July NPS System Price 2.2 Times Lower than Estonian Regulated Market Price

Due to a surplus of hydro energy in July, the system price on the Nord Pool Spot (NPS) exchange fell 45% month-on-month to 13.70 euros per megawatt-hour – 2.2 times lower than the regulated price in the Estonian market. July also saw the lowest NPS system price for any single month in the last decade. At the same time, the NPS Estonian price area recorded an increase of 16%, with an average price of 35.85 euros per megawatt-hour.

The NPS system price has been lower than Estonia’s regulated market price for several consecutive months, and although the electricity market will only be opened fully in January of next year, the electricity amounts purchased in the NPS Estonian price area currently account for approximately half of gross domestic consumption. The figure was 49% in July, and 51% in June.

Due to a shortfall in the transmission capacity between Finland and Estonia, the average NPS Estonian price remained higher than the Finnish price, by 22.18 euros per megawatt-hour. The Estonian price was higher than the Finnish price every day in July.

The market price of electricity in the NPS Lithuanian area was 45.81 euros per megawatt-hour in July, approximately 10 euros higher than in Estonia. The price in the NPS ELE area, which has been operating since June and covers the Estonian-Latvian border, was 42.63 euros per megawatt-hour, or 6.78 euros higher than the NPS Estonian price.

As the price in Finland was 2.6 times lower, the electricity flow in July was in the direction from Finland to Estonia for the entire 744 hours. The EstLink 1 interconnection was used at maximum capacity for 732 of those hours. The amount of electricity imported via EstLink 1 grew by 45% compared to June, to a total of 260 gigawatt-hours.

July sales in the NPS Estonian and NPS ELE areas only accounted for a total of 311 gigawatt-hours of electricity, of which 302 gigawatt-hours were sold in the Estonian price area. The tiny sales in the NPS ELE price area, a mere nine gigawatt-hours, point to the fact that Latvia and Lithuania are still experiencing energy deficits, and the marginal costs at their power plants are higher than those in Estonia and Finland.

Purchases in the NPS Estonian and NPS ELE price areas grew again to exceed June’s record numbers, with July’s total coming to 571 gigawatt-hours of electricity purchased in these two areas. Out of that, purchases in the NPS Estonian price area accounted for 258 gigawatt-hours, while demand from market participants trading in the NPS ELE area came to 313 gigawatt-hours. Estonian market participants bought a total of 258 gigawatt-hours of electricity during the month, while Latvian market participants bought 231 GWh and Lithuanian market participants bought 82 GWh.

The price of electricity in the Baltics is significantly affected by the price of imported natural gas, as half of the installed generation capacity in the Baltic states is gas-based. According to Elering’s estimation, the price of natural gas imported into Estonia grew to 40.5 euros per megawatt-hour in July, compared to 39.9 euros in the previous month. The increase is attributed to the growth in the nine month average oil price, and the euro’s weakening against the dollar.

The carbon dioxide price fell from 8.25 euros to 6.25 euros per ton in July.

The full July report on the electricity market is available here (published only in Estonian).