Competition Authority: 2022 was year of price shocks in Estonia's electricity, gas market

TALLINN – 2022 was a year of price shocks in the Estonian electricity and gas markets, the Competition Authority says in its electricity and gas market review for 2022. 

Kulli Haab, head of the regulation service at the Competition Authority, said the changes that have taken place in the energy sector have been the subject of a lot of attention, as all residents were directly affected by the price increase.

"In addition, Russia's military aggression against Ukraine also had a significant impact on the security of supply and energy security for the global energy sector," Haab said in a press release.

The rise in energy prices, which started in 2021, continued in 2022. In 2022, the Estonian electricity system produced 7,533 gigawatt-hours (GWh) of electricity, 19.3 percent more than the year before. Imports amounted to 7,069 gigawatt-hours and exports to 6,138 gigawatt-hours.

Estonia's domestic electricity consumption was 8,464 gigawatt-hours. In the wholesale market, the trend continued in 2022 whereby imports exceeded exports, meaning that Estonia consumed more than it produced. The average price of electricity in Nord Pool's price area Estonia in 2022 was 192.82 euros per megawatt hour, 122.3 percent higher than the price in 2021. On Aug. 17, 2022, the maximum price of electricity on the Estonian electricity market was 4,000 euros per megawatt hour.

A big change in electricity market regulation took place in 2022 with the introduction of the universal service regulation on Oct. 1, which allowed electricity sellers to offer electricity to households as a universal service, that is, as a regulated price service. The cost price of the universal service is calculated on the basis of the three most cost-effective production facilities. On Sept. 29, the Competition Authority set the provisional universal service production price at 154.08 euros per megawatt-hour.

The most significant changes in the natural gas market were related to ensuring the security of gas supply and the large price increase, which started back in 2021. Russia partially cut off gas supplies to members of the European Union, which in turn affected the European gas price index TTF as well as consumption. The European Union responded by issuing a recommendation to voluntarily curtail gas demand by 15 percent.

Estonia decided to stop importing Russian gas by the end of 2022. The Baltic-Finnish region relied on liquefied natural gas (LNG) capacity from the LNG terminal in Klaipeda, Lithuania. However, as the capacity of this terminal was not sufficient to handle the region's entire gas supply in the second half of 2022, LNG reception capacity was developed in Paldiski, Estonia, in 2022, and an additional LNG terminal was set up in Inkoo, Finland.

According to the data of the GET Baltic gas exchange, the average price in 2022 was 130.24 euros per megawatt hour, marking an increase of 106.36 percent compared to the average price for 2021. By August 2022, the price of natural gas on the TTF exchange had risen to a record 339.20 euros per megawatt hour.

The Estonian Competition Authority exercises state supervision in the areas of competition, electricity, natural gas, district heating, mail, public water supply and sewerage, railway, aviation, and port services.