Electricity market | Pörssiähkö is exhilarating at exorbitant prices – at this price you can now get a fixed contract

Electric has been at exceptional prices again in recent days. In the most expensive hour on Monday, stock exchange electricity cost as much as 60 cents per kilowatt hour including VAT. Even on Tuesday, electricity costs more than 30 cents per hour.

Very expensive hours have already been experienced for about a week, that is, since the second reactor of the Olkiluoto nuclear power plant had to be shut down due to a fault in the turbine plant.

At the same time, the second unit of the Loviisa nuclear power plant is also undergoing maintenance and the weather has been quite calm. For example, on Monday morning, all of Finland’s wind turbines produced a total of less than 400 megawatts of electricity, even though the installed nominal power is already more than 7,700 megawatts.

Also, a large part of the transmission connections between Finland and Sweden is out of use due to the main network works. A shortage of transmission connections raises the price sensitively, when domestic production is scarce compared to consumption.

Size On the other hand, electricity in the summer and even in early September was exceptionally cheap, and many buyers of stock exchange electricity have been satisfied. However, after the volatility of the last few days, eyes may have turned to the fixed-term contracts available.

Exchange electricity price fluctuations only affect contracts that follow the exchange price. In a fixed-term contract, the price of electric energy is either completely fixed or it can be influenced to some extent by timing consumption according to the price.

In addition to electricity, a transfer price is paid for electricity to the grid company of the point of consumption and electricity tax. The portion of the transfer cannot be tendered.

Would you mind? the price of electricity now to protect in winter, and at what price would it be possible?

On Monday, the cheapest fixed-price electricity contract was with the Energy Agency electricity price.fi– service, Cheap Energy’s offer is 8.49 cents per kilowatt hour. The contract is for three years, but the consumer can terminate it at any time after two years.

If the contract includes a flexible element according to the timing of consumption, the cheapest price can be found at Väre company: 7.55 cents.

Electricity market director of Taaleri Energia, which invests in renewable energy Aleksi Nordlundin in my opinion, the prices of fixed-price fixed-term contracts are currently a rather expensive insurance against price fluctuations. He uses stock exchange electricity himself.

“What is hardly talked about is that this year’s average price, despite the high prices of the winter and the last few days, has been less than five cents per kilowatt hour,” he says.

Taxable the price per kilowatt hour has indeed been only 4.85 cents per kilowatt hour so far this year, when the price is calculated according to the current value added tax. Last year, the average price for the whole year was about seven cents.

“If you can live with the uncertainty that the electricity bill varies from month to month, you should at least consider electricity at a market or stock exchange price. Then you don’t have to pay the ‘insurance premium’,” he says.

In Nordlund’s opinion, occasional expensive prices should not be alarmed. On the other hand, electricity is often very cheap. The average price is decisive and it is likely to be cheaper with a stock exchange electricity contract than with a fixed price contract.

“If you compare the situation to grocery shopping, the year’s food budget doesn’t change much if you buy a couple of expensive sirloins.”

Electric heating in a detached house (consumption approx. 20,000 kWh per year), a price difference of three cents would mean a saving of approx. 600 euros per year. However, it may be practically impossible to achieve such a large saving, because consumption is concentrated in the winter and even then the prices are usually clearly higher than the annual average.

A three-person apartment in an apartment building consumes about 4,000 kilowatt-hours of electricity per year. Then the calculated saving would be around 120 euros per year.

Why fixed-term contracts are clearly more expensive than the average price and also the future prices of electricity?

The futures prices of the Nordic electricity exchange have also fallen in recent weeks. The future of the system price of electricity delivered in October–December costs about 4.5 cents per kilowatt hour after tax.

The price of electricity for January–March of next year has dropped to around seven cents. A year and a half ago, the price was still 14 cents.

Electricity companies protect the electricity they sell with futures. However, the prices of fixed-term contracts are clearly more expensive than futures.

Nordlund’s according to the reason are risk premiums. When the electricity company sells a fixed-price contract, it assumes the risk that neither the electricity consumption nor the price will follow the forecast.

“The company has to take into account the profile risk, which means that more electricity is consumed when the price is high.”

For example, if it is exceptionally cold in winter, more electricity is consumed than predicted. The electricity company that sold the fixed-price contract has to acquire additional electricity from the market at a potentially very expensive price.

A consumer who bought a fixed-price contract, on the other hand, has no incentive to reduce consumption, even if the market price is in the sky.

Nordic the system price future also does not tell the whole truth about prices in Finland. In addition to the system price, the electricity buyer will have to pay the regional price difference derivative of the futures market.

The price of regional price derivatives in Finland has risen sharply in recent days, so that for the electricity futures at the end of the year one would have to pay more than two cents higher in Finland than for the Nordic system price futures.

In its market review, the electricity company Väre estimates that there are no real grounds for such a large difference. The situation may become balanced again when the nuclear power plants return to use at the end of the month and the border wires are also operational again.

The market however, the reactions indicate general uncertainty. Just two years ago, the European electricity market was in chaos when the vast majority of Russian gas exports to Germany stopped.

According to Nordlund, the background of the futures price drop is the actual price development of electricity, but also the improved situation in Germany and the rest of Central Europe. Germany’s gas reserves are almost full and the price of natural gas has fallen.

The price of electricity produced in Germany affects the price of electricity in Finland, especially when production is scarce compared to consumption.

At the same time, huge amounts of new wind and soon also solar power have been built in Finland and Sweden. Its production is throwing strongly.

Size from the point of view of the electricity system but also the prices, it would be advantageous for as many people as possible to buy their electricity with a contract that encourages flexible consumption according to the prices.

“Last winter, we saw that it had an effect, when even small consumers started to save in those moments that were really scarce. One consumer has no effect, but when 100,000 leave the sauna unheated, it already does,” says Nordlund.

It also equalizes the price of electricity, when electricity wholesalers start to take the consumption effect into account in their offers.

According to data compiled by the Energy Agency, almost a third of households buy electricity with an exchange-linked contract.