Energy Market Overview, November 2015

Mathias Vaarmann

Market Analyst

In November, electricity prices increased in Sweden and Norway but decreased in Finland and the Baltic states

In this market overview, we explain the changes in electricity exchange prices, talk about the state of the oil market and provide our readers with information about important news from the Baltic energy markets.

Read more about these topics below

  • In November, electricity prices increased in Sweden and Norway but decreased in Finland and the Baltic states »

In November, the Nord Pool Spot (NPS) market area prices for Estonia, Finland, Latvia and Lithuania experienced a decline. Compared to the October average, prices dropped 6% in Estonia, 5.2% in Finland and in 19% in Latvia and Lithuania . Hence, the average price was EUR 32.88 per megawatt-hour in Estonia, while it was EUR 31.74 per megawatt-hour in Finland, EUR 45.76 in Latvia and EUR 45.84 per megawatt-hour in Lithuania.Compared to October, prices increased in Nord Pool Spot’s largest markets, Norway and Sweden. In Sweden, the October average was EUR 23.30, while it was EUR 21.50 in Norway. In November, however, these prices increased to EUR 25.00 and 24.00, respectively. The prices of Denmark’s two market areas decreased from EUR 26.50 in October to EUR 25.60 in November.23 November was nearly twice as expensive as usual, as the two market areas saw a daily average price of EUR 63.34. During the two most expensive hours of the day, 1 megawatt-hour of electricity cost EUR 150.06. This was the highest price for electricity so far this year . That same day, the system price for the Nord Pool Spot market also saw a very rapid rise, increasing from EUR 27.50 from the previous day to EUR 41.14./-/doc/8457332/news/turuylevaated/2015_11/kaart_eng.jpg


Average €/MWh

Change compared to previous month



Nord Pool Estonia





Nord Pool Finland





Nord Pool Latvia





Nord Pool Lithuania





On 23 November, three factors pushed Spot prices higher. First, there was a rapid drop in temperature in the countries of the Nord Pool Spot area. Second, little production was seen from wind generators. And finally, on top of all this, the most powerful nuclear reactor in the Nordic countries, the 1,400 MW Oskarshamn-3, was down for unscheduled maintenance due to a technical fault. These three aspects conspired to raise electricity prices, as the market had less than its usual supply to meet rapidly growing demand.

The postponement of seasonal maintenance on two other Swedish nuclear reactors, Ringhals-2 and Forsmark-3, also had an impact on NPS market prices. With a combined output of more than 2 000 MW, the two reactors were supposed to start working already in October or at the beginning of November. According to information available at the time of writing, they are not expected to go back into production again before the the second half of December. Colder winter temperatures drive up the demand for electricity considerably, as electric heating is very widely used in NPS countries. **The delay in getting the nuclear reactors ready for production has thus made it more difficult to satisfy the increased demand. As a result, electricity prices can, at times, be higher than usual.**

In November, Swedish and Norwegian prices were higher compared to October, while the prices in Finland and the Baltics were lower because the four countries had better access to nuclear and hydroelectricity produced in Sweden and Norway. In October, maintenance was performed on the Swedish-Finnish cable. As a result, a decreased amount of that cheap electricity moved from Sweden to Finland and from there to the Baltic countries.

**Maintenance on EstLink-2 (which lasted a day and a half) had an impact on electricity prices in Estonia, Latvia and Lithuania** and increased the gap between the prices in Estonia and Finland. Due to an overload of the Estonian-Latvian cable, the Latvian-Lithuanian connection was limited as well. As a result of limited transmission capacity between Latvia and Lithuania, prices in the latter exceeded those of the former, thus creating an average price difference between the two countries for the first time since this past April.


