New trends observed in the electricity market in March

With the arrival of spring, changes are noticeable in the Latvian and Baltic electricity markets, indicating a need to increase the capacity of electricity storage facilities. Information compiled by the energy company Enefit for March shows that the wholesale price of electricity was significantly lower – EUR 91.99/MWh – than in February, when it reached EUR 151.8/MWh. However, price fluctuations within a day have increased.

The lower price compared to the previous month is mainly due to a twofold increase in wind energy production in the Baltics, reduced heating and an increase in solar energy production. However, price fluctuations have been significantly influenced by the decline in hydroelectric power generation in Latvia, which also affects the other Baltic countries. In March, hydroelectric power generation in Latvia fell to its lowest level in more than three years.

In March last year, Latvia generated almost 695 GWh of electricity from hydropower, compared to approximately 271 GWh in the same period this year, a decrease of almost 61%. As a result, there was a greater reliance on wind, solar and fossil energy. This trend is likely to continue in April, as hydroelectric power generation remains low, putting pressure on prices during periods of high electricity demand.

Enefit energy market research and analysis expert Inese Karpoviča predicts that price fluctuations will continue in the coming months, as the Baltic electricity market is influenced by two main factors: unpredictable, but cheap renewable energy and predictable but more expensive fossil energy. "Electricity import capacity is limited due to the interruption of the EstLink 2 electricity cable, and low hydroelectric power generation continues in Latvia and, to some extent, in Lithuania. Wind and solar energy production in March was record high in the Baltics as a whole, at 718 GWh. These factors have created a new trend in the Baltic market – sharp price fluctuations during the day, which could continue in the coming months," predicts I. Karpoviča.

The growing importance of solar energy is expected to reduce prices during daylight hours in April. However, prices could rise in the evenings, as renewable energy alone will not be enough to meet demand during peak hours. In April, prices could be up to a third higher than when EstLink 2 is operational, and could even double from May onwards. The solution to such price fluctuations and their mitigation would be to increase the capacity of electricity storage facilities.