http://www.businessweek.com/news/2012-12-04/national-policy-may-hinder-inter-eu-power-trade-fingrid-says

Bloomberg News

National Policy May Hinder Inter-EU Power Trade, Fingrid Says

December 04, 2012

A patchwork of national energy policies may restrict cross-border electricity trade in the European Union similar to a slump in Finnish imports from Russia, according to Finland’s grid company Fingrid Oyj.

Power imports from Russia, which met more than 10 percent of Finnish demand in the past, dropped 64 percent in the first 10 months from a year earlier, Fingrid data show.

The European Commission, the bloc’s regulator, last month urged governments to avoid changes to power market designs through mechanisms known as capacity markets that reward utilities for guaranteeing back-up plants when renewable power falls short. Germany and the U.K. are considering the system. Finland’s eastern neighbor introduced a capacity tariff that made it unviable for it to export electricity since August 2011.

“The severe restrictions in power flows from Russia into Finland is a good example for the EU how capacity tariffs can almost kill electricity trading, due to a lack of co- ordination,” Juha Kekkonen, Fingrid’s executive vice president, said yesterday in an interview in Helsinki.

It is likely to remain uneconomical for Russia to export power to Finland for most of the next months as temperatures drop, Risto Lindroos, leading expert at Fingrid, said Nov. 28. This underpins baseload power prices and may contribute to temporary surges to 30- or 40-fold levels in case of colder- than-average temperatures, Lauri Konsen, a portfolio manager at Tampereen Saehkoelaitos, Finland’s fourth-largest utility, said Nov. 29.

Russian power for baseload delivery today cost 844.57 rubles ($27.30) a megawatt-hour in the Central, Ural and South Hubs, according to data compiled by Bloomberg. That compares with 61.43 euros ($80.29) in Finland, according to data from the Nord Pool Spot AS exchange.

“Russia’s capacity tariff of circa 25 euros a megawatt- hour keeps on rising, while the country’s natural gas prices are gradually climbing to global market levels, which makes it unviable to ship power to Finland” when also factoring in grid tariffs totaling less than 10 euro levied on both sides of the border, Kekkonen said.

To contact the reporter on this story: Torsten Fagerholm in Helsinki at tfagerholm@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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