Electricity prices rose late in August and may keep climbing with gas costs

Estonia’s average electricity price was lower in August than a year earlier, but the decline concealed sharp swings between individual days. Prices rose noticeably during the second half of the month, and developments in the gas market may keep electricity prices under pressure.

The monthly average fell from 77.3 euros per megawatt-hour last August to 59 euros this year. That equals a decline from 7.7 cents to 5.9 cents per kilowatt-hour. Marko Allikson of Baltic Energy Partners told ERR that the main reason was not higher wind and solar production.

Instead, limited connection capacity with Latvia meant Estonia’s exchange price matched Finland’s more often than Latvia’s. The result helped lower the average price, even as the market experienced substantial daily jumps.

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The lower price was not caused by higher wind and solar production.

Forecasts for the coming autumn and winter remain uncertain. A cold, windless winter would increase reliance on gas and add another source of volatility. Allikson said Europe’s gas storage levels will be especially important, because inadequate supplies would push prices higher.

Gas prices above 70 euros per megawatt-hour on the Dutch TTF exchange could also attract more liquefied natural gas to Europe. Asian prices are lower, making European sales more appealing to LNG suppliers, Allikson said.

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A cold and windless winter would mean a greater need to use gas.