October Price Drop in NPS Estonia Price Area

Nord Pool Spot power exchange’s Estonian price area recorded a drop in the price of electricity in October, despite an increase in the NPS system price caused by growing consumption.

In both NPS Estonia and NPS ELE price area prices dropped in October by five and two percent respectively, month-on-month, to 40.20 and 42.13 euros per megawatt-hour. In Lithuanian price area, the price climbed slightly to 44.81 euros. One of the factors in the price movement was the increased flow rate on the Daugava River, shrinking the deficit of the Latvian electricity system compared to September. Latvia’s electricity output in October also compensated for the interruption of electricity imports to Lithuania from Kaliningrad, caused by maintenance work on a thermal power plant.

NPS system price grew by 37% in October compared to September, to 34.76 euros per megawatt-hour, as the increased demand compared to hydro energy was not sufficient to keep the price at the low level established in the previous months.

The price in NPS Finland price area, 38.57 euros per megawatt-hour, also remained higher than NPS system price in October. This was mainly due to the bottleneck between Finland and Sweden, where restrictions on the Fenno-Skan interconnection will remain in place until the start of the next year.

An October average of 77% of marketed transmission capacity was utilized between NPS Estonia and NPS ELE area where transmission capacity on Estonian-Latvian border is allocated and physical limitations on the electrical interconnections are taken into account. For 178 hours, the transmission capacity was utilized at full load. Compared to September, the interconnection’s load increased, since there were fewer hours when then price of electricity was equal between two price areas. The EstLink 1 interconnection between Estonia and Finland was used for transmitting electricity from Finland to Estonia for 85% of all hours in October. For the same share of hours, the price of electricity in Finland and Estonia were equal.

A total of 424 gigawatt-hours of electricity were sold in NPS Estonia and NPS ELE price areas in October, with 96% of that sold in the Estonian area. Sales in NPS ELE price area decreased to 17 gigawatt-hours. NPS ELE price area is used by Latvian and Lithuanian market participants to trade in Estonia, and there is no real consumption or generation in that virtual area. The small sales in the ELE area point to that region’s energy deficit, as well as Latvia’s increased exports of hydro energy to the higher-priced NPS Lithuanian price area. Imports from Lithuania to Estonia brokered on the exchange decreased by 53% last month compared to September, coming to a mere 17 gigawatt-hours.

The amount of electricity purchased in the market grew in NPS Estonia and NPS ELE areas by 8.5% in October, compared to the previous month, to a total of 563 gigawatt-hours. 235 gigawatt-hours were purchased in the NPS Estonia price area, while the demand from Latvian and Lithuanian market participants trading in the NPS ELE area came to 328 gigawatt-hours, significantly higher than Estonia’s domestic demand.

Estonian market participants bought a total of 238 gigawatt-hours of electricity in the day-ahead and intraday markets in October. The figure shows an increase of 11% over the previous month, accounting for 35% of domestic electricity consumption.

In the NPS Finland price area, October faced a decrease in the market price of the Contract for Difference (CfD), a derivative instrument used for risk management. Based on future transactions for 2013, the price of electricity in Finland would come out to 43 euros per megawatt-hour. This gives an indication of the possible price formation in Estonia next year. The local price is affected not only by the Finnish price, but also by the existence and extent of bottlenecks between Estonia and Finland or Estonia and Latvia.

The price of natural gas, which affects the price of electricity, remained stable in October according to Elering’s estimation, keeping the previous month’s level of 37.71 euros per megawatt-hour.

The price of carbon dioxide emissions increased in October back to the level of early September, moving from 7.57 euros per ton at the start of the month to 8.25 euros per ton at its end.

The full report on the electricity market in October is available here (in Estonian).