Last Year Nordic Market Electricity Price Drops by a Third

The Nordic power exchange Nord Pool Spot (NPS) has had a positive year 2012, particularly for consumers, as the NPS system price dropped 34% compared to 2011 to a total of 31.20 euros per megawatt-hour. This makes the system price roughly the same as the regulated electricity price that was set for Estonia until the end of last year.

In the Nordics, last year’s hydro energy production rose to the highest level in years, causing the system price to drop as low as 13.70 euros per megawatt-hour in the summer. The average price in the NPS Estonia price area for the last year decreased by 9.6% to 39.20 euros, but unlike 2011, it remained higher than both the system price and the Finnish price.

The effect of cheap Nordic hydro energy did not reach the Estonian price area in full, as the Fenno-Skan 2 breakdown last winter caused insufficient transmission capacity between Sweden and Finland, while the transmission capacity between Finland and Estonia will remain insufficient until the completion of EstLink 2. In addition, prices were affected by high demand from Latvian and Lithuanian market participants, leading to a higher price in the Estonian area compared to the system price.

The most significant of last year’s events in the Nordic-Baltic electricity market were the opening of the Nord Pool Spot Lithuania price area on June 18th, and the launch of the Nasdaq OMX Commodities financial service based on the Estonian price area on November 26th.

The NPS ELE area set an average price of 42.63 euros per megawatt-hour last year, while the figure for the NPS Lithuania price area was 45.50 euros per megawatt-hour. Average prices in the Baltics were consistently the highest in NPS. The biggest discrepancy between the Baltic area prices and the NPS system price was in the summer period, when the Nordic prices were strongly affected by the large supply of hydro energy. The deciding factor in the NPS Estonia, NPS ELE and NPS Lithuania prices was mainly the high demand from Latvia and Lithuania, where in the summer period the cost of generating electricity at power plants was significantly higher than the Nordic level.

Estonian market participants sold 4.1 terawatt-hours of electricity in the NPS Estonia price area’s day-ahead and intraday markets, compared to 5.3 terawatt-hours the year before. Latvian and Lithuanian market participants sold 0.79 terawatt-hours of electricity in the Estonian and ELE price areas in the last year.

Estonian market participants purchased a total of 2.97 terawatt-hours of electricity in the Estonian price area over the year, accounting for 37.3% of Estonia’s domestic consumption. A year earlier, that figure was 33.2%. Estonia’s domestic consumption reached 8.1 terawatt-hours in 2012, compared to 7.9 terawatt-hours the year before. Latvian and Lithuanian market participants bought a total of 3.12 terawatt-hours of electricity in the NPS Estonia and NPS ELE price areas in 2012.

The price drop on the power exchange was also supported by the decrease in the price of CO2 emissions: over the year, the CO2 price fell from 10 euros to 6.1 euros per ton, and on the last trading day of the year, the price stayed at 6.44 euros.

Financial transaction prices for this and next year fell along with the drop in the system price, and the lowest monthly prices were around 37 euros per megawatt-hour. Based on the financial transaction prices in the Estonian electricity market, the average price for 2013 as measured at the end of November is projected to be 42.00 euros, and the price on the last trading day, based on the 2014 futures price, is projected to be 42.65 euros per megawatt-hour.

In December of last year, the power exchange experienced a price increase. The system price rose by 26% compared to November, to 42.94 euros per megawatt-hour. In the Estonian price area, the price rose by 16% to 43.56 euros. The same price was recorded in the NPS ELE price area, which operates on the Estonian-Latvian border and includes Latvian and Lithuanian market participants. The prices in the NPS Estonia and NPS ELE areas were strongly affected by the winter’s high water level in Latvia, which significantly increased the amount of electricity sold in the NPS ELE area.

Among NPS areas, the highest December price was in the Finnish price area, at 46.79 euros per megawatt-hour. The lowest prices were in Denmark. Wind power output jumped so much that it exceeded consumer demand, leading the Danish price areas to record negative prices over the Christmas holidays, with occasional hourly prices of minus 200 euros per megawatt-hour, which is the minimum possible price on the Nordic power exchange.

The full electricity market report for the last year is available here, and the December summary is available here. The summaries are in Estonian.