All Transmission Capacity on Estonian-Latvian Border to be allocated by NPS

With the opening of the NPS Latvia price area on June 3rd of this year, Elering and Latvia’s transmission system operator AST will abolish capacity auctions for the distribution of transmission capacity on the Estonian-Latvian border. In the future, the entire cross-border capacity will be distributed by the Nordic power exchange Nord Pool Spot (NPS).

Until now, NPS had been allocating 80 percent of the transmission capacity between Estonia and Latvia, with Elering and AST running weekly capacity auctions for the remaining 20 percent.

The plan for the merger of Baltic energy markets, drawn up in 2009 by the European Commission and the Baltic Sea states, called for a full transition to energy auctions from the moment when all three Baltic states join NPS. With Latvia’s accession, this condition will be met, enabling the launch of a more efficient capacity distribution scheme on the border between the countries. The new solution will ensure transparent and simple cross-border capacity allocation, providing equal access to transmission capacities for all market participants. Energy auctions will also deliver the most valid price signals for further investment decisions to market participants and transmission system operators, supporting the long-term integration of the regional market.

Due to time-zone differences on the first hour on 3rd June according to EST time, the total 100% of trading capacity will be given to implicit auction between NPS Estonia and NPS ELE. Starting from the second hour EST time and first hour CET time 100% will be allocated between NPS Estonia and NPS Latvia price areas.

The region’s system operators and regulators will continue analyzing the situation to find the best solution for implementing additional measures that would support the integration of Baltic electricity markets. Such measures may become necessary with the completion of EstLink 2, the second interconnection between Estonia and Finland, when the current bottleneck in transmission capacity between Estonia and Finland will very probably shift to the Estonian-Latvian border. The necessary supporting measures must already be in place in the Baltic states before the possible structural overload arises on the Estonian-Latvian border following the availability of EstLink 2 to the electricity market.

The specifics of running the energy auction have been established by the system operators of the Baltic states in an agreement signed on March 15th of this year.

The last capacity auction took place on May 21st.