Eastern European Markets

April the 12th, 2012

New phenomenon in electricity trade between Russia and Finland:
Electricity import volumes from Russia vary depending on market situation

The volume of electricity imported to Finland from Russia has varied considerably within a single day in recent times. This is a new phenomenon associated with changes in the price of electricity in the Nordic and Russian electricity markets. Electricity trade between Russia and Finland is undergoing a change in other ways, too. The goal is to increase two-way trade between the countries.

Electricity has previously flowed from Russia to Finland as steady imports at 1,300 megawatts per hour. At present, imports go up and down depending on the price of electricity on both sides of the border. Up until last autumn, the sales of electricity from Russia to Finland were profitable at almost all times. However, in recent times electricity has been more expensive in Russia than in Finland at daytime, and sales to Finland have been lucrative mainly at night and on weekends.

“The basic principle is that electricity always flows from an area of a lower price to an area of a higher price. We are not accustomed to fluctuations in electricity imports from Russia, but now electricity trade between Russia and Finland is becoming more market-driven. The price of electricity determines the direction of cross-border electricity transmissions, which is why we need to upgrade our trading systems to enable electricity exports to Russia in the future,” said Jukka Ruusunen, President of the Finnish electricity transmission system operator Fingrid, in the company’s electricity market seminar today.

In August 2011, a trial commenced in electricity trade between Russia and Finland, whereby 100 megawatts of the total transmission capacity between the two countries is reserved for use by the Nordic electricity exchange. Earlier, electricity imports from Russia were based entirely on bilateral trade, and the import volume was set in advance, irrespective of the market price. In the new procedure, the delivery volume is determined in the electricity exchange by the market situation.

“So far, this procedure only applies to 100 megawatts while the total transmission capacity is 1,300 megawatts. However, we believe that the share of exchange trade can be increased gradually. This requires the establishment of a kind of bridge between the two different markets.”

Launching direct trade of electricity between Russia and Finland is a first step towards more market-focused procedures in electricity trade between Russia and the EU. It also serves as a model for EU-level development work, which has been launched between ENTSO-E (European Network of Transmission System Operators for Electricity) and Russian parties. The objective is an increasingly broader and more effective European electricity market.

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