|Price zone||Average exchange price||Change (previous week)|
Last week the electricity price in Estonia was on average 72.4 €/MWh (+17.8 €/MWh compared to the previous week). Electricity was the most expensive last Friday night at 21:00, at which time the price was 161 €/MWh. The cheapest hourly price was 24.63 €/MWh, recorded on Sunday 2 April at 15:00.
Last week, electricity prices in the Baltic States and the Finnish region were favourably affected by the test phase production of the Olkiluoto 3 nuclear plant at the maximum level as well as by high water levels in Latvia, which have enabled the production of more hydroelectricity than usual throughout the first quarter.
High water levels in Latvia have enabled production of more hydroelectricity in the first quarter
Compared to the first quarter of last year, the production of hydroelectricity in Latvia has increased by 62% this year, to 1.4 terawatt-hours. In the same time period the average production volume over the past five years has been just under one terawatt-hour in Latvia. However, the slightly colder weather last week, lower wind electricity production and a small rise in fuel prices has pushed electricity prices upwards.
The colder weather also affected the market price of natural gas, which increased by 1.7 euros compared to the previous week to a weekly average of 42.9 €/MWh. The decision made over the weekend by the OPEC oil cartel to limit crude oil production caught the markets by surprise, and the oil price went up by 6% to 85 USD/bbl on Monday. According to analysts, if that decision is upheld, oil prices could go up to 110 USD/bbl by the end of the year. Such an increase in oil prices would inevitably lead to natural gas prices going up as well.
Natural gas prices are currently being affected in the short term by energy strikes in France, which have led to interruption of work at various power facilities, from nuclear power plants to LNG terminals. In some companies, work has been interrupted for three weeks, but due to the cool spring the heating season has also not ended in Central Europe, even though a few weeks ago the temperatures exceeded 15 degrees. Maxar Technologies forecasts that lower-than-average temperatures will persist until at least the end of this week.
On the other hand, the European Union is putting increased pressure on energy companies to stop importing LNG from Russia. While up until now the European Commission, Germany and Spain have made recommendations in this regard, the commission is now looking for ways in which countries can ban Russian exporters from using the infrastructure needed for LNG shipments. The aim of this step is, of course, to reduce Europe’s energy dependence on Russia and to impose sanctions on Russia. At the same meeting, it was decided to leave the gas consumption restrictions in force for at least another year to ensure sufficient fuel availability for next winter.
Although imports of pipeline gas from Russia became nearly non-existent, export of LNG gas from Russia to the European Union increased by 30% last year. On the one hand, Europe needs all the LNG it can get to ensure security of supply, but at the same time politicians are criticised for continuing dependence on Russia and financing their military through the purchase of LNG. In so far as there are no specific sanctions or deadlines associated with them, imports of LNG from Moscow will continue in normal volumes. The Baltic States have been lobbying to impose an import ban, but according to various publications, there would be no consensus in this regard due to the firm opposition of certain countries.
Several large companies such as Repsol and Enagas in Spain have said that they will no longer buy Russian LNG, but at the same time many buyers have long-term contracts and France’s TotalEnergies holds a whopping 20% stake in the Yamal export station and has not expressed any willingness to abandon it.
While the sharpest peak of the energy crisis is behind us with this winter, several countries are continuing with crisis measures. Last week Spain, Portugal and Italy announced that they wish to extend the relief mechanisms. For Spain and Portugal, this means a price capping for natural gas used in gas power plants. Italy continues to provide price compensation for private consumers.
Pipeline gas supplies from Russia to decrease further this year
The consultancy firm McKinsey forecasts that natural gas prices in Europe will remain at or above current levels for a few more years, but should fall to 28.5–31.7 €/MWh by 2026. The price level will be affected by whether the current reduction in gas demand in Europe persists and how large the increase in Chinese gas consumption proves to be. Currently, the 2024 TTF gas futures trade at 59€/MWh and the 2025 gas futures will cost 50€/MWh.
Russia’s pipeline gas imports are expected to decrease by around 60% this year, amounting to 40 billion cubic metres, but despite this, the European Union will be able to replenish its reserves before winter, estimates analytics firm Energy Aspects. This decrease is large, but significantly lower than last year, when pipeline gas imports fell by as much as 78 billion cubic metres compared to 2021. Gas reserves are currently at 56%, while at the same time a year ago this figure was at only 27%. According to European Union rules, storage facilities must be filled to 90% by 1 November, which seems to be achievable at the moment.
Infrastructure would allow Moscow to sell substantially more natural gas to Europe, and in light of existing agreements this would theoretically be possible, but new agreements with the Kremlin are ruled out. Repairs of the Nord Stream pipelines by Russia are also not foreseen. On the other hand, Energy Aspects estimates that the European Union can fill its storage facilities even if Russia cuts off supplies altogether.
Eesti Gaas received its first shipment of LNG from the Inkoo terminal in Finland that opened in January. Of the ten shipments of LNG ordered for this year, seven will come from Inkoo. Until now, Eesti Gaas has always used the Klaipeda terminal.
EU lawmakers agreed to raise the 2030 binding renewable energy target to 42.5%, and this could be brought to 45% on a voluntary basis. Until now, the target enforced in 2021 was 41%. According to the agreement, authorising renewable energy projects will be accelerated to bring green electricity to the market more quickly and to increase independence from Russian fossil fuels. Member States must designate areas for the development of renewable energy where authorisations shall be proceeded in an accelerated and simplified procedure and, in order to reduce the risks of legal disputes, they are assigned the ‘overriding public interest’ status.
Last week the repair of the Ringhals 4 nuclear plant, with a capacity of 1130 MW, ended in Sweden, which adds affordable nuclear energy to the Baltic Sea region. Olkiluoto 3 was launched in test mode on 15 March and the start of regular electricity production is scheduled for 17 April. Until now, everything seems to have gone smoothly.
The average weekly CO2 price was 90.0 €/t (+0.5 €/t compared to the previous week), remaining at the same level compared to the previous week. The small rise was due to colder weather forecasts and a market expectation of better macroeconomic prospects, leading to higher demand.
Carbon dioxide emissions from Estonian power plants and industrial sites covered by the European Union Emissions Trading System increased by 23% to 8.5 million tonnes last year. The increase was mainly due to a surge in electricity generation in shale oil power plants, providing relief amid the energy crisis.
Eesti Energia’s Narva stations provided up to 170 MW to the market last week. The 5th energy block of the Eesti power plant returned from annual maintenance. The 3rd energy block of the Eesti power plant is in maintenance until May and the 4th energy block is undergoing annual maintenance until September.
The price of electricity is formed per hour based on the exchange price, depending on the production capacity and consumer demand in each particular hour, as well as interstate limitations on transmission capacity.
Olavi Miller, Market Analysis Strategist at Eesti Energia
The market overview has been compiled by Eesti Energia according to the best knowledge currently available. The information provided is based on public information. The market overview is presented as an informative material and not as a promise, proposal, or official forecast by Eesti Energia. Due to rapid changes in the regulation of the electricity market, the market overview or the information contained therein is not final and may not correspond to future situations. Eesti Energia is not be liable for any costs or damages that may arise in connection with the use of the information provided.