Electricity sellers: Broken undersea cable will lead to higher prices
Estonian electricity sellers believe the disruption of the EstLink 2 undersea cable connecting Estonia and Finland will lead to higher electricity prices on the market and increased costs for new fixed-price packages. Economist Kaspar Oja estimates prices will rise by around 6 percent for households.
Tarmo Kärsna, head of energy sales at Alexela, told ERR existing fixed-price electricity packages will not become more expensive as a result of the cable disruption, but future fixed-price contracts and market prices for electricity will rise.
He noted that market prices are heavily influenced by weather conditions, and in calm, cold weather, prices could be 15-20 percent higher.
"Those on market-based electricity packages will feel the impact first, as prices are demand-driven. A significant portion of production is on the other side of the Gulf, and the transmission capacity is now lower," Kärsna explained.
He added that the price difference between Finland and Estonia jumped sharply after the cable disruption.
It is difficult to predict how much fixed-price packages might increase since various factors affect the price. However, he highlighted that consumer prices could also be influenced by decisions made by Elering, Estonia's transmission system operator, regarding risk mitigation.
"From the last Estlink disruption, we saw that Elering offered a risk mitigation service for pricing – whether they absorb the costs themselves or pass them on to market participants and, consequently, to consumers. During the previous incident, the disruption was deemed a force majeure, and consumers had to cover the price difference. Elering has not yet made a decision this time," Kärsna said.
He stressed that weather plays a major role in market prices: "If the weather is warm and windy, electricity prices are lower because Estonia has production capacity for such conditions. However, during cold, calm weather, when renewable energy production in Estonia is low, we rely heavily on imports from Finland, which will inevitably raise market prices."
Kärsna also highlighted that while Enefit Power's plants are ready to support the market, entering the market is significantly costlier due to CO2 taxation.
Elering's CEO, Margus Kaasik, reiterated that existing fixed-price packages will remain unchanged, but market prices and new fixed-price packages will increase. He said it is challenging to predict exact price increases.
"Existing fixed-price contracts should continue as they are, at least with responsible electricity sellers," Kaasik said. "New contracts, however, will definitely factor in the disruption, as market prices are forecasted to be somewhat higher."
The EstLink 2 disruption will result in electricity being €10-15 per megawatt-hour more expensive next year, Eesti Energia's analysis suggests.
Armen Kasparov, Eesti Energia's director of energy trading and portfolio management, noted that compared to the previous EstLink 2 outage, the Sopi-Tootsi wind farm operated by Enefit Green now provides some relief during windy conditions.
Elering board member Erkki Sapp told "Aktuaalne Kaamera" that compared to the previous EstLink 2 disruption, electricity prices are expected to rise by around 10 percent.
"The outage increases the risk that electricity prices in the Estonian price zone will be higher than they would have been with EstLink 2 operational. During the previous outage from January to September, the end price for consumers rose by approximately 10 percent," Sapp said.
Economist: Prices to rise 6 percent for households
Economist Kaspar Oja estimates that the cable failure will result in an approximately 6 percent price increase for consumers.
If the cable remains out of service for the projected seven months, its economic impact could reach nearly €105 million.
Oja told "Aktuaalne kaamera" that based on experiences from the previous cable failure, the effect amounts to about €22 per megawatt-hour. "However, it's important to note that this estimate heavily depends on the weather, global market prices, and the reliability of our equipment," he added.
"Considering that the cable is out of service for seven months, this will lead to approximately €105 million in costs to the economy," the economist said. "For households, it will raise electricity bills by an average of 6 percent. But this estimate takes into account that some people have fixed-price contracts, meaning their prices won't rise immediately. Additionally, a significant portion of electricity bills consists of various other costs, which don't increase as rapidly."
Oja clarified that the €105 million represents the total additional cost over seven months. "For a single summer month, this would mean €12 million. If we move into the autumn months, then in autumn it would be approximately €15 million per month," he added.
"These estimates are derived from the previous failure and take into account average conditions and current global energy prices. If these change or if weather conditions differ significantly from last year, these estimates could also be different," Oja said.
Experts: Regional electricity prices may spike due to EstLink 2 failure
The interruption of the 650-megawatt EstLink 2 electricity cable could lead to significant regional electricity price increases, experts told the energy-focused publication Montel.
According to experts, the impact of the disruption may intensify in the coming weeks, particularly if temperatures drop.
The publication noted that the cable failure caused prices in the Baltic region to rise to €220 per megawatt-hour during certain hours, though the disruption had no substantial effect on Finnish electricity prices.
Arto Pahkin, a representative of Fingrid, told Montel that while the EstLink 2 cable was primarily used for delivering electricity from Finland to Estonia, it also played a critical role in meeting Finland's high electricity demand during cold periods. He added that the failure could lead to price increases in Finland as well, especially if temperatures drop as forecasted in January.
Montel reported that from January 4 to 6 of this year, Finland imported up to 856 megawatts of electricity through EstLink 2 and EstLink 1.
Montel's head of analysis, Ljubov Cherney, said prices could rise in both Finland and Estonia as a result of the EstLink 2 failure, particularly when wind power production is low.
Last Wednesday, Finnish electricity prices soared to €500 per megawatt-hour due to low wind production, despite other generation sources and transmission connections being operational.
Following the EstLink 2 failure, electricity flows from Sweden to Lithuania via the 700-megawatt NordBalt connection increased, according to Modity analyst Kruno Kuljis.
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Editor: Valner Väino, Toomas Pott, Helen Wright
Source: Aktuaalne kaamera, Mondel