According to state owned energy group Eesti Energia's energy market review, the price of electricity in Estonia rose by 2 percent on year in the second quarter. The primary driver behind this price increase was the Estlink 2 failure, which has severely limited the amount of electricity coming into Estonia from the Nordics.

Eesti Energia market analysts estimate that the disruption of the undersea power link may have bumped the average price of electricity in the second quarter up by as much as €24.

In July, the difference in electricity prices with and without Estlink 2 was as much as €42, meaning this undersea cable outage resulted in the price of electricity nearly doubling last month.

The market review also noted that peak electricity prices are, as a rule, set by fossil fuel-based power plants. According to their information, rising carbon quota prices have also started to impact electricity prices in recent months.

Electricity prices could fall 30 percent

According to Kalvi Nõu, portfolio manager for energy trading at Alexela, fall electricity prices will depend specifically on whether Estlink 2 returns to the market or not.

"If it comes back, we'd expect electricity prices to drop by about 30 percent from current levels," Nõu said. "If it doesn't, then we'll likely see similar prices in September to what we've seen in August."

Eesti Energia predicts that the upcoming completion of repairs to Estlink 2 will nearly triple the current transmission capacity between Estonia and Finland, potentially leading to the return of lower prices to the Estonian market.

The reduced sunlight, cooler weather and start of the heating season in fall is expected to hike electricity consumption, however, which the state-owned energy group believes could in turn drive prices up.

On the other hand, new wind farms are being completed in the Baltics, which will add a significant amount of additional wind energy and could help alleviate electricity prices.

Even so, for so long as the Baltics' link with Finland is limited due to the Estlink 2 outage, market analysts expect average electricity prices to remain higher than last year's.

Estlink 2, an undersea power connection between Estonia and Finland, failed on January 26 due to an internal short circuit, likely caused by the complex positioning of the cable itself. The outage resulted in the loss of 650 megawatts (MW) of transmission capacity between the two countries.

Estonian transmission system operator (TSO) Elering initially set September 1 as the deadline for maintenance on the cable. According to their recently updated schedule, however, repairs will now continue through September 12.

The Estonian-Finnish connection is expected to return to the market on September 13.

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