Price forecasts hidden in exchange electricity – “Would be valuable information”

The next day’s spot prices for exchange electricity are published the previous afternoon. However, industry players have different models at their disposal that predict the price of electricity on the stock exchange for several days ahead.

However, these forecasts are not available to all consumers.

“For ordinary electricity users, it would be valuable information if the forecasts showed, for example, a big price change in two days. With that, you could, for example, postpone the charging of an electric car or the other way around: charge before electricity becomes more expensive,” professor of electric power engineering at the University of Tampere Pertti Järventaus characterizes.

He says that he brought up the forecast issue in different contexts.

“During the last year, a couple of electricity sales companies have adopted this as a service for their own customers. It can also serve as a good competitive factor.”

According to Järventau, forecast models are made in the industry for about a week ahead.

“The further we go, the more the uncertainty grows”, states Järventausta and compares modeling to weather forecasts.

“Some operators are hesitant with this because they assume that customers consider the forecast to be the final price. It could arouse negative feedback if the forecasts do not match. There is a risk here, but it should convey a strong message that it is specifically a forecast. Personally, I would start with a forecast period of about three days.”

Järventausta says that he has seen the forecasts of stock exchange electricity.

“As far as I understand, they have relatively good reliability, knowing, however, that a failure of, for example, a larger power plant would swing the price very quickly.”

So what would it take to make forecasts more public? According to Järventautäus, he has no known real “obstacles”.

“Some operator could offer such a forecast in some public service. Perhaps the biggest question is who will pay for it.”

Maximum price “possible”

On Tuesday, the price of electricity on the stock exchange temporarily rose to more than 80 cents per kilowatt hour. Järventau brings to mind January 5, 2024, when the highest price for exchange-traded electricity was more than 2 euros per kilowatt hour.

“At that time, several traditional power plants were out of action due to faults or maintenance downtime.”

Now the price has been affected by, among other things, a long period of frost without wind and freezing of wind turbines.

“If, for example, Olkiluoto had been out of use on Tuesday, the price of electricity on the stock market would have risen to well over a euro, maybe even over two euros per kilowatt hour,” Järventaus says.

“In addition to Finland’s own production and consumption, the price increase is also affected by Sweden’s electricity production, cross-border transmission capacity and the situation in the Baltics. The calculation is a very complex whole.”

The theoretical maximum price of exchange electricity is 4 euros per kilowatt hour. It could have been possible even on Tuesday, according to Järventautta, although “very unlikely”.

“A large part of the purchase offers in the electricity market are ones where electricity is offered at 4,000 euros per megawatt hour. We are ready to pay anything for it, because electricity is a necessity commodity. If there is less production than demand and if the capacity of the cross-border transmission connections does not allow for more transfer, and the intersection of the offers and the demand curve falls exactly on that same point, then exchange electricity costs 4 euros per kilowatt hour,” explains Järventau.

“It might rise that high in some situation.”