Unusually Warm February Lowers Electricity Market Price

This February’s unseasonably warm weather caused electricity consumption in the Nordics and Baltics to fall up to 15 percent year-on-year. The lower demand forced the price of electricity on the Nordic power exchange to fall by an average of four percent compared to January.

The Nordic power exchange recorded a system price of 39.67 euros per megawatt-hour in February, with prices in Finland, Sweden, Norway and Estonia staying below 40 euros. The average price in the NPS Estonia price area was 39.82 euros, compared to NPS ELE’s 41.47, NPS Lithuania’s 42.94 and NPS Finland’s 39.43 euros per megawatt-hour. For 77 percent of all hours, the market price of electricity was equal in Estonia and Finland.

The hydro reservoir level, which is the greatest factor contributing to the price of electricity in the Nordics, was 18 percent lower this February than it was at the same time in 2012, and Norway’s electrical system changed from an exporter to an importer. Despite this, there was no shortage of generating capacity among the regions, nor a noticeable shortage of transmission capacity, except for the Danish and NPS ELE regions.

In Latvia, domestic production covered 81 percent of consumption in February. In Lithuania that figure was only 35 percent, meaning that most of the electricity was imported from neighbouring countries. As the Estonian and NPS ELE prices were more affordable than the NPS Lithuania price, exports from Estonia to both Latvia and Lithuania increased. Because of this, the Estonian-Latvian border had a shortage of transmission capacity for 173 hours. In Estonia, all of the electricity required to cover domestic consumption was purchased in the market.

The price of CO2 emission quotas, which affects power plants that use fossil fuels, has stayed low since the beginning of the year, supporting the competitiveness of electricity produced in Estonia. In February, the price of CO2 emissions fluctuated between 4.07 and 5.18 euros per ton, which is higher than the 3.3 euros recorded at the end of January.

By Elering’s estimation, the price of natural gas imported into Estonia fell by eight percent in February to 32.35 euros per megawatt-hour. The price drop was caused by the continuing fall in the nine-month average of gas oil and crude oil prices.

The power flows of the EstLink 1 cable connection between Estonia and Finland were highly varied in February, with power mostly going from Estonia to Finland at night and from Finland to Estonia during the day; that electricity then proceeded to the NPS ELE price area. Due to the increased demand from our southern neighbours, Estonia’s net imports from Finland came to 42 gigawatt-hours. Over the month, EstLink 1 was at maximum capacity for 57 hours in the direction from Estonia to Finland, and for 101 hours in the direction from Finland to Estonia.

On the Nasdaq OMX Commodities market, futures transactions pointed to an NPS system price of 37.10 euros per megawatt-hour for the second quarter of this year, and 37.20 euros for 2014. The corresponding prices for the NPS Estonia price area came to 38.10 and 41.30 euros per megawatt-hour.

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