Electricity prices surge in the Baltics in early November, reaching an average of €414/MWh in Latvia on Monday

Wholesale electricity prices in Latvia, Lithuania and the wider Baltic region have climbed sharply in early November. On some days the daily average price in both countries exceeded €300 per megawatt-hour (MWh), and on Monday it reached €414 per MWh in Latvia. This directly affects customers whose bills are tied to the exchange price.

Gatis Junghāns, a board member of Augstsprieguma tīkls (AST), Latvia's electricity transmission system operator, said the average wholesale price in Latvia over the first nine days of November was €278 per MWh, more than twice the October average. He explained that the November price increase is being seen across Europe, except in the north.

Main causes

The AST representative links the increase mainly to the sharp rise in natural gas prices on the international market. This raises generation costs at local thermal power plants, which are needed in colder weather to meet growing demand and to replace shrinking renewable output. In October, solar and wind farms produced about 40% of the electricity consumed in the Baltics; in November the share is around 30%.

The energy company Latvenergo says the effect of high energy prices, caused largely by the conflict in the Middle East and resulting supply restrictions, is now showing up more clearly in the electricity market. Until now it had been softened by high renewable generation. As winter approaches, solar output falls by as much as 50%, while wind farms, whose capacity has grown by 59% this year, are currently producing significantly less than last week. Inflow on the Daugava river is a third lower than a year ago, and availability of Nordic nuclear plants is 55%, compared with 85% last year.

Transmission limits and repairs

Limited transmission capacity between Estonia and Latvia complicates the situation. Estonia has a sufficiently powerful link with Finland, whereas Latvia and Lithuania have fewer options for exchange with the Nordic countries. In addition, part of the interconnector capacity is reserved for balancing services, leaving less for the day-ahead market. In November the Baltic states imported a quarter of the electricity they needed, mostly from the Nordic countries.

Several thermal power plant units in Lithuania and Latvia, with a combined capacity of about 1,000 megawatts, are under repair. Producers plan to bring them back in the second half of November, which should have a positive effect on prices. Latvenergo notes that the fluctuations do not affect customers on fixed-price contracts. Junghāns stresses that the region needs to develop additional competitive renewable generation capacity.