Olkiluoto nuclear plant addition will impact Estonia's electricity prices

Olkiluoto Nuclear Power Plant.
Olkiluoto Nuclear Power Plant. Source: ERR

Olkiluoto Nuclear Power Plant in Finland, which is due to come on line at full capacity on Monday, will significantly improve Estonia's security of supply and also bring down energy prices. However, a shortfall in transmission capacity between Finland and Estonia means that price differences between the two countries will persist until the Estlink 3 cable is built.

On Thursday, the third reactor at Olkiluoto Nuclear Power Plant, which was originally due to be completed in 2009, passed its final inspection. It will now start producing electricity at full capacity from Monday.

Olavi Miller, market analysis strategist at Estonian state-owned energy group Eesti Energia, told ERR, that starting up Olkiluoto's third reactor will fully cover the deficit caused in Finland after it stopped importing electricity from Russia in response to the latter's full-scale military invasion of Ukraine.

"In addition to the absence of Olkiluoto 3 from the market, prices in our region were not only affected by high gas prices, but also by repair work carried out on nuclear power plants in southern Sweden. This meant that several thousand megawatts of capacity were suddenly taken off the market. As of today, those Swedish plants are also operational," Miller said.

According to Miller, in addition to the new Olkiluoto generator, Finland has also brought new wind farms online, which will increase the supply of renewable energy available the market and may electricity prices significantly on windy days.

Timo Tatar, secretary general at the Estonian Ministry of Economic Affairs, told Vikerraadio's "Uudis+" show, that last winter the balance between supply and demand in the region was at its limit. However, the addition of 1,600 megawatts of controllable capacity from Olkiluoto's third reactor will considerably improve the security of supply for Estonia's electricity.

"1,600 megawatts is the same amount of capacity as Estonia's peak consumption, (in fact) it's a little bit more. Olkiluoto 3 produces about 15 percent of Finland's own electricity consumption capacity, which is about 90 terawatts per year," he said.

"This is a plant that will start to make relatively low variable cost offers to the electricity market every day. The addition of a plant like this in our region will push prices down a bit." However, Tatar said that these price decreases will be greater in Finland than the Baltic countries.

"There has been quite a significant shortage in transmission capacity between the Baltics and Finland in recent years," he said.

In fact, Estlink 1 and Estlink 2 are short of transmission capacity by quite a number of hours. This is an issue that Elering and Fingrid are currently working on, with a view to establishing a third connection between Estonia and Finland in the future, Tatar said.

However, Miller pointed out, that the positive impact on prices is being hampered somewhat by a lack of transmission capacity.

"In the longer term, it is not the case that every new wind farm in Finland will have an impact on the price in Estonia, as Estlink will not be able to transmit any more capacity," Miller said.

According to Tatar, it is hoped that an additional connection between Estonia and Finland will be established in the early 2030s.

"If the price in the Nordic countries and the Baltic countries is the same, the market to which Estonia can export its electricity in the future without price-related risks will be larger" Tatar said.

"Certainly, the addition of Olkiluoto will further illustrate the need for this connection in the future. This is due to the fact, that we will see a greater price difference between the Baltic countries and Finland until the additional connection has been completed."


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Editor: Michael Cole

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