Finland Enjoys Record-Low Electricity Prices Amid Summer Surge in Production
Finland is experiencing a remarkable period of exceptionally low electricity prices this summer, making it one of the cheapest regions for spot electricity in Europe. According to Lumme Energia’s review of electricity prices, the average spot electricity price in Finland for June and July has been significantly lower than in other Nordic countries, with prices even dipping into negative values on certain days.
The trend of low electricity prices in Finland began around Midsummer and has continued for five consecutive weeks, setting a new record. The average monthly price of electricity in July was just 1.7 cents per kilowatt-hour before tax and 2.1 cents per kilowatt-hour including VAT. This makes July 2024 the first time Finland has recorded the lowest electricity prices in Europe, a fact confirmed by Jukka Leskelä, CEO of the trade association Finnish Energy.
Leskelä noted, “In July, electricity was on average cheaper in Finland than anywhere else in Europe. This is the first time this has happened.”
Typically, the lowest electricity prices in Europe are found in northern Sweden and Norway, where hydroelectric production exceeds local consumption. These regions benefit from abundant hydroelectric power, which leads to lower electricity costs. In contrast, Finland operates within a single pricing area, meaning the spot price of electricity remains consistent across the country, from Hanko in the south to Utsjoki in the north.
Sweden and Norway, on the other hand, are divided into several pricing zones. Sweden has four zones, and Norway has five, which can lead to variations in electricity costs depending on the region. However, Finland’s efficient internal transmission system allows it to maintain a uniform price, contributing to the country’s low electricity rates this summer.
Several key factors have contributed to the unusually low electricity prices in Finland this summer. One of the main reasons is the strong nuclear power production following the completion of maintenance work on the Olkiluoto nuclear reactor units. Additionally, there has been a lower-than-average demand for electricity during the holiday and summer season, combined with increased solar and wind power capacity.
Another significant factor is the transmission constraints within Finland. During windy periods, excess electricity that could not be exported due to maintenance work on transmission lines had to be sold cheaply within the country. This has led to even lower prices, particularly during peak production times.
Maintenance work is ongoing on the transmission lines between Sweden and Finland, and repairs to the Estlink 2 cable between Finland and Estonia—damaged last winter—are expected to continue until at least the end of August. These factors have also played a role in keeping electricity prices low in Finland.
One of the most striking developments this summer is the occurrence of negative spot electricity prices. On Friday, spot electricity prices in Finland dipped into negative values, with the price dropping to -0.08 cents per kilowatt-hour between 2 to 6 pm, including VAT. The average hourly price for the day was just 0.54 cents per kilowatt-hour, highlighting the extreme nature of the current market conditions.
Despite the current low prices, experts are skeptical that this trend will continue in the long term. Marko Pikkarainen, Lumme Energia’s chief analyst, expressed doubt that the same conditions leading to these low prices would align again in the future. “Several factors contributed to the creation of that low average price. It’s hard to imagine that all these same conditions will align again in the future. However, one lesson from the electricity markets is ‘never say never,'” Pikkarainen said.
The return of the Estlink 2 cable between Finland and Estonia in September could lead to higher prices in Finland, as excess electricity on windy days will be more easily exported. Additionally, the end of the holiday season and the subsequent increase in industrial demand are expected to push prices higher.
Maintenance work at Fortum’s Loviisa nuclear plant, which will last into September, along with potential transmission constraints or weather-related issues, could also lead to price spikes similar to those seen last August.
Looking ahead to the winter months, electricity prices in Finland are expected to rise. With an increase in VAT starting in September, the average price forecast for the winter is projected to be above 10 cents per kilowatt-hour. Additionally, forecasts suggest that Finland’s prices will remain higher than those in neighboring Nordic countries in the future, as the market adjusts to the changing conditions.
The summer of 2024 has been a unique period for electricity prices in Finland, with record-low prices providing significant relief to consumers. However, the sustainability of these low prices is uncertain, and experts caution that the factors contributing to the current situation are unlikely to repeat in the near future. As Finland moves into the winter months, electricity prices are expected to rise, with potential challenges on the horizon due to ongoing maintenance work and increasing demand.
