CO2 quota four-week high may end recent electricity price fall

Parking spot for CO2 efficient cars.
Parking spot for CO2 efficient cars. Source: Siim Lõvi /ERR

The average weekly price of Carbon Dioxide quotas has risen by over four euros, to €85.90 per tonne, a four-week high, just as mild weather and other factors have caused a drop in both electricity and natural gas prices to consumers.

State electricity generator Eesti Energia stated in its energy market overview that, according to market participants, the main factor behind this price increase is the deadline for the redemption of CO2 quotas approaching at the end of April.

At this time, the various producers have to pay the corresponding value of  European Union Allowance (EUA) quotas for last year's CO2 emission. 

Quotas can be purchased from the EUA market if required.

Last week's electricity price in Estonia stood at €113.9 per MWh, a fall of two euros on week, ERR reports.

At the same time, milder and also damper weather, and lower natural gas prices, have spelled a fall in the price of electricity across the Nordic region.

Analysts say the Nord Pool system price may normalize to the level of €50 per MWh in the second and third quarters of 2023, if the rainy weather persists and the price of natural gas continues to fall.

The weekly average natural gas price fell by €2.7, to €58.2 per MWh also, and  European gas prices continue to fall in the face of a milder and windier outlook.

The return to market of the U.S. 20.5 billion-cubic-meter Liquified Natural Gas (LNG) terminal in Freeport, Texas, has also had an impact – since much of its output is Europe-bound.

European natural gas reserves remain at a record level compared with previous years and in the wake of the need to decouple from dependence upon Russian supply.

However, falling prices will lead to increased demand – which will in turn drive up prices again – experts say, even as the end of heating season in Estonia (taken as October to March inclusive) draws ever nearer.

Estonia's natural gas consumption per annum is listed at 5TWh, while the state has around 1TWh in reserve.

Natural gas prices in Estonia derive from the Title Transfer Facility (TTF), which is based in the Netherlands. A mirror TTF exchange is being set up in London next month.

Natural gas prices in Estonia recently dropped below a temporary state support measure's threshold level. While this measure is only in place through heating season, a longer-term universal service price for electricity has come under some pressure amid claims that its price has been higher than the market level. Consumers needed to opt-out of membership of the scheme, in most cases, while it is set to run to 2026 as things stand.


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Editor: Andrew Whyte, Barbara Oja

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