Current issues in August: what is happening in the electricity market?
The situation in the electricity market has given rise to a wide debate in recent times. Last autumn, the prices of the Nordic power exchange rose significantly. The same trend has also continued this year: the prices have more than doubled since the beginning of the year.
This has been influenced by many elements. Last autumn, the reason for the rise in prices was the disproportion between production and demand. Power production was restricted by, e.g. the exceptionally low level of water resources in Norway and the generally low gas reserves in Europe. On the other hand, demand was spurred by global industrial production that recovered rapidly after the COVID-19 pandemic. This year, the war in Ukraine has resulted in uncertainty in the market. For this reason, factors having an impact on the price of energy, especially the cost of raw materials such as gas and coal, may vary greatly and rapidly in the global market. It can also be estimated that the considerably reduced gas imports to Europe will put pressure on electricity prices.
Finland is not immune to changes and uncertainty in the global markets, and unfortunately the trend in the global market prices is manifested in the electricity prices also in the entire country. However, prices in Finland are still among the lowest in Europe.
Due to the constantly changing situation in the electricity market, we have received a lot of queries especially in relation to contracts and prices. We wanted to share a few of our frequently asked questions and our answers to them.
Are the price increases permanent?
It is always difficult to forecast market prices. We are living in a globally exceptional situation in the midst of the war in Ukraine and the transition of the energy sector.
It is generally believed that electricity market prices are likely to fluctuate in the short term due to global instability. The green transition is supported with various aids both at the EU and the national level. Especially in the transition period when, for example, wind power production plays a significant role, we will see daily and hourly volatility to an increasing extent. As the transition progresses, renewable energy production develops and new technological solutions are established and scaled, it is likely that spikes in electricity prices will also level off.
How do the market prices impact my contract prices?
How quickly the market prices will have an impact on contract prices depends on your contract type and your individual situation.
If you have a contract valid until further notice, the prices change a few times a year and you will be notified of the new price level about one month before the change enters into force. Market prices have an impact on the price level of the contract because, in the same way as other companies, Helen buys the electricity supplied to customers from the market in advance at the market price of a certain moment. The price at this moment therefore has an impact on the customers’ final contract prices. You can sign up for a contract valid until further notice at any time, and you can also cancel it whenever you wish.
If you have a fixed-priced fixed-term contract, your price level in terms of the basic charge and the energy fee remains unchanged throughout the contract period. Helen will not terminate this contract, and you as a customer cannot cancel it in the middle of the fixed term unless you move house. Helen sends its customers a reminder to renew their contract well in advance, and therefore customers always have plenty of time to renew their contract. With respect to new contracts, the prices change almost on a daily basis, taking into account the price predicted by the market for the entire fixed term (e.g. 24 months). Therefore, a price that was valid yesterday may have changed quite rapidly overnight if the market fluctuates in terms of the next 24-month price levels.
If you have an exchange electricity contract, your price level changes when the electricity exchange prices move at the hourly level. In addition, you pay a fixed margin. This contract can be sign up for and cancelled at any time. The advantage of an exchange electricity contract is the possibility to make use of low-cost hours by directing your own electricity consumption to exactly those hours.