Electricity market

1.1.4 Electricity market

The average market price of spot electricity on the electricity exchange (system price) was EUR 26.91 (20.98) per megawatt hour. The price level in the Nordic electricity markets trended downwards for an extended period during the first half of 2016, but rebounded during the summer. The drivers behind the price increase include weakened hydrological conditions as well as price hikes in fossil fuels and emission rights.

In 2016, prices on the Finnish wholesale market were higher than they were in other Nordic countries. The overall increase in Nordic prices made the price disparity between Finland and Sweden less pronounced and, as a result, congestion hours between Finland and Sweden decreased significantly during the latter half of the year. In addition to the increased Nordic price level, another reason for the decrease in congestion hours and decreased price disparity was the completion of the NordBalt transmission link between Sweden and Lithuania during the first half of 2016.

Fingrid accrued EUR 37.5 (86.8) million in congestion income from the cross-border power lines between Finland and Sweden. EUR 29.9 (24.3) million of this was accrued during the first half of 2016 and EUR 7.6 (62.5) million during the second half of the year. The links between Finland and Estonia generated EUR 2.4 (4.2) million in congestion income. All the congestion income accrued by Fingrid during 2016 was used for maintaining cross-border transmission capacity and for upgrade investments.

The imports from Russia increased to 5.9 (3.9) terawatt hours. Despite the increase, electricity imports from Russia to Finland have decreased significantly in recent years, and the hourly import volumes from Russia have varied considerably. In addition to Russia’s capacity mechanism, the reduction in electricity trade is attributed to increased electricity prices in the country.

In spring, Fingrid published a discussion paper on the challenges of the electricity market and various alternative solutions to them entitled “Electricity market needs fixing – What can we do?”, which sparked a lively debate. Fingrid’s consultation request was responded to by a total of 36 industry operators, associations, research institutions and private citizens. During the second half of the year, Fingrid published a summary of the feedback, which contained suggestions for various routes to a market-based green electricity system.

The operating capacity of the electricity market and the sufficiency of electricity supply became national topics due to the bitter cold of January 2016. As the consumption of electricity broke records, the topics of meeting consumption needs and national self-sufficiency in terms of electricity were widely debated.

Roughly half of the cross-border transmission capacity between Finland and Sweden is provided by the Fenno-Skan links, i.e. high-voltage DC connections. Several measures were started by Fingrid early in 2016 to improve the reliability of cross-border transmission capacity. Thanks to the improvements, it was possible to keep interruptions very brief, and the availability of the connections has been clearly better compared to previous years.

Fingrid Datahub Oy, a company focused on the transfer of retail market information, was established on 16 February 2016. The task of the subsidiary, wholly owned by Fingrid, is to implement a centralised information exchange system for the electricity markets, i.e. a datahub, in which the exchange of information between retail sellers and distribution system operators is concentrated into a single service. This makes the exchange of information in the retail electricity market more straightforward and efficient. Data exchange among retail markets is needed in managing the various business processes of the electricity markets, such as balance settlement, an end user’s change of address and a change of seller, for example. The system will facilitate the processing of measurement data, simplify and speed up client agreement events and improve the reliability of the service.

The implementation of European network codes required by the European Union proceeded in Finland, as Fingrid established a network code forum that is open to all market parties. The forum promotes public debate on all matters related to network codes and aims to gather the views of stakeholders as well as to complement the public hearing processes related to implementing the network codes. The network code forum convened three times during the year under review.

The Finnish, Norwegian and Swedish TSOs continued with the switchover to shared Nordic balance settlement. The jointly owned company eSett Oy, which Fingrid owns one third of, aims to start up operations in spring 2017.

In September, the Ministry of Economic Affairs and Employment set up a working group to look into the role of smart grids in the electricity market. The aim of the working group is to forge a common vision of future smart grids and to propose concrete measures for using smart grids as a means of increasing customers’ opportunities to participate in the electricity market and contribute to maintaining a secure supply of electricity. The members of the working group broadly represent the stakeholders in the sector, including active participation by Fingrid.

Electricity market Jan-
Dec/16
Jan-
Dec/15
Oct-
Dec/16
Oct-
Dec/15
Nord Pool system price, average €/MWh 26.91 20.98 34.42 21.92
Area price Finland, average €/MWh 32.45 29.66 37.48 30.59
Congestion income between Finland and Sweden, € million* 75.0 173.5 3.9 44.1
Congestion hours between Finland and Sweden %** 32.7 47.1 10.9 47.4
Congestion income between Finland and Estonia, € million* 4.7 8.4 0.1 1.6
Congestion hours between Finland and Estonia % 9.7 12.0 2.8 9.1