Weather risk struck – Soon the price of electricity may rise significantly

According to a new forecast, wholesale electricity in Finland will cost up to 63 percent more at the end of the year than at the same time last year. Last autumn, in August–December, the taxable average price of wholesale electricity was just under 6 cents per kilowatt-hour, now the price can rise to more than 9 cents.

This is what one of the largest energy traders in the Nordics, a Dane, predicts Mind Energywhich buys and sells energy for about 70 terawatt hours per year.

And that’s not all. The increase in electricity prices is even more dramatic in the so-called low electricity counties of the Nordic countries, in the SE1 and SE2 regions of Sweden and in the NO4 region of Northern Norway.

128–130 percent more expensive electricity is delivered to Swedish regions and 179 percent more expensive wholesale electricity to Northern Norway compared to the same time last year.

The change is significant compared to last year, and it has also surprised electricity market participants – at least in part. Already at the beginning of the year, the price of electricity in Finland has been clearly more expensive than last year. Prices have so far been 76 percent higher than in the first months of last year, Mind Energy’s country manager Kimmo Kuusinen states.

Consumption statistics are lagging behind, but according to the monthly statistics of the Energy Industry, Finland’s January-March electricity consumption has increased by 10.4 percent. The increase in consumption alone does not explain the large price increase.

The consumption of the rolling 12 months has risen clearly less – 5.6 percent – ​​compared to the same period.

The reasons for the higher price can be found in the electricity production structure in the Nordic countries. Pohjola, which is dependent on water, is now facing the consequences of drought really harshly. The water reserves in the Nordic region, i.e. in practice especially in Norway and Sweden, are at their lowest level in ten years.

At the same time, gas prices in Europe have risen sharply due to the geopolitical uncertainty caused by the closure of the Strait of Hormuz. There is great uncertainty in European natural gas deliveries, which also spills over into electricity futures prices in the Nordic countries.

According to the forecast of Mind Energy’s meteorology team, it is unlikely that the water situation will normalize during the summer. The likelihood of another El Niño weather phenomenon this summer is high, further increasing the risk of prolonged warm and dry spells.

In both Europe and the Nordic countries, there is a 65 percent probability that the coming summer will be drier and warmer than usual. This has been foretold in Britain, for example, where a new May heat record was measured this week.

Heat waves increase the risk of companies predicting the price of electricity. Now, high levels of energy protection really matter. What about households? Norway and Sweden protect their own households with such a low threshold that Finland is not capable of.

An important question for many is whether the forecast is a possible sign of a permanent price change in Finland. The answer to that is: it is not. The years are not brothers to each other, prices vary greatly both seasonally and within a day.

That’s why it’s essential to have flexibility to keep your electricity bill under control.