With imports declining, the share of fossil fuel-based electricity generation in Latvia increased significantly in October

In October, the average price of electricity in Latvia was 10.51 cents/kWh, which is 15% higher than a year ago, while compared to September, it was on average 25% higher, according to information compiled by the energy company Enefit. The increase in the average price of electricity can be explained by seasonal changes, which are likely to significantly increase prices in the morning and evening hours in November.

As repair work on the Estonia-Latvia interconnection continued, imported electricity capacity decreased in October, resulting in average electricity prices in Latvia and Lithuania being 17% higher than in Estonia (8.98 cents/kWh). During peak hours, prices in Estonia were reduced thanks to imports from Finland, while Latvian consumers had more limited access to such imports. This shows how sensitive Latvia is to the availability of imports and how important the flow of electricity from the Nordic countries to the Baltic region is.

In October this year, electricity imports compensated for about half of Latvia's consumption, thus slightly reducing Latvia's import volumes in historical terms, as the average import share in October over the last five years has been around 56%. As a result, fossil fuel energy production was also more intensive than usual, accounting for 22% of demand in October, compared to a five-year average of 13.2%.

Solar and wind energy production in Latvia decreased and provided only about 5% of total demand, while in Estonia it accounted for about 20% and in Lithuania as much as 47%. Our neighboring countries are strengthening the Baltic electricity system with solar and wind energy production, while Latvia is helping to reduce prices with its strong hydroelectric power production, thus creating a useful symbiosis between the three neighboring countries. However, as hydroelectric power generation has declined seasonally, Latvia has become more dependent on wind energy from Estonia and Lithuania, as well as imports from the Nordic countries.

"It is predicted that there will be no significant increase in hydroelectric power generation by the end of the year. Of course, this will depend on precipitation and temperature. As a result, Latvia will continue to supply the region with its natural gas production capacity, supplemented by a small amount of hydroelectric power," explains Enefit Market Research and Analytics Department Manager Romāns Tjurins.

Thus, the frequency of cheap electricity prices will largely depend on what is happening in the other Baltic countries: if there are strong winds throughout the region and interconnection capacities are operating at full capacity, prices may fluctuate between 5 and 8 cents/kWh. If there is no such renewable energy production, prices may rise to more than 10-15 cents/kWh.

As the weather becomes more wintry, we can expect a seasonal increase in demand in the Latvian electricity system due to heating, which will result in the usual winter pattern – significantly higher prices in the morning and evening hours and relatively lower prices during the day and at night.

"Last November showed that in the morning hours from 7:00 to 9:00 a.m., electricity prices were on average one-third higher than the monthly average price. In turn, during the most expensive evening hours, from 4:00 p.m. to 6:00 p.m., prices were on average almost 50% higher. Price dynamics will be determined by the availability of imports from the Nordic countries, wind production in the Baltics, and air temperature. Everyday consumers should closely monitor electricity prices on a daily basis or, depending on their consumption, consider a fixed-price contract to protect themselves from sharp fluctuations," recommends Romāns Tjurins.