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Energy expert forecasts market price of electricity to fall in coming years

Konrad Hanschmidt.
Konrad Hanschmidt. Source: Janek Luts/ERR

Konrad Hanschmidt, energy expert and head of EV smart charting software developer Gridio, believes that the market price of electricity will keep falling next year, which should also bring down fixed-price packages.

Hanschmidt said that those who opted for the universal service or fixed-price electricity contracts in the conditions of high energy prices in 2022 drew the short stick compared to customers who stayed with marked-based pricing.

"The average market price [of electricity] came to €91 or around 9 cents per kilowatt-hour last year. The price has fallen by leaps and bounds compared to 26 cents per kW/h the year before last. The average market price remained below 9 cents per kWh even in December, which one might have expected to be a critical month. Until last week, this winter had been boring in the best possible sense," the expert told Vikerraadio.

He said that the market settled into its usual rhythm last year, with prices stably remaining below 10 cents/kWh and the difference between day and night prices around 40 percent.

This means that if a customer who bought power at market prices also managed to shift some of their consumption into night time, they got a good price. Those who opted for a fixed-price package in the summer are also okay, paying around 12 cents/kWh, Hanschmidt suggested.

But people who have stuck with more expensive fixed-price packages from 2022 have paid considerably more for electricity.

"We see that electricity prices have come down a lot, and I believe they will come down further next year. That is why market-based or fixed-price packages will offer better value than the universal service, which was created as a short-term solution."

Fixed prices will gradually come down in the wake of the average market price falling.

Talking about fixed-price contracts, Hanschmidt said that some electricity sellers took advantage of the 2022 price panic and aggressively sold fixed-price packages for periods of five or even seven years at prices which seemed very competitive at the time.

"We have said on multiple occasions that it almost amounts to highway robbery. It was a great way to guarantee profits for five years for sellers, while it is not something we might describe as decent business," he commented.

"I also think that these patterns will reemerge as soon as prices go back up. It is important to look at contract conditions other than the price, such as whether it is possible to get out of the contract without having to pay a penalty."

Hanschmidt also said that the current cold snap has left system operators holding their breath as consumption spikes, while power plants have held up to the pressure so far. "If this keeps up, I believe we will seep prices normalize by this weekend. But we need to hold our breath for now."

On Wednesday, January 4, the market price of electricity for the Estonian region on the Nord Pool exchange came to €219.6/MWh.

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Editor: Mirjam Mäekivi

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