Northern rains fail to ease expected Finnish power price rise

Heavy rain in northern Norway and Sweden will not prevent Finnish electricity prices from rising this autumn, Yle reports. Reservoirs remain low in southern Norway and northern Sweden, the areas most important to Finland’s electricity market.

Electricity prices in Finland are forecast to rise by as much as 70 per cent from last autumn’s low levels. Pekka Salomaa, a director at Energy Industries, said the estimates remained broadly unchanged.

Abundant water in northern Norway offers little relief because transmission connections to the region are limited. Electricity is currently considerably cheaper in northern Norway than elsewhere in the country, according to Norway’s public broadcaster NRK.

Northern Sweden is also important for Finland. Heavy rain has caused flooding in places such as Boden, and a local energy company has released several times more water through its power plants during the rainfall. However, the reservoirs have not yet returned to their normal level for this time of year.

Salomaa said short-term high water flows and the overall level of water stored in reservoirs were separate issues. High flows can reduce electricity prices, but low reservoirs in the key price areas for Finland could keep price expectations elevated for the autumn and coming winter, particularly during cold periods.

Rainfall in Finland has less influence on electricity prices because Finland produces much less hydropower than Norway and Sweden. Hydropower accounts for about 60 per cent of electricity production in Norway, 30 per cent in Sweden and 10 per cent in Finland.

Salomaa said Nordic hydropower remained important for balancing Finland’s electricity market, while wind power had become more significant. Strong winds in Finland can lead to electricity exports to Sweden while Swedish reservoirs are replenished. In calm weather, Finland imports large amounts of electricity from Sweden.

He said the most favourable weather for Finnish electricity consumers would be strong winds in Finland and rain in Sweden and southern Norway.

Electricity prices are also being affected by the impact of the United States and Israel’s attack on Iran and the resulting disruption to shipping in the Strait of Hormuz. This is influencing European natural gas prices, which in turn affect how much Nordic hydropower is needed in central Europe.

Electricity price forecasts could fall if the situation improves or if water reserves increase in the price areas important to Finland.