Russia is buying electricity from this unlikely source

Russia is a major exporter of energy, writes Andy Tully, but the oil and gas super-producer will soon begin importing power from the Nordic, where the cost of electricity is now very low.

Electricity has become so inexpensive in Europe’s Nordic countries that Russia, originally only an energy exporter to the region, will now begin importing power from neighboring Finland as well.

Fingrid, the operator of Finland’s national electricity network, said that for the first time, on June 14, it will begin furnishing the St. Petersburg area just east of the Finnish border, based on a deal recently signed by the two countries. (Related: EIA: Major U.S Shale Plays Have Peaked, Expect Decline To Kick In)

The company said the initial feed will include 140 megawatts of electricity and will last for 13 hours, from 9 a.m. to 10 p.m.

“The price of electricity has been so low here in the Nordics that it’s profitable for Russia to bring it in,” said Fingrid’s planning chief, Timo Kaukonen. “It’s the market price that has made this deal.”

So far the two countries have not set up a delivery schedule beyond June 14 because each side has to consider the overall European market and the prices fetched by electrical power. The Russian news broadcaster RT, quoting TASS, said the price may rise the very next day.

The price of electricity from the Nord Pool – which includes eastern Denmark, Finland, Norway and Sweden – is much lower on weekends than on weekdays. For example, on June 1, a Monday, the average price for 1 megawatt per hour was more than $35.75. On June 6, a Saturday, it was $11.85; the next day it was even lower, at just over $9.40.

 

One reason for the current low price of Nordic electricity is the region’s increased reliance on nuclear power generators and wind farms, as well as an energy surplus now that winter is over. The power will be received at one of the four electrical substations in Vyborg, Russia, just east of the Finnish border, in an effort to strengthen the reliability of energy availability in the St. Petersburg area. (Related: Could This Be OPEC’s Long-Term Goal?)

The new deal, completed during negotiations between Finland and Russia at the end of 2014, marks an increase in the flow of energy between the two countries. Finland also imports electricity from Russia, usually in quantities of 1,400 megawatts at a time, also through the Vyborg facility.

“For many years Finland has been importing Russian electricity, but that was when there was no direct link to market pricing,” Kaukonen said. “Now the market has started to play more of a part in electricity imports, with electricity also being traded through energy stock exchanges.”

Plans for the countries’ two-way electricity trading began in 2012 when both Russia and Finland were searching for ways to save on energy costs. Since then, Fingrid conducted tests to ensure that the Vyborg station could handle two-way energy traffic, according to Juha Kekkonen, Fingrid’s executive vice president. (Related: Concerns Over Earthquakes Spread To Texas)

Finland has been importing Russian electricity since 1982 to meet more than 10 percent of its annual power needs. With the cost of electrical power declining, the two-way arrangement, if it becomes regular trade, may be a way for households and businesses in both countries to get access to more energy at more affordable prices.

By Andy Tully Of Oilprice.com

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