Twofold increase in electricity trade between the Baltic states and Europe
Over the last four years, the trading capacity between the Baltic and European electricity market has doubled and there has been a growth in cross-border trade, according to data by the Latvian transmission system operator JSC Augstsprieguma tīkls (AST).
"The rapid growth of cross-border trade has been achieved through efficient investments in the Baltic transmission network infrastructure, increased efficiency of the transmission network and an improved operation model of the electricity wholesale market. International trade has resulted in increased competition between electricity producers in a broader region. The plan for the next five years is to continue to significantly increase the cross-border trade capacity both within the Baltic states and between the Baltic and European energy markets," says Gatis Junghāns, Member of the Board of JSC Augstsprieguma tīkls.
To ensure the integration of the Baltic states into the European power system, the Baltic transmission system operators JSC Augstsprieguma tīkls, Elering (Estonia) and Litgrid (Lithuania) have consistently been implementing integration projects over the past decade. The best indicators of the success of integration are the market performance results.
Last year, the Baltic power transmission interconnection capacity with the European market reached 2,200 MW, which is more than double compared to 2014 (1,000 MW in 2014). Electricity trade between the Baltic states and Europe reached 8.7 TWh last year, whereas four years ago it only amounted to 3.5 TWh. This shows that both during electricity shortages and surpluses, the Baltic market participants have access to a broader and more competitive market for more economically priced deals.
Another key indicator of the degree of integration of the electricity market is the convergence of electricity prices between countries, particularly observed after 2016, when the NordBalt and LitPol interconnections were put into operation. Electricity prices converged both among the Baltic states and between the Baltic and Scandinavian regions.
While back in 2014 the average spot price difference between Latvia and Estonia was 12.5 EUR/MWh, last year it decreased more than four times reaching 2.83 EUR/MWh. The convergence of prices is an indicator of a higher degree of competition because, as the prices become more aligned, the competition between producers is not restricted by the transmission network, thus contributing to an overall reduction in price.