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Market Price Reduced 13% Due to Operation of NordBalt and LitPol Link
2017-01-04

Market Price Reduced 13% Due to Operation of NordBalt and LitPol Link

In 2016, the average price for electricity in the Lithuanian bidding area of Nord Pool was the lowest in the history of the exchange: EUR 36.5 per megawatt hour (MWh). The price was 13% lower compared to 2015 and 25% lower than in 2014 and 2013. 
 
‘The impact of NordBalt and LitPol Link, the new power links, exceeded our expectations. Lithuania and Latvia are the only countries in the Baltic-Nordic region where the average market price for electricity has dropped last year. The new links enabled us to diversify the sources of electricity import, and we have been benefiting from this from the first days of the links’ operation. Apart from opening the way to Europe, they have changed the behaviour of players in the electricity market. The year 2016 has shown that now we are dependent on events and trends in Poland and Sweden, and local producers have to learn to compete under the new conditions‘, - said Daivis Virbickas, CEO of Litgrid, the Lithuanian electricity transmission system operator.
 
In 2016, the availability of LitPol Link was 96%, and that of NordBalt 78% (time per year). The loading of cross-border links connecting Latvia and Estonia, the insufficient capacity of which had influenced the price difference was reduced by one quarter compared to 2015.
 
According to Daivis Virbickas, the first year of operation of the power links was very important to the Baltic States, Poland and Sweden: ‘During the first six months of the year when the prices in Poland were higher than those in our bidding area, the electricity flow to Poland prevailed in LitPol Link. In the early autumn, when generation at hydropower plants in the Nordic dropped considerably, Sweden started using NordBalt as a source of import. ‘
 
November became a historically important month for Nord Pool as the average electricity price in the Lithuanian and Latvian bidding areas was lower than that in Sweden.  
 
The average annual price in Nord Pool system grew by 28% up to EUR 26.9 MWh. The price increase varied between 5% and 25% in the Estonian, Finnish, Danish and Swedish bidding areas; in Poland, the price remained stable at EUR 37.3 MWh.
 
‘In 2017, the market price for electricity will depend on the scope of generation at hydropower plants and wind farms of the Nordic countries. As the generation of hydropower plants decreased in the autumn of last year, one may forecast that the prices will not be low in the first quarter of this year. Forward contracts show that in the Lithuanian bidding area the average price this year can be slightly higher than the past year‘s price and range from EUR 33.9 to EUR 37.7 per MWh‘, said Daivis Virbickas.
 
Electricity started flowing in LitPol Link, which extends between Alytus and Elk in Poland and is 163 km long, in December 2015; normal operation of the power link started in February 2016.
 
During the year, the power link served as a support for the power system‘s reliability as well. It was used by both Lithuania and Poland for this purpose several times. Litgrid used the power link as an emergency reserve during 141 hours, and PSE, the Polish transmission system operator, during 18 hours. 
 
NordBalt, a 450 km sea cable connecting Lithuania and Sweden was put into trial operation in February 2016, and normal operation was started at the end of June. After the end of trial operation, LitPol Link disconnected five times and NordBalt six times. Failures in NordBalt’s land cable were recorded two times; other disconnections occurred due to errors in the control and safety systems.
 
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