Energizing surprise: Abundance of energy sends prices plummeting in Finland

Source: Business Insider

Finland was dealing with an unusual problem on Wednesday: clean electricity that was so abundant it sent energy prices into the negative.

While much of Europe was facing an energy crisis, the Nordic country reported that its spot energy prices dropped below zero before noon.

This meant that the average energy price for the day was "slightly" below zero, Jukka Ruusunen, the CEO of Finland's grid operator, Fingrid, told the Finnish public broadcaster Yle.

In practice, it doesn't appear any ordinary Finns are being paid to consume electricity. People pay a markup on the electricity and often pay agreed rates for power instead of the raw market price.

The price drop was driven by an unexpected glut of renewable energy and Finns cutting back on energy use because of the crisis caused by Russia's invasion of Ukraine.

"Now there is enough electricity, and it is almost emission-free," Ruusunen told Yle, adding that Finns could "feel good about using electricity."

Finland went from energy poverty to glut in just a few months

The news is a remarkable turnaround for a country that only a few months ago told its people to watch their energy consumption.

"Last winter, the only thing people could talk about was where to get more electricity. Now we are thinking hard about how to limit production. We have gone from one extreme to another," Ruusunen told Yle.

The country faced an energy crisis after it banned energy imports from its neighbor Russia as part of the global backlash after it invaded Ukraine.

But a new nuclear reactor was brought online in April this year and provided a significant new stream of power for Finland's population, around 5.5 million people.

Olkiluoto 3, the first new nuclear reactor to be opened in Europe in more than 15 years, brought the price of electricity in Finland down by 75%, from 245.98 euros per megawatt-hour in December to 60.55 euros per megawatt-hour in April, according to The National.

The country aims to become carbon neutral by 2035 and has been pushing to introduce renewable energy solutions. Ruusunen told the National that Finland wanted the wind to become its primary power source by 2027.

This is also contributing to the drop in energy prices. Excessive meltwater — which has caused flood warnings in several northern European countries — is pushing Finland's hydroelectric plants into overdrive and giving plentiful electricity.

"During spring floods, there is often this kind of forced production because production cannot be slowed down. Due to the huge amount of water, hydropower often has a poor capacity to regulate in spring," Ruusunen said.

Finland is now dealing with the opposite problem of poor energy supply: energy operators may no longer be able to operate normally if the electricity is worth less than the cost of producing it.

"Production that is not profitable at these prices is usually removed from the market," Ruusunen said.

Because hydropower cannot be slowed down or turned off, other producers like nuclear are looking to dial back their production to avoid losing money on energy production.

Ruusunen said this meant Finns could happily use all the energy they wanted.