Electricity Price Down 24% On Last Year

Electricity prices on the Nord Pool Spot (NPS) power exchange maintained a uniformly low level in May, with the Estonian price area setting a price of around 36 EUR/MWh.

The high levels of hydro reservoirs, drops in consumption and lack of interruptions at major power plants have kept the price of electricity low across the Nordics all throughout May. The average price across all NPS price areas hit the lowest point yet for this year, at 28.50 EUR/MWh, which is also lower than the regulated price for Estonian consumers.
Despite the overall low price level across the Nordics, Estonia and Finland were some of the highest-priced areas on the Nordic power exchange (at 36.15 EUR/MWh and 33.34 EUR/MWh respectively). The main reason for the higher price is still the shortfall in transmission capacity between Scandinavia and Finland/Estonia. In addition, Estonian prices experienced pressure in May from scheduled and emergency service interruptions at various production facilities, as well as increased purchase amounts from Latvian and Lithuanian market participants.

“May’s electricity prices showed that, in a situation where the fill rates of Nordic hydro reservoirs maintain a high level, and nuclear power plants do not experience any interruptions, the price of electricity offered to the market by Estonian and other Baltic producers is higher,” said Taavi Veskimägi, Chairman of the Board of Elering. “Thus, the experience of 2011/2012 suggests that the construction of new connections and the opening of the market should offer consumers a better price than what would have potentially been the regulated price for the Narva power plants for 2013, when CO2 costs would have been added to the price. Reality has definitively shown that the electricity market can produce cheaper prices, and scaring people with talk of a major rise in energy prices after the market opens is unacceptable. Out of the new cross-border connections, the most important one is EstLink 2, the second connection between Estonia and Finland, which will be completed in early 2014. The importance of cross-border connections is affirmed by the market launch of Fenno Skan 2, the second connection between Sweden and Finland, which has helped bring down the price of electricity by 40% in Finland and 24% in Estonia over the last year,” added Veskimägi.

Compared to April, the amounts of electricity sold in the NPS Estonian price area grew to 428 GWh in May, an increase of 23%. The growth in sales was mainly driven by the increased supply from Estonian market participants. In May, Estonian market participants sold 349 GWh in the NPS Estonian price area, with Latvian market participants selling 57 GWh and Lithuanian market participants at 21 GWh.

Purchase amounts came to 549 GWh in May, setting a 12-month high. The significantly increased demand for electricity in the Estonian price area was caused on one hand by the drop in hydro energy and the deepening deficit in Latvia, and on the other hand by the demand from Lithuania, which is experiencing a massive deficit, leading in turn to a price increase on Lithuania’s Baltpool power exchange. In May, Estonian market participants purchased 239 GWh in the NPS Estonian price area, compared to 171 GWh purchased by Latvian market participants and 138 GWh by Lithuanian market participants.

As in previous months, May’s purchase amounts in the NPS Estonian price area overtook the sale amounts, with the difference being imported from Finland to Estonia over the EstLink 1 cable connection. Compared to April, imports from Finland increased by 75%, with total net imports at 121 GWh.

In May, the power flow via the EstLink 1 cable was from Finland to Estonia for 76% of the time and from Estonia to Finland for 23% of the time (compared to 64% and 30% accordingly in March).

The prices of CO2 quotas were affected positively in May by the price drop on the Nordic and Central European power exchanges, leading to May’s CO2 prices remaining stable at between 6.26 and 7.05 EUR/t.

The price of natural gas imported into the Baltic states has a significant effect on the price of the electricity sold in the local market (50% of the installed output capacity in the Baltic states is based on gas). By Elering’s estimation, the price of gas imported into Estonia has risen to a historic high of 43.2 EUR/MWh. Compared to the price a year ago (28.22 EUR/MWh), this is an increase of almost 15 euros, or 53%. The 2012 increases in natural gas prices on the Estonian market were driven by ever more expensive oil products, and the price of natural gas is expected to continue climbing in June, despite the stabilization in oil prices over the last few weeks.

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