Even if gas were as expensive as last winter, electricity in Finland would be clearly cheaper than last winter. This is what the model developed by economist Juha Teirilä says.
The Energy Agency economist Juha Teirilä is specialized in the detailed analysis of the electricity market with econometric tools. Recently, he published on the messaging service X (formerly Twitter) an analysis of the factors influencing the price of electricity next winter and the most likely price forecast according to them.
The electricity market is affected by many factors, and Teirilä has first analyzed how they affect the formation of prices in Finland. The electrical system also looks very different from a year ago.
Olkiluoto’s 1,600 megawatt triple reactor is now in use, and wind power has become a couple of thousand megawatts more per year.
On the other hand, the use of electricity has clearly decreased, which is mostly due to the weak economic situation in industry. Because of this, the factories of forest companies have been running at low capacity or stopped at times.
This year, electricity has been consumed about eight percent less than last year. Consumption, on the other hand, is very flexible depending on the price. It was visible in those August days when prices rose high. The consumption curves did not fluctuate much.
Summer After 2021, according to Teirilä’s analysis, the price of natural gas has had a greater impact on the price of electricity in Finland than the situation of water storage. The price of gas started to rise in the fall of 2021 when Russia started to limit supplies to Europe long before the attack on Ukraine. A year ago, prices were at their peak, when the gas flow in the large Nord Stream gas pipeline had completely stopped.
Electricity prices in Finland were also affected by the end of electricity imports from Russia.
Teirila therefore created a model that described well how different variables affected the formation of the price of electricity last winter. When he tested it, the prices calculated by the model corresponded quite closely to the prices realized last winter.
The model would therefore be able to accurately estimate how prices would develop next winter or what they would have been last winter if things had been different.
For example, Teirilä’s model calculated that electricity would have been a third cheaper than the actual prices if the triple reactor of the Olkiluoto nuclear power plant had already been in operation last winter.
After all, the power plant was supposed to be put into operation a year ago in the fall, but the repairs of the equipment that broke down during the tests postponed the start-up until spring.
Model also says that if the Finns had not used electricity, i.e. the consumption would have been the same as the year before, electricity would have been 34 percent more expensive than it was.
The impact of the savings was greatest at the very end of last year. According to Teirilä’s model, the prices would have been really high then without the savings.
But what about next winter? It is now of interest to all electricity buyers. The price of natural gas has risen a bit recently, but it is still much cheaper than a year ago, when the price of gas and with it electricity shot up to sky-high heights.
Teirilä’s model calculates that if the price of natural gas remains at the current level, electricity would be no less than 62 percent cheaper than last winter. The tax-free price would be only 52 euros per megawatt hour on average.
After tax, it would mean 6.5 cents per kilowatt hour. Last winter, the prices tended to multiply at their highest, even though the average price for the whole winter was “only” 139 euros per megawatt-hour, or about 17 cents per kilowatt-hour after tax.
The price forecast produced by the model corresponds quite well to the view of the Nordic electricity futures market on winter prices. On Friday, the price of electricity to be delivered next January–March was 55.88 euros per megawatt hour, or 6.9 cents per kilowatt hour after tax.
The model is based on the assumption that the winter would have the same weather conditions as last winter. If it’s exceptionally cold or something unexpected happens, prices can naturally jump.
On the other hand, the forecasts only provide an estimate of the average price of electricity. The growth of wind power has brought about a large variation in prices. Prices may fluctuate tens of cents even within one day.
Although the price of natural gas would rise to the heights of last winter, which Teirilä considers very unlikely, electricity would cost clearly less than last winter. It is due to the reduction in electricity consumption and the increase in domestic electricity production: Olkiluoto is working and there has been more wind power.
Wind power a thousand more megawatts are coming during the rest of the year, compared to the current approximately 6,000 megawatts.
In summary, Teirilä estimates that prices will be clearly lower on average in the coming winter than in the previous two winters. However, the lowest prices of the previous winters will not be returned, at least for the time being.
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