Large electricity producers sell the majority of the electricity they produce well in advance at a price that is no longer affected by the fluctuation of electricity on the stock market. Hydropower producers still usually make a good account on days like Friday.
Multi A Helsingin Sanomat reader has updated in his comments how the electricity producers made huge profits on Friday at the peak electricity price, even though the electricity production costs were exactly the same as on other days.
The truth is not so simple. Some of the producers received a stock market price for their production, the majority did not.
The majority of the electricity consumed each day is actually sold and bought at a fixed price long before it is produced and at a fairly moderate price. The transactions have been made either on the derivatives exchange or directly between the companies. It's called price protection.
For example Fortum tells the shares and prices of hedges in each of its earnings reports. In October the company saidthat 75 percent of the October-December 2023 electricity production was protected at a price of 50 euros per megawatt hour, which corresponds to 5.0 cents per kilowatt hour.
65 percent of this year's production had already been sold in advance last October at a price of 4.7 cents per kilowatt hour. Fortum also reports that it received an average of 6.5 cents per kilowatt hour for all the electricity it produced in January–September last year.
Producers it is worth protecting the price in advance with such a cheap price, because electricity has often been even cheaper on the market. Last year, the stock exchange price quite often even went negative. Investors appreciate the stability and predictability of the business.
This pre-sold electricity has been bought either by electricity retailers or by companies that use a lot of electricity, who want to hedge their electricity purchase price well in advance.
Retailers, on the other hand, have sold electricity sold by Fortum to consumers and companies in the form of fixed-term fixed-price contracts. In this way, consumers have also been able to protect their electricity purchase price.
Fortum received a high exchange price for the electricity it produced on Friday only for the part of the production that it has not already sold in advance. For the most part, all large electricity producers with a lot of stable production, such as nuclear power, operate in the same way.
Loviisa nuclear power plant is fully owned by Fortum. Fortum also owns a quarter of Olkiluoto.
The second largest electricity producer in Finland is the forestry company UPM, which owns about a third of the electricity from the Olkiluoto nuclear reactors. Helen owns more than eight percent of Olkiluoto's production.
Can however, the production of electricity is specifically regulated according to the price, which is the purpose of the market. This part usually benefits from high stock prices directly.
Easily adjustable and therefore the most valuable production is hydropower. Fortum's Meri-Pori coal-fired power plant with an output of about 500 megawatts and even Olkiluoto's new 1,600 megawatt triplex unit can also be easily adjusted.
It is not known how much of OL3's production is actually adjusted according to price. It depends on the will of the owners.
Friday's electricity production can be viewed by the grid company Fingrid on the power system status page. From there, you can see minute by minute how electricity is produced at any given time.
On Friday all nuclear power plants run at full capacity of nearly 4,400 megawatts all day long. Wind power was generated at noon with a power of about 1,500 megawatts. It is difficult to know what kind of price the producer will get for wind power.
Meri-Porikin, which had problems last week, was probably at full capacity in the morning. Its production is shown under other production.
Hydropower was produced during the day with a power of about 2,000 megawatts. There would be more nominal power in the power plants, but winter conditions limit production. On the other hand, hydropower cannot be driven completely downhill.
How did a large part of the production really benefit from Friday's average kilowatt-hour price of more than a euro? It's impossible to know, but we can guess that at least the Meri-Pori coal power plant, as well as a large part of the hydropower and part of the wind power, belong to this group. Perhaps even part of the Olkiluoto trio.
If it is assumed that an average of 2,000 megawatts of all the production capacity received electricity at the stock market price, that would mean the amount of electricity produced is about 48,000 megawatt hours per day. At the tax-free average price of electricity of 890 euros per megawatt hour, it would make just under 43 million euros in income for the producers.
For hydro, nuclear and wind power it means a fairly clean profit, because the so-called variable cost of their use is close to zero. Vesivoima's largest owners are Fortum and UPM.
The use of the Meri-Pori coal-fired power plant, on the other hand, is not free. The cost of carbon and carbon dioxide emission rights eats up a large slice of the price of electricity sold. The power plant also stands unused but ready for most of the year, which is also not free.
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