The price of stock electricity will drop to a record low on Friday. The grid company Fingrid hopes that consumers will not get excited about consuming too much electricity.
Friday is a completely exceptional day in the electricity market, when the price of electricity on the exchange drops to a record low.
The average price of electricity on the exchange is falling to -25 cents per kilowatt hour. It is by far the cheapest average price during the entire existence of the electricity exchange.
From 15:00 to 24:00, electricity on the exchange costs -50 cents per kilowatt hour, including VAT.
What are the reasons for the record low prices?
Friday’s prices are due to an error by Norwegian power company Kinect Energy.
According to the electricity exchange Nordpool, Kinect Energy sent an incorrect electricity supply offer to the Finnish price range on Thursday due to an internal system error.
The company offered nearly 5,800 megawatts of electricity for sale in the Finnish price range for the entire duration of Friday. The amount offered is large, as it corresponds to half of the electricity consumption in Finland predicted for Friday. As a result of the error, the average price of electricity on the stock market drops to a record low.
Nordpool said on Thursday that it would first clarify the matter with Kinect and other market participants in order to resolve the “extreme situation”. However, the grid company Fingrid later said that Nordpool has not organized a new auction, and thus the prices announced earlier on Thursday for Friday will remain in effect.
Due to the low price, production was removed from the market, because electricity producers do not want to produce electricity at a loss.
Exchange electricity the next day’s prices are determined in the auction held the previous day at noon. The electricity exchange calculates the price of electricity based on the given purchase and sale offers and transmission capacities for each hour for the next day.
Market participants can balance their electricity purchases also in intraday trading between countries. However, the exchange in this trading is usually small.
On Friday, practically the entire electricity trade is run through the intraday market. In practice, Kinect Energy has to buy the missing electricity in the trading that started after the auction that set the prices on Friday.
What is Fingrid going to do?
There is a threat of a power outage in Finland on Friday due to a Kinect Energy system error.
Fingrid said on Thursday that it will take measures to balance the production that will be exhausted from the Finnish electricity market on Friday. In the evening, it communicated to market participants that it plans to make purchases in the intraday market, if necessary, to ensure the safety of the electricity system. In addition, the company said it will close intraday trading between the two price areas of Finland and Sweden.
On Thursday, Fingrid also hoped that all market parties would be active in order to ease the situation. Intraday trading continues until the electricity is delivered.
The grid company said that there is still enough electricity production capacity in Finland and neighboring countries to meet Friday’s consumption.
“It doesn’t look like there should be any restrictions, but we are trying to use different measures to get electricity producers back on the market,” said the head of Fingrid’s unit Jonne Jäppinen.
If Kinect Energy cannot buy enough electricity from the market to balance its supply, Fingrid must balance supply and demand in Finland with its own actions.
The Swedish grid company Svenska Kraftnät also said on Thursday that it will take measures to cover the missing electricity. Svenska Kraftnät estimates that the situation on Friday is manageable by the market, but expects trading to be “messy”. The error also affects the price of electricity in other Nordic countries.
Consumers are expected to be patient with electricity consumption
Fingrid hopes that consumers will not get too excited to consume record-cheap electricity on the exchange on Friday.
The state of the electrical system can be at risk if electricity consumption grows larger than production. Fingrid hopes that consumers will operate as usual on Friday, with normal consumption. Thus, consumers can help balance production and consumption.
“From the point of view of the electricity system, it would be good if consumers did not overreact to negative hours of electricity, because it is an error situation in the market,” Fingrid’s Jäppinen said.
Also CEO of Energy Industry Jukka Leskelä on Thursday, hoped for patience from consumers, even though electricity is exceptionally cheap.
“Minus hours reduce the bill, but customers must remember that they pay for electricity transmission and electricity tax. I don’t encourage it now [erityisen kovaan sähkön käyttöön] no way.”
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