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Competition Authority: Nord Pool must offer greater flexibility in products on the Baltic market

The analysis identified no violation of market rules.
The analysis shows that the power exchange needs to be reviewed

According to the joint analysis of Estonian, Latvian, and Lithuanian energy regulators, the steep increase in the electricity price on the Nord Pool exchange on 17 August 2022 was a result of a combination of different factors along with the peculiarities arising from the small size of the Baltic market. The analysis identified no violation of market rules.

In co-operation with Latvian and Lithuanian regulators, the Competition Authority found that the maximum market price of €4,000 per MWh was caused by the fact that, on 17 August from 18:00 to 19:00, there was a shortage in production capacity on the Baltic market. Under the power exchange rules of Nord Pool, the 50 MW peak power reserve of the Lithuanian transmission network operator Litgrid was activated for the whole day, which helped avoid reaching the €4,000 per MWh price level in two other hours on the same day, but which still did not prevent the €4,000 per MWh price from occurring in one hour-slot from 18:00 to 19:00. The shortage in production capacity totalled 2.14 MWh (0.57 MWh in Estonia, 0.6 MWh in Latvia, and 0.97 MWh in Lithuania).

According to Evelin Pärn-Lee, Director General of the Competition Authority, the analysis shows that the power exchange needs to be reviewed, as several circumstances that led to the price increase may also reoccur in the future. At the same time, it is necessary to immediately take steps to make the products offered by Nord Pool more suitable for the Baltic market. ‘The flexibility of the power exchange needs to be increased and Nord Pool must adapt its processes and offer products in such a way that fits our local conditions,’ Pärn-Lee said.

The increase in electricity price was caused by the fact that the price was affected by transmission capacity restrictions, simultaneous maintenance and failures of Baltic and Finnish production units, low wind power generation, low Norwegian hydropower reservoir filling levels, and the rigidity of the Nord Pool system due to which the offers of some market participants were repeatedly rejected. Compared to other EU electricity markets, the Baltic market is small in size, which means that even the smallest changes in the market (e.g. minor restrictions imposed on transmission capacity) can significantly influence the prices.

In co-operation with Latvian and Lithuanian regulators, the Competition Authority came to the conclusion that both the processes and the products offered must be made more flexible. The Competition Authority also considers it essential to adopt an approach in which the bid lists are reopened in the event of a risk of high market prices, as it would allow for market participants to change their production bids.

Baltic energy regulators have presented the results of the analysis to Nord Pool, which has pledged to improve its products and processes.

Electricity prices have risen since July 2021 in both Estonia and elsewhere in Europe. In 2021, the average electricity price on Nord Pool power exchange in the Estonian price area was €86.73 per MWh, a 157.4% rise on the average price in 2020. The main factor affecting the price of electricity in the Baltic market has been the dramatic increase in gas prices. In addition, the demand for electricity has grown, CO2 prices have doubled, and the weather conditions have affected the hydropower reservoir filling levels – all of which, in turn, have affected the price of electricity.

On 17 August, the average price of electricity in the Estonian price area increased to 682.05 euros/MWh, with the price being 4000 euros/MWh from 18:00 to 19:00. In relation to the record increase in the price of electricity, the Competition Authority launched an analysis in order to identify the reasons for the price increase.

The Competition Authority exercises state supervision over competition, electricity, natural gas, district heating, mail, public water supply and sewerage as well as railways, aviation and ports.

Veel uudiseid samal teemal

On 17 August, the average price of electricity in the Estonian price area increased to 682.05 euros/MWh, with the price being 4000 euros/MWh from 18:00 to 19:00.
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