  • Corporate clients value cooperation with Eesti Energia even more than before »

This year's customer satisfaction survey highlights that the satisfaction of Eesti Energia’s corporate clients has risen to its highest level in recent years. The survey has been conducted for over 10 years now, and this year 254 Eesti Energia corporate clients took part in the survey conducted by TNS Emor.Continuing a trend from last year, customer satisfaction rose again this year : going up an additional 3% following a jump of 52% the year before. Artur Teesalu, Head of Large Business Customer Services at Eesti Energia, explains that, “We were proud already last year for the fact that for the first time we reached a higher than average result among European electricity companies. “Today, we can be happy to have even better results, which are the result of the field expertise of our account managers, as well as of the simplification of price formation, making it more understandable.”40% of customers consider management solutions for energy consumption highly important Open-market energy prices fluctuate and cannot be compared to stock markets. Thus, there is a need for greater attention and estimation skills. To achieve cost-effectiveness, there is an increasing need for automated solutions, and there are applications in the market that monitor prices and manage consumption accordingly by lowering a company's energy consumption in the event of an expensive hourly rate, and increasing it when there a cheaper rate is available. An analysis of current Scandinavian trends suggests that there are also future business opportunities regarding the automation of energy consumption in the Baltic imbalance market and the frequency market, mostly in the form of resale of energy left unconsumed by companies.55% of customers consider a weighted purchase strategy very important With a weighted purchase strategy, the agreed quantity or base energy has a fixed hourly price and if consumption increases, the electricity seller supplies the customer with electricity at the hourly prices of the Estonian area of the Nord Pool Spot electricity exchange. If consumption of electricity in a given hour is less than agreed, then the seller will buy back the difference at the agreed buy-back price, an arrangement that customers value very highly these days. (Add an example with a fictional customer?)Electricity at base rate and exchange price/-/doc/8457332/news/turuylevaated/2015_11/graafik_T2_513x270.jpg/-/img/6983966/operations/estonia_benefit2_color1.gif Customer's price/-/img/6983966/operations/estonia_benefit2_color2.gif Market price/-/img/6983966/operations/estonia_benefit2_color3.gif Base rateYou can find more information about the exchange prices for the Estonian area if you select the "EE" region on the Nord Spot Pool power exchange website

Possibility of fixing prices for a longer period highly valued Eesti Energia already offers clients the possibility of concluding contracts up to 2020 and as of the beginning of the new year, it will be possible to conclude contracts right through until the end of 2021. With market prices at a low point, it is now a good opportunity to fix an advantageous price and secure oneself against future price changes. For offers regarding longer periods, please contact your account manager at Eesti Energia.Electricity at spot price/-/doc/8457332/news/turuylevaated/2015_11/graafik_T3_513x270.jpg/-/img/6983966/operations/estonia_benefit2_color2.gif Market price

Over one-third of customers consider Eesti Energia market overviews very important We are happy to acknowledge that our market overviews are valued and read by hundreds of clients each month. Thus, our plan is to make a number of changes to improve our market overviews, e.g. this month we started illustrating our monthly overviews with video summaries.“On behalf of our Large Business Customer Services department, I would like to thank everyone who took the survey and provided constructive feedback, which helps us improve the products and services we offer,” said Teesalu. “I would like to thank our customers who value their cooperation with Eesti Energia and who will continue with us next year, as well as those customers who have chosen offers from other electricity sellers, as they give us a reason and an opportunity to review our offer and to make it even better.”

  • Lithuania has started testing new electricity connections »

In November, Lithuania started testing two new electricity connections, NordBalt and LitPol Link. In November and at the beginning of December, the first electricity from Sweden and Poland reached the Lithuanian market. The testing period for the 700 MW NordBalt and the 500 MW LitPol Link connections, which connect the Lithuanian electricity market with the Swedish and Polish markets, started almost two years after the test period for EstLink-2 started. EstLink-2 has helped considerably lower Estonian electricity prices, and NordBalt and LitPol Link are expected to have a similar impact on Latvian and Lithuanian electricity prices. In the context of new connections, Estonian prices may become even more harmonised with Finnish prices because NordBalt helps share the load of EstLink-2 when transmitting Swedish and Norwegian nuclear and hydroelectricity into the Baltic states.NordBalt’s operations can lower Latvian and Lithuanian prices from last year's average of EUR 40/MWh towards a price limit of approximately 40 EUR/MWh. Poland’s LitPol Link, which is going to be opened at the same time, may limit price decreases since prices in the Polish market may rise during certain time periods. In addition to the impact on prices, the new cables will lessen Lithuanian dependency on Russian energy./-/doc/8457332/news/turuylevaated/2015_11/yhendused.pngExisting, new and planned electricity market connections

