Electricity prices in Finland hit record high in 2021

Prices could continue to rise this year as electricity consumption returns to pre-pandemic levels.

Price hikes were driven by the growing demand from the industrial sector and consumers due to a cold winter. Image: Heikki Rönty / Yle

Wholesale electricity prices in Finland rose to a record high as the power market returned to pre-pandemic levels in 2021, according to the latest statistics from energy sector organisation Finnish Energy.

The rise in wholesale prices was reflected in increased bills for households, particularly for consumers who had opted for a market-price electricity contract or a tariff that is valid for an indefinite period.

Exceptional market conditions at the end of the year caused the average price of electricity to soar to 72 euros in 2021. Wholesale prices in the region are set by Nordic power exchange Nord Pool.

"Wholesale prices have been at an unprecedented high for a long time now. It is possible that the severe, freezing temperatures could result in new price spikes," Jukka Leskelä, Managing Director of Finnish Energy, said.

However, Finnish Energy's data indicates that the total electricity price (including tax) remains at a moderate level for consumers in Finland compared to other European countries.

A household consuming 2,500–5,000 kWh (kilowatt hours) of electricity per year paid an average of about 17 cents per kWh in the first half of 2021 in Finland.

Electricity prices in Europe were the highest in Germany and the lowest in Hungary last year, with households in the former paying just over 30 cents per kWh, three times the price in Hungary.

Finnish Energy's statistics do not; however, reflect the steep rise in electricity prices which occurred at the end of the year.

Renewable energy helped cope with increased demand

Following a slump in 2020, electricity consumption in Finland grew in 2021, driven by a cold winter and increased demand from the industrial sector.

According to Finnish Energy, renewable energy helped cover half the increase in electricity consumption in the country last year, while the other half was covered by imports.

While wind power capacity rose by a quarter, production stayed the same due to low winds. However, hydropower production was higher than before and bioenergy replaced a significant share of peat in energy production. The share of peat dropped by 2 percent last year.

Carbon emissions from energy production remained at the same level as 2020 last year; however, partly due to a slight rise in the use of coal compared to previous years.

Growth in electricity import and export

Electricity imports returned to pre-pandemic levels in 2021, and covered a fifth of the total energy consumption in Finland. While Nordic countries still accounted for the majority of Finland's imported electricity, imports from Russia saw the highest hike.

Despite rising prices, Estonia imported more electricity from Finland than ever before last year. It also increased its imports from Finland the year before, as emissions trading has significantly increased production costs.

Estonia imported the same amount of electricity from Finland as the latter did from Russia in 2021.

Leskelä estimates that within a few years, electricity import and export volumes will be at the same level.

"Import and export will reach a plateau, as wind energy production in Finland is increasing and Olkiluoto 3 will gain momentum," he stated. The Olkiluoto 3 nuclear reactor got the green light to begin operations last year.