Estlink 2 repairs increasingly impacting electricity prices each month
While the impact of repairs to the Estlink 2, the undersea power cable connecting Estonia and Finland's electricity systems, was in February initially less than €5 per megawatt-hour (MWh), by July this impact had ballooned to €42.5 per MWh, according to estimates by Eesti Energia.
At the beginning of the week, Estonian state-owned energy group Eesti Energia announced that they estimate the disruption of the Estlink 2 connection with Finland may have raised electricity prices in Estonia by up to €24 in the second quarter and up to €42 in July. Considering that the market price of electricity in Estonia averaged €98 per MWh in July, Estlink 2's ongoing repairs are estimated to have driven up electricity prices by more than 40 percent.
July saw the highest impact of these repairs on prices. According to Eesti Energia, the impact amounted to (an increase of) €4.20 per MWh in February, €10.50 in March, €14.40 in April, €28.60 in May and €29.10 in June. Including July, the six-month average impact was an increase of €21.50 per MWh.
The average price of electricity in Estonia in the same six months totaled €78.25 per MWh, meaning that absent the estimated impact of the power cable's ongoing repairs on prices, the price of electricity would have been below €60 per MWh, or roughly 25 percent lower.
Estonian transmission system operator (TSO) Elering, one of the owners of Estlink 2, doesn't want to speculate on electricity prices, saying that that is a matter for market participants. The company likewise doesn't want to retrospectively assess whether and how much electricity prices in Estonia have been higher during the months that the undersea power link has remained under repair.
Return of Estlink 2 doesn't automatically mean lower prices
In Finland, which is currently connected to Estonia by just one cable – the approximately 350-megawatt Estlink 1 – electricity prices have been significantly lower from February through July. The six-month average for this time period in Finland totaled €41.30 per MWh.
Despite the fact that transmission capacity between Estonia and Finland will nearly triple when Estlink 2 comes back online in mid-September, Eesti Energia energy trading analyst Karl Joosep Randveer says that this doesn't necessarily mean that price levels between the two neighboring countries will equalize.
"The likelihood that prices in Estonia and Finland will then equalize is low," Randveer told ERR. "Even when both connection capacities are operational, we've seen that the price difference between the Baltics and Finland is so big that even nearly 1,000 MW of transmission capacity isn't enough to balance it out. However, the Estlink 2 connection being restored could mean some reduction in Estonia's electricity prices."
At the same time, he continued, the arrival of fall will mean higher prices anyway.
"It will bring with it a decrease in solar energy production and cooler temperatures," the analyst explained. "The start of the heating season in October will lead to a significant increase in electricity consumption, which could drive up prices in turn."
He added that additional relief in terms of electricity prices this fall may come in the form of windier weather, as a considerable amount of new wind energy production is being added to the Baltics with the completion of new wind farms.
Two thirds of imported electricity still from Finland
Despite the repairs to Estlink 2, Estonia still imported the most electricity from Finland during the first seven months of 2024 – of 2.5 terawatts (TW) of electricity, two thirds came from Finland. For comparison, Estonia exported 0.46 TW of electricity during the same period, less than half of which went to Finland.
This raises the question of whether Estonia would have imported all of its electricity from Finland if both Estonian-Finnish power links had been operational.
According to Randveer, imports from Finland would have definitely been higher, although in spring, when hydroenergy production during Latvia's flood season drives down prices there, quite a bit of electricity also comes into Estonia from Latvia.
"The Baltics' dispatchable gas plants are also located in Latvia and Lithuania – when there is a shortage of renewable energy production on the market, gas plants reach the market before oil shale-fired power plants can," he pointed out. "This also means that during dark and windless hours, imports from Latvia are likely to continue."
Elering communications director Ain Köster noted that historically, there have certainly been situations where electricity moves from Latvia into Estonia even when both Estlinks are operational.
"Especially in the spring, during flood season, Latvia is an exporting system," Köster said. "In theory, it could also happen that a lot of electricity comes from Poland and Sweden to Lithuania, and some of that reaches Estonia via Latvia. Various scenarios exist."
With a transmission capacity of 650 MW, Estlink 2 went under repair after a fault occurred in January; the undersea power link is expected to be operational again by mid-September.
Including losses, electricity consumption in Estonia in the first six months of 2024 was clearly higher than last year. By month, consumption this year has totaled 1,165 gigawatt-hours (GWh) in January, which is up by 340 GWh on year; 889 GWh in February, up from 736 GWh on year; 907 GWh in March, up from 736 GWh in March 2023; 792 GWh in April, up from 640 GWh on year, 804 GWh in May, up from 620 GWh on year, and 730 GWh in June, up from 535 GWh last June.
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Editor: Aili Vahtla