  • Oil low again, dollar had a strong month »

In November, Brent crude oil showed a continuous downward price trend After a month of trading, the price of crude oil decreased by 10%, dropping from the October level of USD 49.50 to USD 44.60 at the end of November. The first days of December saw an additional decrease and by the end of trading on 2 December, oil cost USD 42.50 a barrel, which was also its lowest price this year. At the beginning of November, the price of oil ticked slightly above USD 50, but this was down from around USD 70 in May./-/doc/8457332/news/turuylevaated/2015_11/toornafta_hind_eng.jpgIn the middle of the month, the price of oil shot up after Turkey shot down a Russian warplane. This caused a short-term scare in the markets, as there was fear that the Middle East might be destabilised and in turn limit oil routes to Europe. As a result, the price of oil increased close to 3% in one day. This rise was short-lived, however, as markets turned their attention back to the global abundance of oil. This quick increase was followed by a steady decrease.This year, a global surplus has been pushing oil prices down Oil demand has decreased in many large countries, starting with People's Republic of China, which has seen considerably slower economic activity this year and hence less economic growth. On the other hand, markets are flooded with supply, causing a so-called shale oil revolution in the United States and leading to a decision by OPEC, (Organization of the Petroleum Exporting Countries, at its summit in November to not limit oil production. An increase in supply can also be expected from Iran, whose oil is again hitting Western markets after sanctions were alleviated during the second half of this year.OPEC members met again on 4 December to evaluate the organisation’s strategy and decide on future action. In response to widespread market expectations,, OPEC agreed to continue with its strategy of not limiting its members’ production. This means that OPEC is leaving its agreed production limit unchanged, is sticking with its plan of maintaining market share, and that it accepts current oil prices, which have dropped to their lowest level in seven years.In November, the fast rise of the US dollar spurred on the fall in the price of oil With a stronger dollar, the currency of the oil trade, the price of oil has increased for those countries whose main currency is not the US dollar. This is why, historically, the dollar and the price of oil have had an inversely proportionate relationship: a stronger dollar usually leads to a cheaper price of oil./-/doc/8457332/news/turuylevaated/2015_11/euro-dollar_eng.jpgIn November, the dollar reached its highest level in the past eight months — USD 1.056 to EUR 1 as of 30 November. That day, the European Central Bank fixed the euro price at USD 1.058. The last time the dollar was stronger than this was March of this year, when EUR 1 euro was worth USD 1.049. In October, EUR 1 could still buy USD 1.149.The dollar was strengthened on the back of market expectations that in December, the US central bank, the Federal Reserve, led by Janet Yellen , its director, would raise the base interest rate, whereas the European Central Bank, under the guidance of Mario Draghi, was expected to print even more money. This year, the Eurozone has been struggling with extremely low inflation and deflation threats. During the first half of the year, European Central Bank (ECB) took measures to boost the economies of its member states by injecting money into them. However, the Eurozone has still not achieved the higher inflation that was expected, which is why markets were expecting the ECB’s December meeting to apply even stronger monetary policy measures.After the 3 December meeting, however, it turned out that the measures taken by Draghi and the ECB were far milder than markets had been expecting. That is why a quick correction of the euro-dollar exchange rate took place on 3 December, and the day ended with the price of the euro at USD 1.094, which also meant that the currency’s November fall had been almost completely reversed. The price of crude oil also reacted to this change and showed a stable growth trend.

  • News from the Baltic states »

Elering becomes sole shareholder of gas transmission network

At the beginning of November, the general shareholders meeting of Võrguteenus Valdus AS (the parent company of Elering Gaas AS, which manages Eesti Gaas’s transmission network) declared that there would be a binding takeover of shares belonging to small shareholders, as a result of which Elering AS would become the sole owner of the gas transmission network. Up to that point, Elering had a 99.14% stake Võrguteenus Valdus, while small shareholders had the remaining 0.86%. According to a press release, during the takeover, Elering will purchase A shares in Võrguteenus Valdus at a price of EUR 54.1 and B shares at EUR 0.541 a share. Elering used the same price in all earlier transactions with Võrguteenus Valdus. The takeover of shares belonging to small shareholders is expected to take place in December.

