Gas price drop will gradually bring down electricity costs

A gas hob.
A gas hob. Source: Priit Mürk/ERR

Lowe gas prices on the world market will eventually filter down and reduce the price of electricity - but only temporarily, experts said on Tuesday. Eesti Gaas promises to lower prices by almost a third in December.

Natural gas prices have fallen significantly recently and this will soon reach customers in Estonia who are currently paying €2.85 for a cubic meter of gas, Tuesday's "Aktuaalne kaamera" reported.

"Now that gas prices on the world market and on the European market have fallen significantly, we will certainly adjust our price for December. At the moment, it looks like the price will drop significantly and should come in below €2 per cubic meter," said Eesti Gaas manager Margus Kaasik.

This will also affect the price of electricity throughout the region, but will only reach Baltic consumers after a delay.

"The bottleneck for our market at the moment is the Lithuanian-Latvian connection, which means that this cheaper European price will not reach us 100 percent. The price of gas has come down, but nowhere near as much as it has in Europe. As there are no restrictions on bringing cheap gas from Europe here, there are bottlenecks," explained Kaasik.

This bottleneck only affects spot prices but most gas is purchased at the monthly price.

"Gas is purchased from several sources to run one power plant. There are long-term contracts linked to historical price indices, there is spot gas, etc. It should gradually enter our electricity prices through the fall in gas prices," said Baltic Energy Partners board member Marko Allikson.

However, long-term deals do not suggest prices will fall significantly.

"If we look at gas prices for December — in the first quarter, these price levels are actually higher than current spot prices and next month's deals. In the longer term, electricity prices are unlikely to see much of a fall," said Allikson.

Eesti Energia said electricity prices are not rising at the moment as the autumn is reasonably warm.

"Demand has fallen. This October has been warmer than in previous years. Due to this, demand has been lower and fewer gas plants are coming on the market to be able to cover this electricity generation with shale, with renewables and with gas plants doing very few hours now," said Armen Kasparov, head of energy products at Eesti Energia.


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Editor: Merili Nael, Helen Wright

Source: Aktuaalne kaamera

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