Record high electricity exchange price in Latvia in January

Last January, prices on the Nord Pool electricity exchange reached record highs, with the average price on the Latvian electricity market rising by 82.8% compared to December and reaching 15.3 cents/kWh. Information compiled by the energy company Enefit shows that this was the most expensive January ever, due to cold weather conditions, which not only rapidly increased consumption but also hampered energy production. Previously, such a sharp rise in electricity prices at the beginning of the year was only recorded during the energy crisis in 2022, when the average price of electricity in January rose to 14.4 cents/kWh.

The cold weather caused a significant increase in electricity consumption in Latvia – by 20% compared to December figures. This significantly increased the load on the power grid, as cheap wind energy was unable to meet local demand, production volumes at hydroelectric power plants fell sharply, and solar energy production was practically non-existent. Similar challenges were experienced throughout the Baltic and Scandinavian regions, also increasing the cost of imported electricity.

Lower wind intensity reduced wind energy production across the region. In addition, severe frost literally froze wind turbines in some cases. Therefore, even in suitable weather conditions, it was not possible to produce electricity at full capacity. This kept electricity import prices from the Nordic countries high, as they also lacked local capacity, especially in Finland. In Estonia, maintenance work was carried out at oil shale power plants, which meant that older, less efficient and more expensive power plants had to be operated.

"The Baltic countries effectively operate as a single electricity market, where changes in regional production directly affect Latvian consumers, regardless of their electricity supplier. Accordingly, the lack of cheap energy production capacity in all countries, combined with the unprecedented prolonged cold spell in recent years, forced the use of inefficient and expensive fossil fuel power plants," explains Enefit Market Research and Analytics Department Manager Romāns Tjurins.

Current forecasts indicate prolonged cold weather in the Baltic region, so high demand for electricity is expected. Electricity price dynamics are largely determined by weather conditions and how expensive energy production capacities are operated. It is expected that until the average air temperature rises, fossil fuel power plants will provide significantly higher production volumes than wind farms, keeping electricity prices high.

We cannot influence the weather, but smart electricity consumption is becoming a new consumer trend across Europe. It should be noted that electricity prices are increasingly based on wind and solar energy. This creates situations where prices are relatively acceptable at night in winter (e.g., 8-12 cents per kilowatt-hour), but from morning until early evening they reach almost 20 cents per kilowatt-hour.

As Romāns Tjurins explains, there are several ways to use this "rhythm" of price fluctuations to save money: "First of all, it is advantageous to sign a fixed-price contract for the winter season in good time. This ensures predictability and reduces stress related to rapid price increases. For example, in January, the average price of electricity between approximately 9:00 a.m. and 6:00 p.m. remained close to 20 cents per kilowatt-hour. Secondly, exchange tariff users can actively follow exchange prices and plan higher energy consumption – washing clothes, charging electric cars – during cheaper hours. Sometimes the price differences are almost double, and this can significantly reduce your monthly bill."