Energy Market Overview

Warmer weather, higher wind energy output and lower consumption made it possible to significantly lower the price of electricity last week compared to previous weeks. While the decision to invest in the Sopi-Tootsi Wind Farm added optimism for the coming years, the postponement of the start-up of nuclear reactor Olkiluoto 3 to March added clouds of worry to our region despite the quite successful coping with the energy crisis so far.

The arrival of the cold wave in Europe will test the mitigation measures for the energy crisis, accelerating the depletion of gas reserves. The situation in Scandinavia and the Baltic countries is complicated by the maintenance of three powerful nuclear reactors, which is why reserve power plants running on fuel oil were launched in Sweden today.

Electricity prices rose by an average of €90 per megawatt-hour in our price zone last week, primarily affected by colder and drier weather with quite low wind power output. Most of the attention was on the price ceiling for Russian oil and the sanctions that have started to work, but the markets are still in a wait-and-see position.

The energy crisis and its possible solutions fuel passions and provide plenty of talk, but the impact of various mitigation measures on the electricity market is difficult to predict. Both gas and electricity prices continued to rise in sub-zero temperatures, and for the first time this winter, countries had to use their gas reserves. Despite the fact, they are rather optimistic about the coming months.

The cooler weather that arrived last week increased electricity consumption in Estonia and neighbouring countries, and thus the market prices. Good news was announced by NordPool – a second auction round to the electricity exchange will be added in December with the aim of preventing extreme price peaks in the future, similar to the ones we saw in August.

Windy weather helped to lower electricity prices last week, the exchange rate fell close to zero at times, but the increased wind output did not fully get to impact our prices due to maintenance work on the Swedish-Lithuanian submarine cable. Recent weather forecasts promise a milder-than-average winter, however, the threat of power outages in Europe has not disappeared.

Last week’s quite low wind energy output raised electricity prices in Estonia, Latvia and Lithuania. Compared to the universal service provided in Estonia, power exchange rates remain at a higher level, but those who use smart consumption management solutions can enjoy lower rates at night.

The efforts of European countries to cope with the energy crisis, together with a significantly warmer than usual autumn, have led to a situation where gas storage facilities are so full that LNG carriers with expensive cargo have to wait at a roadstead. However, a cold winter can quickly turn the current surplus into a deficit.

The energy crisis forces countries to look for solutions to problems that have already arisen or may arise with the arrival of winter they have not had to face so far. While private consumers are protected by various measures in Estonia and in several other countries, the situation of entrepreneurs can become significantly more complicated as the energy deficit worsens.