September’s Electricity Price Affected by Limited Hydro Capacity in the Nordics

Figures from the Nordic power exchange NPS show that the monthly average market price of electricity in the Estonian price area tracked that of the Nordics.

Both the average price of electricity in the Estonian price area and the NPS system price rose by 8.5% last month. In Estonia, the average price was 47.38 euros per megawatt-hour, while the system price reached the 38.42 euro level. In Finland, the price went up by 9.9% over the same period, to 47.76 euros per megawatt-hour.

The price of electricity in the Nordics and Estonia continued being affected by the low supply of hydro energy. Reservoir fill rates were 74.7% of maximum during the last month. In 2011 and 2012, those figures were 83.4% and 89.1% respectively. Overall for the month, Norway’s output exceeded domestic consumption by 12%, despite output falling by two percent compared to the previous month. At the same time, consumption grew by seven percent, making electricity more expensive in the region.

Finland and Denmark’s domestic consumption stayed at the same level, although output grew by four and nine percent respectively, covering 74% of all domestic consumption in Finland and 80% in Denmark. In Sweden, consumption grew by five percent; electricity production exceeded consumption by three percent for September as a whole. Despite the restrictions in Norway’s hydro capacity, its output covered the deficit of the other Nordic countries.

The price of electricity in the Latvian and Lithuanian price areas stayed equal for all hours of last month, with the average price for September coming to 61.99 euros per megawatt-hour – the highest anywhere in NPS. Latvia’s domestic production covered 66% of consumption last month, while in Lithuania that ratio was 47%. Although the deficit in Latvia and Lithuania decreased, September saw a significant jump in price – an increase of 20.8% month-on-month. The price was affected by the transmission capacity restrictions on the Estonian-Latvian and Belarusian-Lithuanian borders due to repair and maintenance works on the transmission lines, as well as the low hydro levels in Latvia and maintenance works at Kaliningrad’s production facilities.

The price was the same across all three Baltic states for 32.8% of all hours. The influence of the Latvian and Lithuanian price areas on the electricity prices in Estonia will significantly decrease next year, when the EstLink 2 cable will be made available to the market, and the transmission capacity bottleneck will shift from the Estonian-Finnish border to the Estonian-Latvian one. “Most probably, after the launch of EstLink 2 the price will be the same in the Estonian and Finnish price areas for most of the hours in a year, while the Latvian and Lithuanian areas will have a different price. This will give Estonian consumers a much bigger sense of confidence when planning their energy expenditures in future periods,” noted Taavi Veskimägi, Chairman of the Managing Board of Elering.

The price of carbon dioxide emission quotas grew slightly last month, fluctuating between 4.40 and 5.66 euros per ton.

The average price of natural gas imported into Estonia fell to 30.70 euros per megawatt-hour in September, according to Elering’s estimates. This is 55 eurocents lower than the August price.