Following an analysis of the cause of record-high electricity prices in August, European power market Nord Pool is recommending market participants review their strategies for offering energy production to the market.
According to an assessment published by the Competition Authority on Thursday, the spiking of the hourly market price of electricity to the maximum clearing price of €4,000 per megawatt-hour on one mid-August day likely wasn't connected to market manipulation, but may have been induced by a block order, which may not be suitable as a product for the Baltic market.
Asked by ERR whether Nord Pool had reached the same conclusion, Ingrid Arus, Nord Pool regional manager for the Baltics, said that the market is cooperating with regulators and has already submitted its own information regarding the incident, but only regulators can comment on the matter.
She noted that what calls the suitability of blocks for the Baltic market into question is the small size of the market.
"We're a very small market, and if a block placed on the market is very large and set for 12 or 16 hours, for example, then it very likely simply won't fit on the market for all of these hours and based on the average price," Arus explained.
According to the Nord Pool representative, that is the message they ultimately provided as well: that market participants should review their strategies for offering energy production to the market.
"We can't say that they have to change anything, but we can provide advice regarding how to reduce this risk going forward," she said, adding that such offers can't be prohibited under market rules as these are market participants' own strategic decisions.
"We create the opportunities for them, but what exactly they do and how they trade is up to them," Arus said. "Because there are a lot of opportunities and various products, but behind the strategy is the market participant themselves."
On its website, Nord Pool describes a block as a type of order that is available to market participants. It defines a set of hours during which a certain volume of power will be dispatched. The example it provided was selling 500 megawatt-hours of electricity between 5 a.m. and noon if the price is above €200 megawatt-hours on average within that window.
€4,000 per MWh
On August 17, electricity prices in Estonia, Latvia and Lithuania spiked to €4,000 per megawatt-hour, reaching the power market's cap. The daily average price likewise reached a record high €682 per megawatt-hour.
The Competition Authority, which launched an investigation into the incident, believes that the extraordinarily high electricity price was not caused by market manipulation. It is slated to provide an overview next week of how far they have gotten with the analysis, however the investigation will likely continue beyond next week as well.
Editor: Aili Vahtla