The electricity price continued to decline in April, but remained above last year's level

In April, electricity prices decreased by approximately 19% compared to March, reaching €73.3 per megawatt hour. The price decline was mainly driven by reduced heating demand and strong solar and wind generation across the Baltics.

However, electricity prices were nearly a fifth higher compared to April last year (€60 per megawatt hour), despite the absence of the Estlink 2 interconnection during both periods. From the perspective of electricity market dynamics, there are two main explanations for this. First, hydropower generation in Latvia - which plays a crucial role in the Baltic electricity markets - was at a record low this year, which in turn increased reliance on more expensive fossil fuel-based sources. Their price, however, is directly linked to the high cost of natural gas (€43 per megawatt hour at the beginning of April). The less affordable and flexibly usable hydropower is available on the market, the greater the demand for dispatchable gas-based capacity. As gas prices continued to rise, electricity prices in the Baltics increased accordingly.

April was another exceptional month in the Baltics - in April last year, hydropower generation in Latvia accounted for roughly a third of total consumption, whereas this year its share was 11%. At the same time, wind and solar generation from Lithuania covered nearly 26% of total Baltic consumption; Estonia's generation accounted for 11%, and Latvia's for just 2%. The trend in the Baltics is very clear: Lithuania is leading in wind and solar energy, followed by Estonia. Latvia is not generating solar energy on a large scale - hydropower serves as its substitute. Across the Baltics, wind and solar energy accounted for 39% of total electricity consumption, electricity generated from fossil fuels for 22%, hydropower for 14%, and other generation sources (including biomass) for 11%; the remaining demand was covered by electricity imports.

With the arrival of April, the growing solar energy generation is starting to play a greater role across the Baltics. As a result of the increase in solar generation, we are seeing more and more days where prices between 9:00 and 16:00 (as well as at night) are several times lower, while prices during the morning and evening hours are several times higher. Energy with very low generation costs drives daytime prices to levels several times lower than the monthly average. As solar output declines, electricity generation decreases and dispatchable capacity is activated across the Baltics to meet demand - at prices several times higher than solar energy.

Since less hydropower was generated this April compared to previous years, we relied more heavily on more expensive oil shale and gas-fired power plants, which in turn significantly increased prices during the evening hours. Combined with record-high solar and wind generation and, from a recent-years perspective, record-low hydropower production in Latvia, we saw extremely volatile prices compared to previous years. While previously electricity prices during the morning peak hours were around 20-30% higher than the monthly average and evening prices 40-60% higher, this year morning prices were nearly twice as high as the monthly average and evening prices up to three times higher.

Given the high level of solar generation and the unavailability of Estlink 2, a similar situation is expected throughout the summer - with no low-cost evening electricity available for import from the Nordics. This drives electricity prices in the Baltics very high during those periods. As shown in the chart below, the share of solar and wind generation in Estonia's electricity consumption has increased sharply compared to April figures over the past decade.

In April 2025, European natural gas prices fell to €32.5 per megawatt hour by the end of the month, which is nearly 22.5% lower than at the beginning of the month (a decrease of €9.5 per megawatt hour). The price decline was mainly driven by warmer spring weather and very strong solar and wind energy generation across Europe, which in turn reduced the demand for gas-based generation. Stable LNG imports from the United States and Canada also continued, helping to maintain supply levels. The price decline was further supported by a decrease in industrial demand, driven by high electricity prices and a cooling economy.

In May, prices may be affected by growing LNG demand in Asia - particularly in China - which increases the overall demand. Maintenance work in Norway or delays in LNG deliveries may also tighten the market. Weather conditions also affect price - if colder weather were to occur unexpectedly, it could quickly push gas prices higher.

At the beginning of April 2025, the price of European carbon allowances was €71 per tonne, falling to €67 per tonne by the end of the month. Early in the month, allowance prices continued to decline mainly due to trade tensions between the European Union and the United States. There was speculation about a slowdown in economic activity, which in turn reduced demand for allowances. Paradoxically, the decrease in natural gas prices also contributed to the decline in carbon allowance prices: natural gas became cheaper than coal over the course of the month, increasing gas-based generation and thereby reducing emissions and demand for allowances.

The increase in solar generation with the arrival of spring, together with reduced heating demand, also lowered the demand for allowances, which in turn brought down their price. Nevertheless, there was an increase in allowance prices in mid-April, although they remained below the levels recorded at the beginning of the month. The rise was linked to an easing of trade tensions between the US and the EU. At the same time, the price increase during the month was also supported by the annual mandatory purchase of allowances by EU companies to cover the previous year's CO₂ emissions, in accordance with European Union climate regulations.

Karl Joosep Randveer, Energy Trading Analyst at Eesti Energia

The market overview has been compiled by Eesti Energia according to the best current knowledge. The information provided is based on public information. The market overview is presented as informative material and not as a promise, proposal or official forecast by Eesti Energia. Due to rapid changes in the regulation of the electricity market, the market overview or the information contained in it is not final and may not correspond to future situations. Eesti Energia is not liable for any costs or damages that may arise in connection with the use of the information provided.