ICIS Power Horizon: Baltic states to enter higher power price period

Author: Vija Pakalkaite


This story has originally been published for ICIS Power Perspective subscribers on 21 December 2018 at 09:19 CET.

Average yearly wholesale electricity prices are to accelerate from 2020, ICIS Power Horizon modelling reveals. Nominal power prices are expected to peak in 2025 above €60/MWh in each Baltic state, growing from an average of around €48-52/MWh that Baltic market players paid in NordPool in 2018. From the late 2020s to 2030 prices are expected to fall due to expanding renewable energy capacity and the declining price of EUAs, but to remain above the 2018 levels.

Price forecast

  • Based on the ICIS  long-term price forecast, after the rapid price increase that Baltics have been experiencing in 2018, prices will remain at the current level until 2020 and then will increase further (please see the graph below)
    • Having paid for electricity on average €33-36/MWh in NordPool in 2017, in 2018 the Baltics experienced price upsurge: from the beginning of the year until mid-December 2018, average NordPool spot prices were around 43-45% higher than a year before (around €48-52/MWh)
    • Horizon modelling shows that the average hourly wholesale power price will remain close to the current levels in 2019 and 2020, but will subsequently increase to around €54/MWh in 2021
    • Power prices in each Baltic state are expected to continue increasing to a peak in 2025 above €60/MWh and will remain around that level for a couple of years before declining, but not reaching the 2017 or 2018 levels


  • There are several factors that influence the Baltic price forecast: fuel price assumptions, power price levels in interconnected countries and local capacity development
  • Fuel prices
    • We adjust fuel price forecasts with inflation, thus the long-term price forecast output is nominal and further to the future inflation has more accumulative impact on the forecast
    • For gas price inputs, we use front two calendar years for TTF as quoted by ICIS. From 2025, we take the long-term forecast from the IEA World Energy Outlook 2018 nominal, assuming 2% per annum inflation. Between the forward curve and 2025 we do a linear interpolation
    • There is no lignite or coal capacity in the Baltics, so the prices of those fuels do not have direct impact on the Baltic power prices
    • We use ICIS modelled prices of carbon allowances (EUAs), which are expected to peak at 2023 at price level above €40/tCO2e before declining through to 2030
    • Gas prices are assumed to fall for the first two years, which counterweights rising forecasted prices of EUAs
    • However, from 2021 to 2023, both the prices of EUAs and gas are predicted to rise in our modelling inputs, and this period is also marked by price acceleration in the Baltics
    • From mid-2020s, the when the EUAs prices are forecasted to fall, this decrease is partially counterweighted by growing gas prices
  • Interconnected countries
  • Price levels in interconnected countries impact import/foreign trade dependent countries, which is especially the case with Lithuania, but also to a lesser degree other Baltic States
    • Neighbouring Poland is forecast to experience an even higher price increase than the Baltics due to the high penetration of coal and lignite power plants in the generation mix
    • The commercial cross-border capacity increase between Lithuania and Poland from 2025 will most likely be smaller than was expected, and this will contain some influence from a higher price zone Poland to Lithuania
      • It was widely assumed previously that from 2025 the interconnection capacity between Poland and Lithuania would double from the current 500MW (first Litpollink), but we assume a maximum increase to 700MW
      • The overhead power line connection between Lithuania and Poland will most likely be used for keeping the Baltic system frequency synchronous with Continental Europe Network only, whereas commercial flows will move to the second 500-700MW LitPollink line planned on the Baltic seabed
    • Swedish prices are also forecasted to rise in mid-term, and based on the Horizon forecast Lithuania will partially replace imports from Belarus with imports from Sweden once Belarus start technological tests of electricity generation in the Astravyets nuclear power plant and Lithuania sets trade throughput of the interconnections between Lithuania and Belarus to 0 MW
  • Capacity development
  • We assume decrease of oil shale generation capacity in the Baltics following the closures of the blocks owned by the largest Estonian electricity producer Eesti Energia due to the requirements by the Industrial Emissions Directive (IED), which will decrease power price dependence on the EUAs prices
    • In 2019, Eesti Energia plans to close four blocks of oil shale generation units, with a combined capacity of 619MW, which would constitute 31% of the Estonian oil-shale capacity of 2018
    • Based on the Estonian energy strategy, the total decrease of oil shale generation capacity would be around 1.3GW (66%) by 2030
  • As seen in the figure below, we expect an increase of renewable energy capacity in the Baltics, especially stemming from the planned renewable energy auctions in Lithuania from 2019 onwards, and the possible establishment of offshore wind plants in the late 2020s
  • Growing local-generation capacity with zero marginal costs, such as renewable energy is, will partially replace imports and have a negative impact on power prices
  • For more detailed country-by -country capacity assumptions please see the respective ICIS Power Horizon pages for EstoniaLatvia and Lithuania

Vija Pakalkaite is Analyst - EU Carbon & Power Markets at ICIS. She can be reached at Vija.Pakalkaite@icis.com

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