Prime Minister: Nord Pool exchange must be made more transparent

While the main negative factor responsible for the current, record-level electricity prices in Estonia relates to the law of supply-and-demand, the Nord Pool electricity trading exchange also needs to be made more transparent, in order to avoid the electricity cartel planning their maintenance work so that this coincides, Prime Minister Kaja Kallas (Reform) says.

Speaking at the regular weekly government press conference Thursday, Kallas said that: "Yesterday, the electricity price of €4,000 per MWh experienced between 6 p.m. and 7 p.m. is, so to speak, the result of a perfect storm. But key is that the Competition Authority (Konkurentsiamet) is now investigating how prices could have risen to such levels. There was a big shift in terms of demand and supply. It seems that the problems primarily related to the latter. One aspect is that we, together with Finland, Latvia and Lithuania, have forgone Russian electricity, leaving 1 GWh less total electricity available. This is all the result of the war Russia is waging against Ukraine."

"One thing is that we, as well as Finland and Latvia-Lithuania, have given up Russian electricity and there is one gigawatt-hour less in total. This is all due to the war that Russia is waging against Ukraine," she went on.

The prime minister added that it was a surprise to her that several different electricity producers in the Baltic region have scheduled maintenance work all at the same time.

"I do hope that the Competition Authority will investigate whether this really does not need to be coordinated, and whether it is still possible to go out at the same time," Kallas went on.

"I am interested in whether such situations could be avoided via better coordination, while what we are seeing in Latvia and Lithuania, whereby gas-fired power stations have also temporarily exited the market; all of this contributes to disrupting the situation. In other words, if the main culprit is  low supply, then we need to focus on how to increase that supply," the prime minister continued.

As to whether the Nord Pool electricity exchange should be made more transparent, making it clear why peak prices have reached such levels, Kallas said that the idea can definitely be supported. 

"After all, we are all interested in who is making offers, but also who is not."

"Currently, the main problem is a lack of supply, but if one producer has, for example, three production units but makes an offer with just the one, and not with the other two, then they earns it much more than one unit's-worth. I can't be certain that manipulation is taking place right now, but increasing transparency on the electricity exchange is key to allowing us to understand how prices are formulated. That way, we can also start solving the problem, perhaps life has shown that greater transparency brings clarity and, as a rule, lower costs," explained Kallas.

 Minister of Economy and Infrastructure Riina Sikkut (SDE) concurred.

Sikkut said: "Should this be made available to the public or only to market participants [is one question], but compared with the current situation, the electricity exchange certainly needs more transparency, in order to maintain trust in Nord Pool."

"In order for Ukraine to win the conflict, we need to maintain western unity. But people's difficulties in coping are starting to break that unity of supporting Ukraine . However, in the long run, leaving the electricity exchange altogether will not do us any good for our security, nor would it bring a better price. Transparency is the first and most effective way to increase trust now," she continued.

While Estonia's Nord Pool figure of €4,000 Wednesday was an all-time record, and also the maximum permitted at present under European Commission regulations, the EU's own European Emissions Trading System (ETS), is also set to see a record CO2 quota price on Thursday , of € 96.35 per tonne, which will also impact prices.

As to an ERR journalist's question on whether Estonia should apply for changes to be made to the ETS, for example, by establishing a price ceiling, Kallas replied that discussions on this topic at EU-level are currently ongoing. "These discussions have taken place at the Council of the European Union, i.e. between the heads of government. In the current difficult situation with energy prices, there are two important variables - input price and emission units. Proposals have been made to fix these for a year. Another proposal, which is not related to the ETS, is to decouple the price of electricity from the price of gas. We have supported these proposals during the talks and we will continue to do so, as this is a concern of all of us - we have crazy price levels in Estonia, but in many parts of Europe they are even higher."

The cabinet is set to discuss the electricity market reform bill prepared by the Ministry of Economy and Communications this afternoon.

ERR also asked Kristjan Järvan (Isamaa), Minister of Foreign Trade and Information Technology, ahead of the cabinet talks, whether it would be wiser, when defining the basis of universal service recipients, to establish a limit on the volume of consumption instead of setting it specifically to private consumers and apartment associations, as this would also help small businesses.

Järvan said this was a: "Good question. The point is that the energy crisis is general. Some have been heating with natural gas until now. The alternative for them is an electric heat pump. If you say that an apartment association consumes more, where do we draw the line? Companies consume eight times more than domestic consumers."

The proposed universal service would be targeted at domestic consumers, but its likely price range has not yet been announced.


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Editor: Andrew Whyte

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