HS wrote on Tuesday, based on the announcement sent by the CEO of the electricity company Väre, that the electricity market would have been close to the maximum market price on Tuesday. According to experts, the review was too simple.
of the electricity market by looking at the demand and supply curves, it was possible to conclude on Tuesday that a decrease in electricity production or an increase in demand by only 500 megawatts would have raised the price of electricity close to the market’s technical maximum, i.e. four euros per kilowatt hour.
The CEO of the electricity company Väree drew attention to the matter Juha Keski-Karhu in his announcement, inspired by in HS article on the subject.
HS received a lot of feedback on the article, according to which the review was too mechanical. On the electricity exchange’s one-hour supply and demand curves, it really seems that if one of the curves moved only 500 megawatts on the horizontal axis, the curves would intersect only at the maximum price. The reality is more complicated because the curve does not take into account how import connections would react.
The realized tax-free price was at its highest on Tuesday at around 500 euros per megawatt hour, or 50 cents per kilowatt hour.
Electric company Vattenfall’s senior portfolio manager Juho Kinnin According to If the demand had been greater and the price had really started to rise, the supply would also have appeared. It would have restrained the price increase.
For example, electricity was exported from Finland to Estonia, and the southern transmission connection from Sweden was not in full use either. At a certain price level, well before four euros, exports would probably have turned into imports from Estonia, and imports from Sweden could also have increased.
“The electricity market is quite dynamic in such a situation. In addition to the fact that electricity could have come from Sweden and Estonia when the price went up, there could have been so-called block offers below,” says Kinni.
Block offers are, for example, offers given for several hours, which are triggered at a certain price level. So, for example, an industrial plant can stop a process if the price of electricity rises high enough for several hours. These offers do not appear in the individual hourly supply and demand curves.
In reality, demand would probably have decreased if the price had risen sufficiently. Similarly, some power plants have been able to give block offers, i.e. when the price rises enough for several hours, it is worth starting the power plant, even if the one-hour curve does not show this offer in the supply curve.
Also Director responsible for the electricity market in the energy industry Pekka Salomaa considers the estimate of four euro prices to be improbable.
“We have power plants that can be put into use if the price is very high for, say, five hours,” he says.
Electricity market operators naturally strive to understand and model the operation of the market as accurately as possible, but in the current exceptional situations it is challenging.
It can therefore be stated that the prices probably would not have risen to the maximum, but the reaction of prices to the increase in demand cannot be assessed very precisely when the market is abnormally tight.
Power during the summer and autumn, stock exchange prices have been up to ten times higher than the prices of a year ago.
“Especially such extreme situations are really challenging, because there is no experimental data on them. We don’t know how the market will react in these situations,” says Kinni.
The market has no experience of which companies will perhaps put the whistle in the bag, if the price of electricity rises, for example, to more than a euro per kilowatt hour for several hours.
According to Kinn, the interest of business customers in participating in the price flexibility of the market has grown in any case.
Finland is part of almost the entire European electricity market, so even Central European prices are reflected in Finnish prices. It makes it even more difficult to understand the price dynamics of the market.
“We should be able to form a picture far beyond the neighboring countries, so that we get a true picture of what happens in such extreme situations,” says Salomaa.