The electrical power situation in Finland is clearly better than it was last winter.
The Olkiluoto 3 nuclear reactor is now in operation and more new wind power capacity has been added to the grid.
"We are in a historic situation - we produce more electricity than we consume," points out energy market professor Samuli Honkapuro of the Lappeenranta–Lahti University of Technology, LUT.
A year ago, following the Russian attack on Ukraine, Central Europe was crippled by an energy crisis, a development which also raised prices in Finland.
During the present season, electricity has been up to three to six times cheaper compared to last year. For example, in October, the average price of electricity on the spot market was 4.67 cents per kilowatt-hour, while a year ago it was 14.07 cents.
"We are now much more detached from the price effect of Central Europe and the Baltic states," says Pekka Salomaa, director of the industry association Finnish Energy.
Meteorological studies have also disproved the common misconception that winter is less windy than other times of the year. Even if there is no wind at ground level during periods of freezing high-pressure weather, conditions are different at an altitude of more than a hundred meters, points out Jenni Latikka, a specialist at the Finnish Meteorological Institute.
"At the height of the wind turbines, winter is the windiest season," Latikka says.
Futures indicate reasonable pricing
No expert can predict what electricity will cost this winter. The best indicators are futures, which represent the market's estimate of upcoming prices.
The Nordic futures price is on average 9–10 cents per kilowatt-hour (kWh) for December–February and around 7–8 cents for March–April.
Periods of severe cold, windless days and possible interruptions in electricity production, or electricity transmission, can cause large price fluctuations from one day or week to the next.
The risk level in Finland is a little higher than in the region as a whole, for example due to the risk of intense cold, so about one cent can be added to the Nordic futures prices to get a more accurate forecast of Finnish prices.
"Still last summer, it looked as if the futures prices in Finland would be lower than the Nordic average. Olkiluoto 3's maintenance work and the risk of severe cold have, however, slightly increased the price," explains Marko Pikkarainen, the chief analyst at the power utility Lumme Energia.
"However, in general, futures are low compared to last year," he continues.
Spot or fixed-price contract?
Many consumers are now wondering which would be a better deal – paying spot prices, or signing up to a fixed-price, fixed-term contract.
The average price of electricity on the exchange has remained below 10 cents per kWh all year, and in September-October it was at just over four cents per kWh, including VAT.
For fixed-price contracts, the lowest price now on offer is around 8–9 cents per kWh, with a commitment to a two-year contract period.
In the long term, the spot price is the cheapest option, says LUT professor Samuli Honkapuro.
"With a fixed-price contract, the consumer always pays for the utility to assume the price risk. It a matter of consumers buying themselves peace of mind," says Honkapuro.
However, electricity purchased at the exchange price can be very expensive one month and very cheap the next. One benefit of a fixed-price contract is that it avoids large fluctuations in electricity bills and eliminates concerns about when its most advantageous to use electricity.
"It depends on what one values. There is a significant savings opportunity in the spot price contract if you can use electricity during favourable hours. But a fixed-price contract offers some freedom," Honkapuro continues.
Finnish Energy's Pekka Salomaa estimates that around 15–20 percent of consumers are now be relying on spot prices to save them money.
"There is no universal answer to which type of contract is better. It's worth thinking about your own electricity use and whether the kind of flexibility that would bring savings from exchange prices is a possibility," says Salomaa.
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