Electricity market prices have clearly fallen from the price peaks towards the end of the year. Still, the prices of fixed-term contracts traded to consumers are still exceptionally high.
Russian the attack on Ukraine, the ensuing economic sanctions and possible retaliation by Russia increased uncertainty over the availability of natural gas in Europe towards the end of the week.
This, in turn, was immediately reflected in electricity futures prices in the Nordic countries as well. The Nordic price of electricity deliveries in March rose to 110 euros per megawatt hour, which corresponds to a tax-free price of 11 cents per kilowatt hour.
One week ago, the price of a megawatt hour of deliveries in March was about 66 euros. On Friday, however, futures prices were already clearly falling.
Electricity sales company Director of Oomi’s electrical business Ari Lehtinen according to even the futures prices of the system product in 2023 rose by more than 20 percent during the past week, to about 46 euros per megawatt hour.
The price of electricity also reacts to the price expectations of natural gas in the Nordic countries, although gas is little used in energy production in the Nordic countries. The reaction is due to the fact that the electricity market is connected to Central Europe, where natural gas is widely used to generate electricity.
“There is now a typical uncertainty in the market when it is not known how the situation will develop,” the director said Pekka Salomaa About the energy industry says.
Europe used about 550 billion cubic meters of natural gas last year. About 90% of it was imported from outside the EU. About 40 percent of imports were Russian natural gas.
The sanctions announced by the United States and the EU on Thursday did not appear to affect Russia’s natural gas supplies to Europe, at least on Friday.
On the website of the Nord Stream gas pipeline company data found gas flowed to Europe at a normal pace on Friday. On the other hand, gas is not currently coming to Europe via pipelines through Ukraine and Poland, but the situation has been the same for some time.
German Chancellor Olaf Scholz announced on Tuesday, according to the news agency Reuters, that the Nord Stream 2 gas pipeline project will be suspended in protest of Russia’s actions in Ukraine.
Read more: Germany’s Scholz: Nord Stream 2 project can no longer proceed – Russia’s Medvedev threatens to rise in gas prices
Russia tightened Europe’s gas taps as early as last year. The Russian state gas company Gazprom has, at least until now, adhered to the agreed gas supplies based on long-term contracts.
However, the company has not participated in the daily fluctuating spot market as usual. The exceptionally cold weather and gas shortages pushed gas prices into the clouds at the end of last year, almost tenfold compared to last year’s prices.
On Thursday, the price of natural gas rose momentarily close to the December peak but fell sharply on Friday.
Liquefied The share of natural gas, or lng, in natural gas imports has grown significantly in recent years, with more than ever imported into Europe in December and January.
Liquefied gas is transported by tankers from, among others, the United States. Lng can be returned to the gaseous state at the receiving terminals and fed to the gas pipeline.
According to the energy industry Salomaa, for example, almost half of the gas consumed in Finland has come through the Baltic Connector gas pipeline, which was recently completed in 2019, across the Gulf of Finland.
“And probably a large part of that gas is lng coming through the Lithuanian port of Klaipeda,” says Salomaa.
For Finland, the importance of natural gas in energy use is small and relatively easy to replace.
Read more: The direct significance of the disruption of natural gas, electricity and oil supplies to Finland would be insignificant – “We are not out of control in these matters”
In Central Europe Completely replacing Russian gas imports would instead be difficult. Gas is used a lot to heat homes.
In Russia, the cessation of gas supplies may be behind a high threshold, as national incomes depend on oil and gas exports.
If Europe had to cope for a long time without Russian gas, there would be a risk that it would no longer return as a Russian customer.
For consumers The effects of the war in Ukraine have not yet been felt in the prices of electricity sold in Finland. The stock exchange price of electricity has been clearly lower in recent weeks than at the peak of winter. Electricity is still significantly more expensive than in recent years.
Last week’s average taxable price on the Nord Pool power exchange was exactly 10 cents per kilowatt hour on Friday, when December saw its most expensive prices more than ten times higher. A year ago, electricity cost about 40 percent less than it does now.
The internal price fluctuation of exchange-traded electricity has been very large throughout the winter. In the morning, during periods of low consumption, electricity has often been almost free, during the day expensive.
For example, on a Friday morning, electricity cost less than two cents per kilowatt hour. During the day, the price was the most expensive in the afternoon at about 13 cents.
Although Long-term futures prices have fallen sharply from their December-January highs, while fixed-term electricity prices are still high, even about double that of a year ago.
The kilowatt-hour prices of the two-year contract offer varied by ten cents on both sides of the various companies.
According to Ori Ari Lehtinen, in addition to the Nordic system price futures prices, pricing is affected by the price of hedging the Finnish regional price and intra-day price fluctuations in the spot hour market.
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