Latvia and Lithuania to blame for extreme electricity price

Illustration: Pm

Counting from start of year, those opting for Exchange Package are still ahead.

For Estonian electricity price rocketing to €200 MWh yesterday, there are several reasons – the main culprits being our Southern neighbours, causing a deficit on the market. Also, unlike us, not all their energy producers have been listed. The crisis was helped along by maintenance works at Narva station.

While, at the beginning of the year, electricity MWh exchange price remained at €30-40, yesterday’s price was scary: averaging €103.85, rising over €200 between 8 am and 2 pm. Today, the price is lower: €64.62.

As explained by Ministry of Economic Affairs' advisor Rasmus Ruuda, the high price is caused by the differing behaviour or Baltic electricity producers – while Estonia offers its capacities to the market via the electricity exchange Nord Pool Spot, the major Latvian and Lithuanian producers do not.

The electricity exchange does not reflect the Latvian hydro stations, nor the gas based power stations of Lithuania, with prices considerably lower than the current, abnormally high market prices.

«Certainly this is not acceptable and there have been remarks made to Latvia and Lithuania, on that subject, already,» said Mr Ruuda, adding that all signs point to the price pressure lessening soon.

The advisor said the ministry is planning, in cooperation with Estonian Competition Authority, to assess the behaviour of participants in Baltic electricity markets with monopoly statuses – and, if needed, to address the European Commission’s competition directorate and find ways of regulating the environment, whereby Estonian consumers will be spared from high electricity prices due to deficit with Southern neighbours.

Another reason for the price hike were maintenance works at Narva power stations. The electricity demand being lower in summer, maintenance is usually done during this season. Therefore, a couple of Narva production blocks are in repairs, explained Eesti Energia, asked about the prices.

Eesti Energia press representative Eliis Vennik commented the extreme exchange price saying that maintenance is needed at every station, the works planned long in advance.

«We will do our very best to engage as much of our own capacity as possible; we are also looking into ways to do some works at other times, if feasible,» she assured.

Still, said Ms Vennik, electricity exchange prices are volatile and always will be, as consumer demand and offers by consumers are constantly changing.

«That is the way a market functions. While, at the beginning of the year, one might have gotten the impression that exchange prices are only affected by the weather and water levels in hydro reservoirs, now we see that this is not quite the case,» admitted the press secretary.

Moonika Kukke, CEO of the Internet portal energiaturg.ee, said that from this January till May, exchange packages have, on the average, been more favourable for consumers than fixed packages – in May, the difference being as much as 18 per cent. «The unexpectedly high June prices should not eat up former five months’ savings,» she hopes.

Tiit Nigul, CEO of electricity trader Nordic Power Management, said that the up to €200 price was caused by deficit in Latvia and Lithuania.

«Surely the price will not remain on that level; at the moment, Finland sends us electricity at full capacity,» said Mr Nigul and predicted that when EstLink 2 is completed, such anomalies will no longer occur.

According to Elering chief Taavi Veskimägi, it definitely cannot be claimed that €200 MWh equals a dysfunctional market.

«On the contrary, the market has both high and low prices. The latter, naturally, are not talked about. They write about «record prices», even though the hourly Estonian price record was set long ago, the maximum price being €2,000 megawatt hours for five hours on August 24^th 2010,» he wrote in his blog.

The shortfall

•    The overall Baltic production capacity is 9.2 GW. As of yesterday, 3,450 MW of that was off – 702 MW of that with Eesti Energia.

•    Of the major Baltic electricity producers, the following were not working: Lietuvos energija CCGT-9 (445 MW), Latvenergo CHP-2 Block-1 (443 MW), Vilniaus energija (360 MW), Lietuvos energija Lithuanian PP G-5 (300 MW) and Eesti Energia.