A review by Elering, the Estonian Transmission System Operator, of the reasons for the dramatic price increase in the Estlink price area on 24 August

The Estonian electricity transmission system and the cross-border connections with Finland and Latvia are working as normal and there have been no exceptional limits on the connections.

The inter-system transmission capacities given for allocation in Nord Pool Spot (NPS) for 24 August were as planned, but were different from those of the previous days. Unforeseen in the plans, there was an emergency shutdown of block 12 at the Balti power station, which removed about 160MW of production capacity from the Estonian electricity system, on top of the five blocks at the Narva power stations currently undergoing planned renovation work.In recent months the electricity systems of Latvia and Lithuania have been importing heavily, and currently have shortfalls of 30% and 60% respectively of their consumption. A large amount of purchase bids were made in the Estlink price area from outside Estonia to cover these shortfalls. At the same time that the available supply for sales in Estonia fell, there was also a shortage of spare transmission capacity in the Estlink 1 cable between Estonia and Finland. Supplies of low-priced electricity from Finland could not reach the market.  The result in the electricity market was that there were more purchase bids than sales offers and for five consecutive hours the demand and supply bids that set the electricity price could not be matched until in the end the system limit or maximum price was reached. In the NPS bidding system NPS SESAM, this is 2000 eur/MWh. Elering believes that this clearly demonstrates how important for the whole region are further connections and production capacity, and a single Nordic-Baltic market in order to prevent such extreme situations arising again.  To prevent similar situations arising in the longer term, it is necessary to: 1. complete construction of the Estlink2 cable, which will raise the transmission capacity between Estonia and Finland to 1000MW. A third connection between Estonia and Latvia must also be built. If there are enough connections, then this will ensure that electricity can always move in the power exchange from the price area with the lowest price to the area with the highest price, and no similar vacuum can occur again. 2. move forward with the single Baltic electricity market by extending the NPS power exchange from Estonia to Latvia and Lithuania too. When Estlink2 is completed it will be possible to talk of a Nordic-Baltic electricity market where many producers produce electricity using different methods and different sources. The larger number of market participants and the resulting higher liquidity will make similar events much less likely to occur. 3. analyse critically the sufficiency of production capacity in Estonia. Ensuring the supply of electricity at its full economic cost in the Baltic region is not a distant threat but a current reality. In the short-term:1. Nord Pool Spot and the Estonian Competition Authority must supervise and look into the behaviour of market participants.2. Work between system operators to establish principles for counter-trading in such circumstances must be widened. 3. Ways of informing the market participants rapidly of unplanned situations must be developed. The power exchange operators must be obliged to inform the system operators immediately of such situations.