Lithuanian president: Nord Pool’s price-setting algorithms need to be changed

VILNIUS – The problem of sky-high electricity prices could only be truly resolved by increased generation but it is also necessary to change price-setting algorithms used by the power exchange Nord Pool, Lithuanian President Gitanas Nauseda has said.

“They can trim the price ceiling but, unfortunately, they cannot truly resolve the problem. And the solution to the problem basically lies in generation, generation and, again, generation. We must generate more electricity, otherwise we will be dependent on imports…,” he told reporters on Vilnius on Thursday.

“The methodology [of price setting at Nord Pool] certainly needs to be changed because those abnormal things that we have seen recently, when smaller price bids were rejected because they [the amounts of energy specified therein] were too large for the demand-supply balance and this led to record-high electricity price on the exchange, such methodological shortcomings cannot be tolerated, to say the least,” Nauseda said.

Under the current Nord Pool's price-setting algorithm, even smaller price bids are rejected in some cases, with market participants saying that such an algorithm paradox leads to a situation when very expensive generation capacity capable of offering very specific amounts of energy leads to record-high electricity price on the exchange.