transmission system operators on 30 December 2013.
The link is due for final handover in February 2014. Its total length is approximately 170 km, some 14 km of which is overhead line in Finland, about 145 km submarine cable laid on the bottom of the Gulf of Finland, and about 11 km underground cable in Estonia.
There are converter stations at both ends of the link, used for converting direct current to alternating current and vice versa. The submarine cable will be connected to the Finnish transmission grid at the Anttila substation in Porvoo. In Estonia, the cable will be connected to the Estonian grid at the Püssi substation in the eastern part of the country.
The total budget for the project is approximately 320 million euros, divided between Fingrid and Elering. EstLink 2 has received 100 million euros investment subsidies from the EU.
Electricity Price in Estonia Remains Lower than Southern Neighbors
The price in the Estonian price area in October was 46.76 euros per megawatt-hour, which is a drop of 62 cents compared to September. In the NPS Latvia and NPS Lithuania price areas, electricity remained the most expensive anywhere on the Nordic power exchange, at 64.18 euros per megawatt-hour – an increase of 3.5% month-on-month.
The price of electricity in the region continued to be influenced by lower than usual hydro energy levels in October. The fill rates of Norwegian hydro reservoirs in October were lower than during the same period in previous years, reaching only 73.5% of the maximum possible level. Norway, Sweden and Finland saw growth in both consumption (18%, 14% and 12% respectively) and production (9%, 15% and 22% respectively).
In the NPS Latvia and NPS Lithuania price areas, electricity prices remained the highest anywhere on the Nordic power exchange, at 64.18 euros per megawatt-hour – an increase of 3.5% month-on-month. Prices in the NPS Latvia and NPS Lithuania price areas remained equal for all trading hours.
In Finland, the price of electricity fell similarly to Estonia, by 3.8% to 45.95 euros per megawatt-hour. Domestic production managed to cover 81% of Finland’s consumption. Power flows across the Estonian-Finnish electrical interconnection EstLink 1 were in the direction from Estonia to Finland for 28% of all hours last month, and in the direction from Finland to Estonia for the remaining hours.
The NPS system price for last month stayed on par with September, at 38.33 euros per megawatt-hour on average.
The price of carbon dioxide emission quotas remained stable in October, fluctuating between 4.57 and 5.32 euros per ton.
The monthly average price of natural gas imported into Estonia was 30.74 euros per megawatt-hour, according to Elering’s estimates. This is four eurocents higher than the September price.
Prices of futures on the Nasdaq OMX Commodities market fell in October. The estimated price of electricity in the NPS Estonia price area in the first quarter of 2014 is 43.9 euros per megawatt-hour.
The full report on the electricity market in October is available here.
Fingrid and Elering Will Become the New Owners of EstLink 1
Today, a sales contract was concluded for the first Estonian–Finnish submarine cable EstLink 1, making the Finnish grid network company Fingrid and Estonian grid network company Elering the new owners of the transmission cable as of 30 December, 2013. The total cost of the sales transaction was 77.6 million euros.
Previously, the Finnish and Estonian transmission system operators have rented the cable capacity from its owners, Nordic Energy Link ("NEL") and N.E.L. Finland Oy, the shareholders of which are Eesti Energia (holding of 39.9%), Latvenergo (25%), Lietuvos Energijos Gamyba (25%), and Finestlink (10.1%).
For the sales transaction to take effect, the Estonian Competition Authority has to give its consent, after which the assets will be owned 50% by the Finnish grid network company Fingrid and 50% by Elering as of 30 December this year.
President and CEO Jukka Ruusunen notes that EstLink 1 opened the Baltic electricity markets to competition in a whole new way. After the transaction, the connection can be utilised more efficiently than before. Moreover, the EstLink 2 submarine cable, to be taken into use in early 2014, almost triples the transmission capacity between Finland and Estonia. According to Ruusunen, after these changes the transmission capacity between the two countries will be on a good level, creating an excellent basis for developing the electricity markets of the Baltic Sea region.
The purchase of EstLink 1 is the final step for Elering in the process of taking over all transmission assets from Eesti Energia AS. It is largely thanks to the two EstLink cable projects that we have seen a tremendous development of the Estonian power market in becoming a natural part of the common Nordic-Baltic electricity market over the past couple of years. This means high transparency and efficient market setup, a larger choice for customers and better opportunities for power generators to utilize their production capacities, Taavi Veskimägi, CEO of Elering, noted.
