In July, a decrease in the average monthly wholesale electricity prices was observed in all Nord Pool sales areas, including the Baltics. The previous month’s average electricity price in Estonia decreased by 20% to 30.10 EUR / MWh and was the lowest electricity price in the Baltics. In turn, in the trade areas of Lithuania and Latvia, the decrease in electricity prices was 18%, and in Lithuania the average monthly price was 31.70 EUR / MWh, but in Latvia 31.80 EUR / MWh. In the Baltics, the hourly price range in July ranged from 0.09 EUR / MWh to 59.89 EUR / MWh.
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In July, electricity price trends in the Nordic countries were determined by climatic and hydrological conditions. Air temperatures in Sweden and Norway were below the July norm. In contrast, higher seasonal precipitation led to an increase in inflows. The filling level of the Nordic water reservoirs only reached the norm in mid-June and has been increasing since then. High development in hydropower continued to keep system electricity prices low, mainly in Norwegian trading areas. At the same time, wind production in the Nord Pool region as a whole was 4,013 GWh, an increase of 46% on average compared to June and 42% higher than in July 2019.
The high volatility of wind farm development at the beginning of July also affected one negative hourly rate in the Baltics. This situation is more pronounced in regions with a high share of wind or other renewable energy resources, but this was the first time in the Baltics. In turn, the decrease in the average monthly electricity prices in the Baltic States was influenced by higher energy flows from neighboring countries. The availability of interconnection capacity was higher than in June, when there were several planned and unplanned outages, and capacity flows from the Kaliningrad region increased.
Wholesale electricity prices in Nord Pool sales areas
Source: Nord Pool
Volatility in the future of electricity contract prices
In July, the future (future) a decrease in electricity contract prices was observed in both short-term and long-term contracts. The hydrological situation in the Nordic countries was the main factor influencing the price in July. At the beginning of the month, the hydrological balance in the Nordic countries was 18.3 TWh above the normal level, it decreased to 16.6 TWh in the middle of the month, however, at the end of July it increased to 21.5 TWh.
In July, the prices of electricity system futures contracts (“Nordic Futures”) for the August contract decreased by 43% to 7.02 EUR / MWh, the contract closing price dropped to 5.70 EUR / MWh. The average contract price of the system in the 4th quarter of 2020 decreased by 17% to 18.90 EUR / MWh, the closing price of the contract at the end of the month was 18.43 EUR / MWh. The future of the 2021 system (futures) the average price decreased by 12% to 21.59 EUR / MWh in July, and at the end of the month the contract price was 20.20 EUR / MWh.
Latvia’s electricity futures (futures) the average price for the August contract increased by 8% to 39.88 EUR / MWh, the closing price of the contract – 38.70 EUR / MWh. In July 2021, the future price of Latvia decreased by 2% to 37.67 EUR / MWh.
Electricity demand in the Baltics decreased
In the Baltics, electricity consumption in July decreased by 2% to 2,021 GWh compared to July of the previous year. In Latvia, electricity consumption decreased by 1% to 545 GWh, compared to July 2019. In Estonia, demand was 3% lower at 550 GWh, while in Lithuania consumption was 3% lower at 926 GWh compared to the same period last year.
In July, the amount of electricity generated in the Baltics decreased by 16% to 1,021 GWh compared to the previous month. In Latvia, electricity generation was 253 GWh or 47% less than in June. In Estonia, there was also a decrease in development by 2% to 305 GWh compared to June. In Lithuania, on the other hand, electricity generation increased by 9% to 464 GWh.
In July, total generation in the Baltics covered 51% of electricity consumption, in Latvia the ratio of production to consumption was 46%, in Estonia 55%, but in Lithuania 50%.
Access to the Daugava at the level of the norm
In July, the inflow into the Daugava was 249 m3/ s. Compared to the 30 – year average inflow level (269 m3/ s), it can be said that the inflow into the Daugava with a minimal deviation was at the level of the norm. In the last two years, inflows have been more than twice the 30-year average inflow level. The improvement of the hydrological situation was facilitated by lower average air temperature and 2% higher total precipitation in the country.
In July, the inflow into the Daugava was at the normal level, and this was also reflected in the volumes of electricity generation. “Latvenergohydropower plants, where 113 GWh were produced. Last month, Latvenergo TEC development volumes more than doubled to 59 GWh, which in turn was driven by electricity market demand.
Upward trend in commodity markets
The price of Brent Crude Futures crude oil futures contract increased by 6% to 43.14 USD / bbl (barrel) in July, and at the end of the month the contract closed at 43.30 USD / bbl.
In July, oil market prices were volatile, driven by economic recovery and changes in oil demand. The high number of cases of Covid-19 made it possible to predict a possible second wave of cases in Europe and the United States. In addition, the deterioration in geopolitical relations between the US and China and, from August onwards, OPEC + ‘s plan to reduce oil production restrictions from 9.7 m bbl / d to 7.7 m bbl / d were factors that contributed to the rise in prices.
Coal future contract (API2 Coal Futures Front month) the average price in July increased by 5% to 50.55 USD / t, the closing price of the contract increased to 51.90 USD / t.
Coal demand remained unchanged. However, the increase in prices was driven by supply disruptions from Colombia, which is the main European importer after Russian. Due to low demand, both countries maintain lower coal production. At the same time, changes in other raw material markets also affected fluctuations in coal prices.
In July (Dutch TTF) The average price of the August contract decreased by 3% to 5.37 EUR / MWh, and the closing price of the contract was 5.22 EUR / MWh.
In the previous month, changes in natural gas prices were affected by the cancellation of liquefied natural gas (LNG) cargo, as well as uncertain demand forecasts, which affected liquidity in the natural gas market. At the end of July, the filling of natural gas storage facilities was 85.4% (81.9% in 2019), the pace of filling the storage facilities was slowed down by the shutdown of Nord Stream due to annual maintenance works. At the same time, volatile price movements in the emission allowance market also had a significant impact on natural gas price developments.
European emissions quota (USA Futures) The price of “EUA Dec.20” increased by 17% in July to 27.53 EUR / t, and the contract price at the end of the month was 26.28 EUR / t.
In July, the prices of carbon allowances in daily trading exceeded the threshold of 30 EUR / t, after a four-month continuous rise since the fall in prices in March. In mid-July, the price of emission allowances reached 30.80 EUR / t, which is the highest price since the beginning of the second phase of the EU Emissions Trading Scheme in 2008 and only 20 cents below the April 2006 maximum of 31 EUR / t. Price fluctuations in the allowance market contributed to the recovery of the oil market and the development of the stock market, which predicted a faster pace of economic recovery.
Wholesale electricity prices in July in Nord Pool retail areas
Source: Nord Pool
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