In July, the price of electricity in Latvia was 53% lower than a year ago

In July, the wholesale price of electricity in Latvia averaged 4.6 cents per kWh, which is 7% higher than in June, but significantly lower than a year ago, when it reached 9.8 cents per kWh. According to information compiled by the energy company Enefit, 53% of the price difference can be explained by the resumption of operations of the Estlink 2 (Estonia–Finland) interconnection and an unseasonal increase in hydroelectric power generation in Latvia.

One of the main factors that helped keep the average price of electricity lower than in July last year was the resumption of the Estlink 2 interconnection, which ensured greater imports of cheap electricity from the Nordic countries. As a result, in July, the price of electricity in Latvia was the same as in Finland for almost 20% of the time. Last summer, prices were significantly higher due to the interconnection outage, which limited supplies to the Baltic region and forced the use of more expensive electricity produced by fossil fuel power plants.

The unusually high increase in hydroelectric power generation in July also helped to keep prices low on average, covering about half of Latvia's electricity demand and 14% of the total demand in the Baltic region. At the same time, solar energy production played a major role throughout the Baltic region. During daylight hours in June and July, solar energy generated in the Baltic countries provided a total of 448 hours, or almost a third of the summer so far, at a price below 1 cent per kWh. This price was three times higher than in the same period last year. In July, solar energy accounted for more than a fifth, or 22%, of total electricity consumption in the Baltic States.

"Looking ahead to August, electricity prices will continue to be closely linked to renewable energy production volumes. However, several factors could put upward pressure on prices. Unusually high hydro production in Latvia, which has been well above normal this summer, is creating additional uncertainty. At the same time, transmission bottlenecks in the Sweden-Norway network may limit cheap imports of hydroelectric power from the Nordic countries via the NordBalt and Eslink interconnections," says Romāns Tjurins, Head of Market Research and Analysis at Enefit.

Tjurins also predicts that in August, with continuing changeable weather conditions, solar generation will help keep daytime prices low on sunny days, but during cloudy periods there will be an increased need for more expensive fossil fuel-based electricity generation in Latvia and Lithuania. Evening prices, on the other hand, will depend on wind strength and import volumes from the Nordic countries. Although summer continues and sunny, moderately windy days will still allow renewable resources to dominate, August could see a slightly greater role for more expensive fossil fuel production and imports in determining prices.