Increased solar energy production in the Baltics and reduced consumption during the summer will lower electricity exchange prices, although during hours when there is a shortage of affordable wind and solar energy, the region will need to use more expensive thermal power plants and import electricity from neighboring countries, resulting in higher electricity prices for consumers, according to an energy market overview by the Estonian state-owned energy group Eesti Energia.
April experienced fluctuations in the Baltic electricity market as variable as the spring weather. Despite a temporary return to winter conditions at the end of April, electricity prices overall decreased for the month. In Estonia, the Nord Pool electricity exchange price in April was 11.53 percent cheaper than in March, costing 60.39 euros per megawatt-hour. The month was marked by variable weather, accordingly influencing the demand for electricity. In total, 680 GWh of energy was consumed nationally in April, while in March, the figure was 721 GWh. The average hourly electricity consumption decreased by 2.6 percent, Armen Kasparov, head of energy trading and portfolio management at Eesti Energia, said.
Good weather at the start of April led to record renewable energy production. Wind farms produced almost as much electricity as solar parks, achieving a total of 160 GWh of green energy production. In the latter half of the month, deteriorating weather increased the demand for electricity and resulted in a decrease in the proportion of renewable energy production. The situation began to improve as cold weather passed.
Renewable energy production in Latvia and Lithuania set records, but deteriorating weather and infrastructure maintenance required the operation of thermal power plants.
The cold weather that dominated the second half of April required the operation of thermal power plants. The situation was compounded by ongoing maintenance of Finland’s significant Olkiluoto-3 nuclear reactor, which limited cheaper electricity production in the region. In Sweden, several planned energy infrastructure maintenance works reduced the availability of cheaper energy reaching the Baltic states. The total capacity of two reactors under maintenance is 2.5 GW, and their repairs are expected to be completed in May.
This summer, Estonia can expect low electricity prices based on renewable energy production, but nightly energy consumption must be covered with more expensive imported electricity.
Sunshine leads summer electricity production, with an expected record high installation capacity of nearly 2,000 MW across the Baltic states. For comparison, the anticipated hourly consumption at noon in June is about 2,800 MW. Adding 1,700 MW of installed wind production capacity, it can be assumed that on most days, the price during sunny hours from 10 a.m. to 6 p.m. will be very low or even negative, as was already seen on several days in April and May.
This could lead to a paradoxical price curve where nighttime prices may actually be much higher, as Estonia would need to import electricity from Finland, Sweden, or Poland or activate fossil fuel power plants. These are currently operating in the price range of 70-100 euros/MWh. For comparison, based on futures, the average electricity price in July in Estonia’s neighboring countries is as follows — Finland 36 euros/MWh, Southern Sweden 37 euros/MWh, Poland 88 euros/MWh. Typically, the electricity price in the Baltic states falls between these figures.
Currently, the Estlink 2 cable is not expected to be operational before the end of August. Although initially it was thought that the cable failure would lead to a noticeable price increase, market prices since March have proven otherwise. This is a strong indication that the Baltic electricity market has reached a point where it is not always dependent on the import of cheap electricity from Finland, and on some days, Estonia even has a surplus of cheap energy to export northward.
Looking at the total electricity consumption data and considering the impact of temperature changes, electricity consumption has remained quite stable during the winter months compared to 2023. However, summer consumption is less predictable, as it is influenced by small and micro producers with their solar panels, which usually means there is no typical demand from them. A slight increase in consumption may be expected to keep air conditioning running if the summer turns out hot. Generally, Estonia’s consumption level is lower compared to the peak levels of 2022, which aligns with the overall economic situation.
Source: BNS
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