Heatstroke in Europe’s Grid // Electricity Prices Rise Due to Heat

The abnormal heat has led to a sharp increase in electricity prices in the Baltics and Eastern Europe: spot prices in some countries at the moment exceeded record levels of € 100 per 1 MWh. The demand for energy has been growing since the beginning of June, but due to weak winds, more expensive thermal power plants using fossil fuels have to cover the deficit. Another reason for the high prices is the inability to increase the supply of electricity from Russia due to the planned repairs of the grid infrastructure in the Baltics.

Spot electricity prices in a number of EU countries continue to break records due to the abnormal June heat. A noticeable rise in prices is recorded in the Baltic countries. The average price in Lithuania for the week from 21 to 27 June was € 85.5 per 1 MWh, having increased by 28% since the beginning of the month, according to the Nord Pool exchange. This is the highest price level for the country over the past six years since the fall of 2015. In Estonia, the average weekly spot price also increased by 24%, to € 76.15 per 1 MWh, in Latvia – by 37%, to € 85.5. At the same time, at the moment, prices in all three countries exceeded € 100.

Lithuania is an energy-deficient country and is self-sufficient in electricity for only 40%. According to the Lithuanian system operator (Litgrid), the reason for the price jump is the rise in the cost of electricity supplies from Sweden and Poland. The increased demand for electricity due to the heat throughout Europe is covered by the expensive production of traditional fuel-based thermal power plants, it follows from the message of Litgrid. At the same time, the cost of such energy is also influenced by the rise in prices for CO2 emissions, which now reach € 55 per tonne.

Another important factor affecting prices in the Baltics is the supply of electricity from Russia. Russia is now exporting electricity through Latvia, but in June the capacity between the countries was limited, Nord Pool told the Estonian edition of ERR. Inter RAO (the operator of the export-import of electricity in the Russian Federation) told Kommersant that the Baltics are undergoing planned repairs of networks, the throughput is very small.

Kadri Simson, European Energy Commissioner, 11 February

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The rise in electricity prices was also observed in other EU countries. For example, in Poland, according to the TGE exchange, prices per week exceeded € 88 per 1 MWh. Due to the weak wind, the production of wind farms there was below 500 MW, and solar panels, despite the heat, rarely exceeded 2 GW, notes S&P Global Platts. The Czech Republic set a record price of € 106 during peak hours on June 24, according to the OTE exchange. Electricity demand in the Czech Republic surged on June 24, including after a hurricane that damaged the country’s grid infrastructure. In Hungary, spot prices also jumped above € 100, and on June 23, the country recorded a record peak in consumption of 6.8 GW. In Russia, the peak consumption was updated twice: on June 23, the figure reached 123.7 GW.

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The rise in prices in some EU countries is due to increased demand due to air conditioning load, a decrease in available capacity due to heat and scheduled repairs of power plants, which are usually scheduled for the summer, says Sergei Rozhenko from KPMG. At the same time, in the markets of the Scandinavian countries in Finland and Sweden, the growth was only temporary on June 22-24, on the other days the prices remained at the level of € 31-33 per 1 MW • h, the analyst notes. In general, the energy systems of the EU countries cope with the load during periods of record heat, the expert said.

Dmitry Stapran of PwC notes that due to the heat in Germany, prices reached 13-year highs, and in France – three-year highs. “Several factors coincided – a sharp increase in electricity consumption due to the need for air conditioning amid heat, a decrease in the production of wind energy – the main source of renewable energy sources in Europe, the withdrawal of traditional generation capacities. The introduction of renewable energy in Europe is a long-term trend made on the basis of a conscious economic and political choice. Changes of this magnitude cannot be painless, ”says the analyst. Now the share of renewable energy sources on average in the EU exceeds 20% in total electricity generation, and in Germany it is more than 50%. Now, recalls Dmitry Stapran, they are discussing raising the pan-European targets for the share of renewable energy from 30% by 2030 to 40%.

Polina Smertina

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