Electricity futures reveal: the price of electricity will remain high throughout next year

The electricity comparison website Halvinsähkösopimus.fi's recent price forecast predicts that the price of electricity may remain high throughout next year.

The data collected on the basis of electricity futures in the Finnish price range shows that the price of electricity with value-added tax would, even at its lowest, drop to an average price of just under 20 c/kWh in the third quarter of the year.

The highest prices can be expected in February. At the moment, the futures are predicting an average price of approx. 45c/kWh in Finland in February.

Highlights:

• The spot price of electricity is expected to be expensive throughout 2023
• Based on futures, it will be the most expensive in February, when the price of electricity rises to approx. 45 c/kWh
• In the second quarter of 2024, the average spot price is expected to fall below 10 cents per kilowatt hour for the first time
• Futures prices have fluctuated at a rapid pace
• Electricity futures prices vary in different Nordic countries, so the analysis has taken into account futures that tell about the price difference in the Finnish region
  

This is how electricity futures information was collected

Electricity futures information was collected from Nasdaq's website on December 13, 2022, with closing prices. The future prices take into account both the system future of the Nordic countries and the future telling the difference in the Finnish price range. Prices for Finland are currently predicted to be more expensive, e.g., because of the problems with Olkiluoto 3.

Electricity futures prices have been changed to c/kWH format, which is more familiar to consumers. In addition, VAT has been added to the prices: 10% for December-April (22-23), 24% for other times.

Electricity futures represent the best forecast of future prices. Currently, however, there are few sellers of futures, and price fluctuations are exceptionally strong. This makes predictions more challenging.

Futures prices have changed at a rapid pace

Electricity futures prices have changed several times during the fall. Even earlier in the fall, the futures expected the price of electricity to drop next spring and lower in the summer, but on the other hand, the prices of the most expensive winter months have now leveled off to a slightly lower level than the peak prices.

The assumption is that more recent electricity futures offer a truer picture of electricity prices for the coming year. In any case, there is also a lot of uncertainty associated with prices.

Future prices affect the prices of different electricity contracts in different ways

Future prices do not directly indicate the future price of electricity, but they represent the best possible view of the market. Futures are used, e.g., to protect electricity purchases for the future.

Electricity futures affect how fixed-term electricity contracts can be priced. Electricity companies can use futures to hedge their purchases at the current price, so even if the price level is ultimately higher than futures, the electricity company will not suffer similar losses.

For example, in a two-year fixed-term electricity contract, the estimate that the price would decrease during 2024 is now taken into account. Although the price will probably remain quite high throughout 2023, the futures predict that in the long run, the price of electricity will clearly decrease from the current level.

On the other hand, in a stock exchange electricity contract, the consumer always pays according to the current hourly changing spot pricing. Based on the futures, the highest price for electricity on the stock market would be paid in January-March, and the cheapest electricity price would be in the third quarter.

The final electricity price of those who have chosen the exchange electricity contract is also significantly affected by the timing of electricity use. Futures only predict average prices, not different price spikes.

The entire report with exact futures prices can be read here in Finnish.

More information:

info(at)halvinsahkosopimus.fi