The Paide cogeneration station has started steady operations

On 5 November, there was celebration to mark the fact that the Paide Pogi cogeneration station had begun steady operations. The station, which cost EUR 8 million to build, is now steadily generating electricity and heat. Eesti Energia has a majority holding in the Paide Pogi cogeneration station, which has been supplying city inhabitants with heat since 2013, whereas its electricity has been reaching the grid as of the beginning of this year.In a year, the Paide Pogi cogeneration station can produce approximately 75% of all the heat that Paide needs, using local biofuel. At the same time, the amount of electricity produced by the station covers around one-fifth of the electricity that Paide needs. The cogeneration station generates 2 MW of electric power and 8 MW of heat. The station can produce 7.5 gigawatt-hours (GWh) of electricity and 42 GWh of heat a year. Together with its at-peak energy boiler plants that, when necessary, use heavy fuel oil and biomass, the station’s production capacity is up to 58 GWh a year. According to estimates, Pogi uses approximately 33 000 tonnes of fuel a year, which is supplied to the station by the nearby timber industry./-/doc/8457332/news/turuylevaated/2015_11/Paide-Pogi-3.JPG

Estonian oil shale industry yearbook stresses the need for more effective technologies

The yearbook of the Estonian oil shale industry was published in November. It is aimed at policymakers, scientists, officials and entrepreneurs, as well as anyone with an interest in shaping the future of oil shale industry and who needs a holistic overview in order to make progressive decisions based on facts.Despite variational circumstances in the energy market, the country has made more than EUR 300 million off the oil shale industry and has considerably increased its production of liquid fuels. The challenges that the industry has to tackle today are the same for all oil shale industry companies — extraction is becoming more complicated, energy prices are falling, and environmental requirements are getting more strict.The yearbook of the Estonian oil shale industry was published by Põlevkivi Kompetentsikeskus, Eesti Energia, Viru Keemia Grupp and Kiviõli Keemiatööstus.

Lithuanian government adopts new maintenance model for LNG terminal

In November, the Lithuanian Parliament accepted a new maintenance model fort its natural gas terminal, specifying who will be covering maintenance costs for the terminal as of next year, as well as how they will be covered. With a majority of votes, the Parliament decided that the obligation for Klaipéda terminal maintenance rests with all market participants, as well as gas clients and funds, regardless of whether they are currently using the gas supplied from the terminal or not. According to the maintenance model, the costs borne by Litgas (the natural gas provider) concerning the supply of the LNG terminal will be also covered from the terminal's maintenance costs.

Elering starts using a new type of wires

At the end of November, Elering announced that they were installing 11.5 km of innovative high-temperature wires on the Tsirguliina-Valmiera 330 KV high-voltage power lines in order to explore whether wires with a larger capacity would be suitable for use in Estonia. Works ordered through public procurement cost nearly EUR 2.7 million without VAT.The high-voltage power lines currently have wires with a steel core, while the new wires that will be installed next to them have a composite material core that has not been used in the Baltic countries or Scandinavia before. These wires are lighter than usual, and their permitted working temperature is considerably higher, and the wires do not stretch much as the temperature rises. This means that with greater power transmission, the wires do not sag dangerously close to ground and hence permit the transmission of twice as much electricity as regular wires would do.

