According to EU regulations, the price ceiling for wholesale electricity will automatically increase by one thousand euros if, even for one hour, the megawatt-hour price of electricity approaches the current ceiling of 4,000 euros.
in Finland in recent days there has been a heated discussion about whether a price ceiling should be set for the price of electricity.
This has been suggested especially by the professor of economics at Aalto University Matti Liski.
“A price ceiling can be set for electricity. In fact, there is already one, but it is currently too high and should be rapidly reduced. In a situation where the price of electricity threatens to get out of control, price control is needed. It should be seen as an economic policy instrument,” Liski said in an interview with HS on July 26.
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Lizard said to Yle on Wednesdaythat it makes more sense to regulate the electricity price ceiling than to replace consumers’ high electricity bills with tax funds.
“Companies are of course against this, but the fact is that the economy will not be able to withstand the increase in electricity prices caused by running out of gas in Central Europe,” Liski justified his view in an interview with HS.
The Left Alliance chairman of the parliamentary group Jussi Saramo and vice-chairman of Basic Finns Leena Meri hope that the government will start preparing a price ceiling for electricity. They shared their thoughts In Ylen’s A-studio on Wednesday.
However, the Finnish government cannot interfere with the wholesale electricity price ceiling, as it is an EU-level decision. The EU Energy Regulatory Agency decides on the price ceiling.
“If a price ceiling is wanted in Finland, it must be negotiated among the entire EU. It cannot be decided at the national level”, says the Energy Agency’s manager responsible for markets Antti Paananen.
If there was a lower price ceiling in Finland than elsewhere, electricity would not necessarily be sold to Finland.
“If there was a lower price ceiling in Finland than, say, Sweden, it could happen that electricity would be exported from Finland to Sweden even if there was an electricity shortage in Finland,” says Paananen.
HS could not get in touch with Liski on Thursday, so it is not known how exactly he would implement the price ceiling.
However, Liski has spoken about the current wholesale electricity price ceiling.
A type of price ceiling for European electricity wholesale is based on an EU regulation. The price ceiling regulates the wholesale price of electricity for only a few weeks.
It also rises automatically if the price of electricity rises, so it is not an effective limiter.
“There is no real price ceiling in the electricity wholesale market. It is an EU-wide system. The EU regulation states that you cannot set a ceiling on the price of electricity, but the market can have a technical price limit,” says Paananen.
Now that technical upper limit is 4,000 euros per megawatt hour. The price of electricity has not risen even close to such a high level.
According to Paananen, in June, the spot price of wholesale electricity in Finland’s bidding area was on average around 150 euros per megawatt hour. Last December, Finland experienced a wild price spike. Then the price per megawatt hour rose to one thousand euros.
“There haven’t been many spikes over a thousand euros in Europe this year. France had one exception in the spring. Then the price rose for a few hours to more than two thousand euros.”
This French double-hour raised the price ceiling from 3,000 euros to the current 4,000 euros per megawatt hour.
Wholesale Electric the price ceiling will always rise if the price of electricity rises to 60 percent of the valid technical price ceiling for at least one hour in one of the EU’s electricity markets.
After that, the previous price ceiling is automatically raised by one thousand euros. The new upper limit will not take effect immediately, but only five weeks after a price spike of more than one hour.
The five-week Interim period has been created so that the market can adjust to the new price ceiling.
Paananen says that the EU regulation does not recognize a system by which the electricity price ceiling could be lowered.
“It can only go up.”
In practice the system does little to slow down the rise in electricity prices.
“The price ceiling is only relevant to the formation of the price in the case that the prices rose up to the current price ceiling at some point,” says an expert from Energiateollisuus ry Janne Kauppi.
After five weeks at the latest, the price ceiling could rise again.
Kauppi says that the legislator has tried to ensure that high price limits are used to ensure the operation of the market, i.e. to enable the sufficiency of electricity when supply and demand meet.
The purpose of the price ceiling is therefore to make the electricity market easier, for example, so that unreasonable prices are not shouted at electricity wholesale auctions, and that in the event of a disturbance, the price increase is somewhat slowed down.
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Problem is that there is no unlimited electricity production capacity in Europe. Paananen says that production will not increase quickly even if the price rises.
“The idea of the EU is that there is no price ceiling, but the market balances the market with supply and demand. At the latest, at a megawatt-hour price of more than a thousand euros, the market will become so flexible that consumption will have to be reduced.”
Paananen believes that if prices get really high, the industry may well start trading their electricity-related derivative contracts rather than keep electricity-consuming production running.
Derivatives can be used to determine, for example, the price of future oil transactions, so the value of these contracts can increase as market conditions change.
“There will be flexibility in consumption if the price goes up,” he says.
The mechanism also has the lowest possible price, and it is – 500 euros.
In this case, it is a real market failure, because the seller of electricity pays so that someone buys electricity.
Paananen says that this can happen, for example, if a power plant needs to keep production in full operation even if there are no buyers.
Power The share of the wholesale price in the price of electricity for consumers has usually been roughly a third, the rest is, for example, the electricity transfer price and tax.
Paananen thinks that due to the increase in the price of electricity, the share of the price of wholesale electricity in the final bill is now about 40–45 percent.
He says that wholesale price changes will not be visible to the majority quickly, as more than 50 percent of Finns have a fixed-term fixed-price electricity contract.
“In order for the price ceiling to be met again, it would probably be an electricity shortage. There is probably enough electricity in Finland, and the operation of Olkiluoto 3 would ease the situation, but its absence would have the opposite effect. There is also a lot of wind power coming in at the end of the year,” says Kauppi.
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