EstLink 1, active since the end of 2006, is the first connection between the networks of Baltic and Nordic countries.The EstLink 1 cable was established by Eesti Energia, Latvenergo from Latvia, Lietuvos Energijos Gamyba from Lithuania, and Finestlink (joint company of Pohjolan Voima and Helsingin Energia) from Finland.
The transmission capacity of EstLink 1 is 350 MW.The total length of the cable is 210 kilometres (two parallel cables 105 kilometres long), of which 148 kilometres are under the sea and 62 kilometres on land.The deepest section of the cable is 100 metres below sea level on the seafloor.
Jukka Ruusunen, President & CEO, Fingrid, tel. +358 30 395 5140
Kari Kuusela, Executive Vice President, Fingrid, tel. +358 30 395 5129
Marina Louhija, General Counsel, Fingrid, tel. +358 30 395 5289
Taavi Veskimägi, CEO, Elering, tel. +372 71 51 221
Kalle Kilk, Asset Manager, tel. +372 71 51 221
Ingmar Lääts, General Counsel, Elering, tel. +372 71 51 314
70 000 Electricity Contracts Added Since Start of Year
The number of consumption points with valid electricity contracts has jumped to 538 000, or 76 percent of the total, by the end of September, according to statistics from the Data Warehouse. Around 70 000 new electricity contracts have been signed since the beginning of the year.
Out of all valid electricity contracts, 78% have a limited term, and the other 22% have an unlimited term. The number of consumption points for which no electricity contract has been submitted to the Data Warehouse was around 169 000 as of the end of last month.
According to contract data submitted to the Data Warehouse by sellers, customers with a contract consumed 88 percent of all electricity in Estonia in September, while customers without a contract consumed the other 12 percent.
The number of customers who decided to switch electricity sellers and whose new contract came into effect as of the start of October was 2144. Statistics for recent months shows increased activity in switching electricity sellers.
According to Taavi Veskimägi, Chairman of the Board of Elering, work has been started on creating the ability to pass on information from network operators to sellers via the Data Warehouse, in order to ensure continued support of the functioning of the electricity market and equal trade conditions for all electricity sellers. This application will give all sellers the ability to present a single bill for network services and the electricity itself to their customers. The technological work is ongoing, and the legal basis for presenting a single bill already exists in law, but it requires clarification, in order to ensure its equal application to all electricity sellers and network operators.
The market shares of balance handlers, which include both the network losses of network operators and the amounts of electricity consumed as a general service, are provided in the table below. The shares of the balance handlers’ portfolios in the system consumption are calculated from the total consumption amounts metered within the balance handler’s balance area. Balance handler market shares do not coincide with the balance handlers’ own shares of electricity sales to end consumers, as the balance portfolio also includes the electricity amounts of other sellers belonging to the portfolio. The table only shows the major electricity sellers and their shares of the total market.
|Market shares of balance providers||September 2013||August 2013||July 2013|
|Eesti Energia AS balance portfolio||70,8%||71,6%||71,2%|
|Elektrum Eesti OÜ balance portfolio||10,5%||9,6%||9,8%|
|Baltic Energy Services OÜ balance portfolio||10,0%||10,2%||10,4%|
|incl. 220 Energia OÜ||1,7%||1,5%||1,4%|
|incl. TS Energia OÜ||1,0%||0,9%||0,9%|
|incl. VKG Elektrivõrgud OÜ||1,2%||1,2%||1,2%|
|incl. Sillamäe SEJ AS||0,9%||0,9%||1,0%|
|incl. AS Loo Elekter||0,3%||0,2%||0,2%|
|incl. VKG Energia||2,4%||2,9%||0,9%|
|Balance portfolio of Elering's grid losses||4,6%||4,6%||4,6%|
|Nordic Power Management OÜ balance portfolio||2,3%||2,4%||2,5%|
|incl. Imatra Elekter AS||1,2%||1,2%||1,2%|
|incl. Eesti Gaas AS||0,1%||0,1%||0,1%|
|Elektrimüügi AS balance portfolio||1,7%||1,5%||1,5%|
|Inter Rao Eesti OÜ balance portfolio||0,1%||0,1%||-|