Watch presentations from Eesti Energia’s Smart Energy Industry forum

Forum presentations can be watched by clicking on the name of presentation:

  • „[Eesti Energia’s strategic challenges](“ – Hando Sutter, Chairman of the Management Board of Eesti Energia
  • „[Innovation for the Sustainable Use of Oil Shale](“ – Andreas Orth, Vice President of Outotec
  • „[Industrial innovation at Eesti Energia](“ – Margus Vals, Member of Eesti Energia’s Management Board, Projects, Technology and New Business/li>
  • „[Cooperation between entrepreneurs and scientists in developing the oil shale industry](“ – Volli Kalm, rector of Tartu University
  • „[Future of the electricity grid](“ – Tarmo Mere, board chair at Elektrilevi
  • „[Smart energy consumption](“ – Karla Agan, head of Energy Sales Management at Eesti Energia
  • Discussion „[Customers' experience in micro and small-scale production of electricity](“ – Kuldar Leis (Solarhouse), Raivo Külasepp (Grüne Fee), Tarmo Mere (Elektrilevi’s board chair), Karla Agan (head of Energy Sales Management at Eesti Energia). Moderated by Hando Sutter, Chairman of the Management Board at Eesti Energia
  • Salvest AS: thanks to Eesti Energia, the gas market now has competition »

In today's customer story, we introduce Salvest, the grand producer of Estonia’s food industry, which makes some 200 items, including canned soups, Põnn baby food, pickles, and Meie Mari jam. The company uses 108.297 m2 of territory and has been tackling the issue of making its energy usage more efficient and minimising energy costs. Some 134 people work at the Salvest factory in Tartu. Salvest is a company with one of the longest traditions in the food industry — it will have been active for 70 years as of next year, having developed from the Tarty Fruit and Vegetable Plant and its successor, the Tartu Canned Food Plant."All this time, our business has been based on production that uses local raw materials and respects Estonian taste preferences. “We consider our strengths to include our expertise in terms of local tastes and and our use of local raw materials to the maximum extent possible,” says Salvest’s executive manager, Lauri Betlem . "Close to 80 per cent of the raw materials we use comes from within a 100 kilometre radius. "We know our farmers and know exactly which field the raw materials come from."Betlem mentioned that during the last two years, the company had seen an increase in turnover of more than 30%. "Our growth is mainly due to a sharp rise in export sales. Baby food is the main product group that we sell more of in export markets than here at home," Betlem said. “The baby food we export is 100 per cent ecological, made from carefully selected raw food and developed in cooperation with pediatricians,” he added./-/doc/8457332/news/turuylevaated/2015_11/salvest_juht.jpgSalvest executive manager Lauri Betlem pictured with baby food that is being sold more for export than here at home.Salvest has made plenty of investments over the years in order to minimise energy costs and to ensure more environmentally friendly production. The company's executive manager said that they are planning to make several investments next year as well in order to make better use of residual heat and to increase the general efficiency of their energy usage.According to Betlem, electricity and gas also play key parts in production. "We use gas as our main source of energy. We have our own gas station where we produce heat and steam that are needed during production processes and also for heating houses," Betlem explained, adding that, this year, Salvest concluded a new gas contract with Eesti Energia.In addition to gas, Salvest also buys its electricity from Eesti Energia. "For us, it is important to avoid surprises; hence, we have decided to fix prices for a year in advance. We concentrate on our main activity — producing food — and trust more competent parties to trade energy on the stock exchange," Betlem said, explaining the reasons for Salvest's energy purchasing strategy.When speaking about cooperation with Eesti Energia, Betlem highlighted positive emotions. "The most important aspect is that, thanks to Eesti Energia, there is at least some kind of competition in the gas market now. I like that our account manager is competent, specific and proactive. This is how we get quick answers and support when making decisions.”/-/doc/8457332/news/turuylevaated/2015_11/salvest_purgid_liinil.jpg

The market overview has been prepared according to the current market knowledge of the Eesti Energia analyst. The information provided herein is based on public information and sources mentioned in the report. The overview is presented as informative material and on no condition as a promise, proposition, or an official prognosis of Eesti Energia. The opinions presented in the market overview are subject to change and the person presenting them reserves the right to make changes to them. Given the rapidly changing regulation of the electricity market, this market overview or information provided herein is not final and may not comply with situations that may arise in the future. The market overview does not create, end, nor change legal relations (including contracts). Eesti Energia is not liable for any expenses or damages which may occur in relation to the use of the information presented in this market overview.