In March, after five months of steady price increases, electricity prices fell in all Nord Pool sales areas. In March, electricity prices were volatile, mainly due to changing weather conditions. In the Baltics, average monthly electricity prices decreased. In the Latvian and Estonian trade areas, the average monthly electricity prices decreased by 26% and amounted to 43.55 EUR / MWh. In the Lithuanian trade area, on the other hand, the average monthly electricity price was 48.02 EUR / MWh, decreasing by 19%. In the Baltics, the hourly price range ranged from 11.36 EUR / MWh to 149.98 EUR / MW.
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In the previous month, the average electricity price of the Nord Pool system decreased by 27% compared to February and was 34.21 EUR / MW. At the beginning of March, the air temperature was below normal, but in the second half of the month it was replaced by warmer weather. Changing weather conditions affected the volatile change in electricity demand in the Nord Pool region, affecting the movement of electricity prices. Overall, demand fell by 5% compared to February, but March this year was cooler than in the previous year. In addition, the filling of water reservoirs in the Nordic countries increased due to higher precipitation and was 7% above the long-term norm. Hydropower was also 4% higher than in February. The decrease in the price of electricity was also influenced by the development of wind farms, which increased by 19% compared to February. In the Baltics, the trend in electricity prices was marked by the movement of electricity prices in neighboring countries and the electricity balance. Last month, energy flows from Finland were 40% higher, which affected prices in Latvia and Estonia. In turn, flows from Sweden’s SE4 area decreased by 38%, therefore the electricity price in the Lithuanian trade area was the highest in the Baltics.
Fluctuating future electricity prices
In March, fluctuations in future Nordic electricity contracts were observed. One of the price determinants in March was the changing weather conditions, which caused the hydro balance in the Nordic countries to fluctuate from 4.6 TWh at the beginning of the month, falling to 3.6 TWh in the middle of the month and rising to 5.6 TWh at the end of the month. Changes in the hydrological balance were reflected in fluctuations in the system’s future contract prices, which were also affected by other market prices for energy products and carbon emissions. March electricity futures contract in April (Nordic Futures) the average price decreased by only 3% compared to the previous month and was 31.31 EUR / MWh. The average contract price of the system in the 2nd quarter of 2021 slightly increased to 28.51 EUR / MWh, the closing price of the contract at the end of the month was 29.10 EUR / MWh. The average futures price of the 2022 system increased by 1% in March and was 26.81 EUR / MWh, at the end of the month the contract price was 26.05 EUR / MWh.
The average price of Latvian electricity futures for the April futures contract increased by 3% to 45.48 EUR / MWh, the closing price of the contract was 46.15 EUR / MWh. The price of Latvian futures in March 2022 was unchanged at 49.52 EUR / MWh, at the end of the month the contract price was 49.05 EUR / MWh.
In Latvia, the volume of development exceeds the monthly consumption
Electricity consumption in the Baltics in March was 2,466 GWh, which is 3% higher than in March of the previous year. This can be explained by the relatively lower air temperature observed this year. In Latvia, electricity demand increased by 2% to 639 GWh compared to March 2020. In Estonia, consumption was 4% higher at 770 GWh, while in Lithuania consumption increased by 4% to 1,057 GWh compared to the corresponding month a year earlier.
Total electricity generation in the Baltics decreased by 4% to 1,400 GWh compared to February. In Latvia, electricity generation increased by 19%, producing an average of 696 GWh per month. In Estonia, production volumes decreased by 38% to 326 GWh. In Lithuania, electricity generation increased by 7% to 378 GWh compared to February. In the previous month, generation covered 57% of total electricity consumption in the Baltics, 109% in Latvia, 42% in Estonia and 36% in Lithuania.
The inflow into the Daugava increased slightly above the norm
In March, the average inflow into the Daugava was 827 m3 / s, which was 12% above the multi-year average inflow level. According to the Latvian Environment, Geology and Meteorology Center, the total precipitation in Latvia in March was 15% below the monthly norm, however, as a result of melting snow and ice, the inflow level increased slightly. However, compared to the inflow in March 2020, this year it was 27% lower. In March, with the increase in inflow into the Daugava, electricity generationLatvenergo“Hydropower plants doubled compared to the previous month and produced 388 GWh. However, production volumes were 18% lower than in March of the previous year. In turn, due to lower market demand, Latvenergo AS TEC development volumes decreased by 43% to 187 GWh compared to February, while development volumes were almost three times higher compared to March of the previous year.
Rising energy product prices
The price of Brent Crude Futures crude oil futures contract increased by 7% to USD 65.70 / bbl in March, and the contract continued to rise to USD 63.54 / bbl at the end of the month. The rise in oil prices was influenced by a number of factors. At the beginning of the month, OPEC + member states decided to continue the restrictions on oil production in April. The positive economic development and the projected recovery in demand in the second half of the year also determined the dynamics of price growth. In contrast, price congestion was significantly affected by the congestion in the Suez Canal, which completely blocked supply flows, or ten percent of world trade. At the same time, as crude oil stocks in the United States increased and the pandemic spread at the end of the month, oil prices declined.
Coal futures contract (API2 Coal Futures Front Month), the average price increased by 4% in March to USD 67,06 / t, the closing price of the contract was USD 70,05 / t. In March, the market price of coal was mainly affected by seasonal changes in demand in both Asia and Europe. However, the rise in market prices was driven by floods in Australia, which disrupted coal mining and exports.
In February (Dutch TTF), the average price of the April natural gas futures contract increased by 4% to 17.43 EUR / MWh, and the contract ended at a higher price of 18.80 EUR / MWh.
In Europe, natural gas price developments in March were mainly driven by higher demand due to colder weather conditions, as well as upward price fluctuations in other energy markets. In addition, the filling level of natural gas storage facilities was still low and at the end of the month it was 30.06%, compared to March of the previous year – 53.81%. In contrast, a record high supply of liquefied natural gas (LNG) to Europe was observed in March, due to high regional demand, lower Asian imports and increasing LNG production.
The price of EUA Futures “EUA Dec.21” increased by 8% to 40.96 EUR / t in March, and at the end of the month the price of allowances increased to 42.55 EUR / t. In March, the price of carbon emission allowances reached a record high, exceeding the threshold of 42 EUR / MWh. Price increases have continued since November / December, when European commision announced an ambitious target to reduce greenhouse gas emissions by at least 55% compared to 1990 levels. The rise in carbon prices was driven by optimistic economic recovery forecasts, rising commodity prices and market speculation, which was the main driver of prices. Demand in the allowance market was also boosted by the closure of the previous trading phase, which wrote off the amount of allowances issued by installations for the previous year by the end of April.
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