Midsummer’s Eve likely to bring very low electricity prices

The combination of increased wind energy production, rainy weather and low consumption is expected to bring very low electricity prices over the weekend, after a long time.

Since the beginning of the week, the price of electricity in the Baltic States has been steadily decreasing. While the average exchange price in Estonia on Monday was 118.27 euros per megawatt-hour, by Thursday it had already fallen below the 100-euro mark. With demand decreasing and other conditions remaining stable, the average daily prices are expected to drop even further over the weekend and on the following Midsummer Day, likely reaching their lowest point on Midsummer’s Eve, which is Sunday.

According to Armen Kasparov, Head of Energy Trading at Eesti Energia, the fall in prices is primarily influenced by improved wind conditions in the Baltic States. ‘The expected average weekly wind production in the Baltic States is above the median – 389 MW/h. Wind production starts to grow on Tuesday and reaches its peak on Thursday with 770 MW/h, after which it will start to fall again,’ Kasparov explained.

According to Kasparov, the formation of the price is also influenced by rainy weather in Scandinavia, as well as repairs on EstLink 2. ‘For example, looking at today’s electricity prices we can see that while in Finland the price falls as low as to be negative for several hours, the Baltic market does not benefit much from it. Our lowest price remains at 20 euros per megawatt-hour,’ Kasparov explains. ‘If the capacity of the connections were higher, more affordable hydropower and wind energy from the Nordic countries would also reach the Baltic States. The output of the Finnish and Swedish nuclear power plants, although these are somewhat underutilised during periods of low prices, would also help to harmonise prices.’

For July and August, Kasparov does not expect a significant price drop. He remarks that windy and sunny weather may result in lower electricity prices on some days, but most of the time this is not enough to cover the evening and morning peak hours. ‘As long as the Baltic connection with Finland is limited due to the EstLink 2 cable fault, our daily average prices will for the most part still be higher than last year. There is still too little electricity production in the Baltic States, especially in windless weather,’ adds Kasparov, noting that domestic electricity production covers on average less than half of the consumption in the Baltic States. Electricity is imported to the Baltic States in the maximum possible volume through all connections – from Poland, Finland, and Sweden.

‘Electricity prices are likely to remain highly volatile throughout the day, and high prices will only prevail for a few consecutive hours a day. As a result, gas and oil shale plants often do not have access to the market. High peak electricity prices arise from very small quantities and are mostly related to consumption management.’