Overview of the energy market: the exchange price fell by more than 8 percent

Photo: Pixabay
Photo: Pixabay

Last week, the average exchange price of the Estonian price area was 385.3 eur/MWh, which is 8.8% lower than the exchange price of the previous week.

In Latvia, Lithuania and Finland, on the other hand, the average stock price continued to grow. Estonian-Latvian transmission capacity was limited to 600 MW during the peak period from Wednesday to Saturday last week, which led to the fact that the Finnish price was equal to the Estonian price throughout the week.

Price range Average stock price Change (last week)
Estonia 385,34 eur/MWh -8,8%
Latvia 521,48 eur/MWh +1,7%
Lithuania 550,29 eur/MWh +6,9%
Finland 385,34 eur/MWh +47,8%

The cheapest exchange price of the week was in the early morning of August 22, when the electricity price between 3 and 5 o’clock was 2.38 eur/MWh. The hour with the highest price was on Friday, August 26 at 19-20, when the price rose to the level of 770 eur/MWh.

The price of natural gas, which the week before last reached a record price of 261 eur/MWh, continued to grow last week as well, reaching the level of 339 eur/MWh on Friday. The continued rise in the price of natural gas raises the price of electricity produced at gas plants in the Baltic countries and elsewhere in Europe, which affects the price of peak hours, because gas plants are put into operation when other and cheaper production methods have been used up. Partly because of the high price, but also in order to save gas for the winter, not all gas stations participate in the daily electricity production.

Market experts predict even higher gas prices by autumn. Gazprom will suspend Nord Stream 1 gas supplies from August 31 to September 2 due to maintenance work. Russia’s state-owned gas company has signaled that supplies should continue at current levels after the maintenance work, unless there are technical problems, but markets also see a risk of supply disruptions. Currently, the pipeline is operating at only 20 percent of its capacity, delivering 33 million cubic meters per day. At the same time, the company is burning huge amounts of gas at the Portovaja compressor station near the Finnish border due to low supply volume, because Russian storages are full.

The gas storages of the European Union member states have an average capacity of 79 percent, Germany has the largest capacity with 83 and France with 91 percent capacity. French President Emmanuel Macron said that the coming winter will be survived with this amount of gas. Market participants, however, fear that in case no more gas comes to Europe via Nord Stream 1 (NS1), it will be difficult to produce electricity next year. On Friday, the German electricity future for 2023 rose to 985 euros/MWh, the price of the French future closed at 1,130 euros. These are exceptionally high prices, which, if they persist, would also affect the electricity prices in our region. However, if NS1 gas supplies are seen to recover after the maintenance, one could hope for a drop in futures prices next year and a normalization of prices.

In the Baltics, the situation of gas reserves is the most critical in Europe. Latvia’s Inčukalns gas storage facility, which stores the gas reserves of the three Baltic states and Finland, is only 55 percent filled. Since August, there has been no more gas coming to Inčukalns from Russia, the Klaipeda LNG wharf is working at full capacity, but since gas is also supplied to the Polish gas network through it, the reserves of Inčukalns are nevertheless slowly decreasing. At the same time, it is known that the first LNG ship of Estonia and Finland is on its way and should arrive in December.

In the European emissions trading system, the CO2 quota price fell slightly, but still remained at a high level, at nearly 90 EUR/t. The price of the quota remains at an all-time high, as a greater use of thermal energy is expected in the autumn, given the low production of nuclear and hydropower and the reduction of Russian gas supplies.

In the near future, several scheduled maintenance of power plants will continue in the region in order to increase their reliability for the autumn-winter period. Unit 2 of the Finnish Loviisa nuclear power plant with a capacity of 507 MW is scheduled for maintenance until September 9. Unit 4 of Sweden’s Ringhals nuclear power plant is scheduled for maintenance until September 7.

Last week, the 11th block of the Balti power plant underwent planned and long-announced summer maintenance, which will return to the market on September 6. The third, fourth and sixth units of the Eesti power plant and the Auvere power plant were also under maintenance, which will be back on line from Sunday. The planned works in the fourth and eighth blocks of the Estonian power plant will be completed this week, and the fifth block will be in operation again from the beginning of next week. The third unit of the Estonian power plant will undergo long-planned annual maintenance from the end of the week to the beginning of October. Transmission capacity from Estonia to Latvia is significantly limited until next week.

Unit 3 of Finland’s Olkiluoto nuclear power plant was commissioned on August 26, and the plant is now operating at 60% load (900 MW). From September, the capacity will be increased to 80 percent, and from the beginning of October, the Finns hope to see the nuclear plant working at full capacity.

Norway cannot reduce electricity exports to help curb domestic electricity prices, Norway’s energy market regulator has said. “The agreement between Norway and the European Union allows for export restrictions if the relevant conditions are met. In our view, security of supply is such an important argument, while protection against high prices is not,” the Norwegian regulator said.

The price of electricity is formed on the exchange for each hour depending on the production capacity of that hour and the demand of consumers and the limitations of transmission capacities between countries.

Olavi Miller

Eesti Energia’s market analysis strategist

The market overview has been prepared by Eesti Energia according to the best current knowledge. The information provided is based on public information. The market overview is presented as informative material and not as a promise, proposal or official forecast of Eesti Energia. Due to rapid changes in electricity market regulation, the market overview or the information contained therein is not final and may not correspond to future situations. Eesti Energia is not responsible for costs or damages that may arise in connection with the use of the information provided.

Source: Lääne Elu by online.le.ee.

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