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Finland: Europe’s most volatile short-term electricity market

May 31st, 2024
White Windfarm

Ahead of Finnish Energy Day 2024, Nordic Market Expert for Montel Analytics, Priyanka Shinde explores the factors contributing to extreme energy prices in the region.

The Finnish energy system has undergone significant transition over the past few years. Following the new nuclear buildouts of Olkiluoto 3 of 1.6 GW in April 2023, total nuclear capacity installed in Finland has reached 4.37 GW. Renewable energy is also on the rise more generally. Installed wind capacity rose by 2.43 GW in 2022, reaching a total of 5.67 GW by the end of that year. Growth has since continued, and by the end of 2023, capacity grew to 6.94 GW.

Solar power is also becoming popular in Finland with the installed capacity reaching 1 GW at the end of 2023. This is also expected to rise. Based on the weather pattern, when the temperature starts to rise, lots of Combined Heat and Power plants are switched off. The consumption pattern is also subject to weather-dependent varying between seasons. As a result, when some of the nuclear power plants are undergoing maintenance, weather-dependent generation is limited. When interconnectors are not then also fully available, then the reliance on conventional generation increases, subjecting the market to higher volatility.

Flexibility on supply and demand side

The day-ahead market in Finland is based on a marginal clearing method. The intersection of supply and demand price-volume curves gives the day-ahead market price. Flexibility in this context refers to how much volume can be added or taken away from the market before it impacts the price significantly.    

Figure 1: Finnish supply-demand price curve for the day-ahead market of 19th May 2024 00:00 and 12th May 2024 00:00

A comparison of price setting on 19th May and 12th May (this year) is shown in Figure 1. The price on 12th May was 26.5 EUR/MWh, while on 19th May it was -5.01 EUR/MWh. Volumes on the day were 5917 MW and 5958 for 12th May and 19th May respectively. This shows how the price can be influenced by the availability of cheaper generation, even when demand levels are similar. 

The slope of the supply and demand curves also indicates the flexibility available. For example, much more supply side flexibility was available on 19th May compared to 12th May, where up to 2 GW of generation could have been added without changing the price much - due to the flatter supply curve.   

Negative prices in Day-ahead electricity market

Where the intersection point of the curve shifts towards the left, reaching the third quadrant, this indicates excess supply and a lack of sufficient demand in the system. In this scenario, prices become negative. This also illustrates a lack of flexibility on either side, where the generators end up paying to produce energy and demand gets paid for consuming energy.

Figure 2: Finnish Day-ahead price sensitivities indicating supply and demand side flexibility 

Figure 2 shows that the price sensitivities of the Day-ahead market price for the period shown on 18th and 19th May were almost negligible. This indicates that prices, which were already quite low, couldn’t have changed much even with the addition or removal of volumes in the market.

On the other hand, for 19th May 15:30, the DA price was -15 EUR/MWh and the sensitivities indicate that an addition of 1000 MW on supply side could have pushed the price further down to -488 EUR/MWh. Interestingly, an addition of 1000 MW on demand side would still have kept the price negative at -1.08 EUR/MWh. This indicates that there was excess supply in the system and therefore it was difficult to avoid negative prices due to limited flexibility on the supply side.

The high levels of must-run generation in Finland make it difficult to avoid these situations, meaning that the amount of hours where we see negative prices are continuing to rise. Finland was the European country with most number of negative price hours in 2023 at 467. Figure 3 shows the cumulative negative hours with negative day-ahead prices per year. The number of negative price hours were significantly low until 2022. However, since the addition of Olkiluoto 3's 1.6 GW of capacity in April 2023, alongside ever increasing levels of wind and solar generation, negative prices are becoming increasingly common.

When it comes to negative prices in Finland, it is impossible not to mention the events from 24th November 2023, when 10 consecutive hours cleared at -500 EUR/MWh. However, that was a result of a fat-finger error where a significant amount of excess power (5787 MW), which did actually not exist due to a mistake in the unit conversion from kW to MW, was sold for the whole day. The excess volumes were then corrected with the help of intraday markets.  

Figure 3: Cumulative negative price hours on yearly basis in Finland from 2021

Reasons for negative prices in DA markets can range from a lack of incentives to curtail Variable Renewable Energy Sources (VRES) due to fixed feed-in-tariffs, PPA prices, Guarantees of Origin (GOs), inability to curtail based on market prices, lack of flexibility in the system, nuclear ramping limitations, must-run limitations, interconnectors and more.

On 24th May 2024, Finland surpassed SE4 to be on the top spot as the country with the most number of negative prices in Europe this year with a total of 169.By 26th May 2024, the count reached 174, almost three times as many as 2023, which you can see in Figure 4. This can be explained by the return of Olkiluoto 3 from its yearly maintenance (which started from 2nd March and returned after 16th May). It is also partly due to the ongoing line outage of the 650 MW Estlink 2 interconnector, reducing the country's export capacity.  

Figure 4: Comparative status of cumulative negative prices from 2023 and 2024 until 26th May

While it is interesting to note the number of hours with negative prices, it is also important to understand the range of negative prices. Figure 5 shows the boxplot of the day-ahead prices in Finland from January 2023 until May 2024. (Note: the outlier of -500 EUR/MWh from Nov 23, four consecutive hours of negative prices below -38 on 16th July 23, and one hour of -30 EUR/MWh on 13th June 23 are eliminated from this plot). One of the observations is that the prices haven’t been as strongly negative in this year compared to last year - due to falling GO prices.

Volatility in the Day-ahead market

While Finland has been popular in terms of low and negative DA prices, it has also seen some of the highest DA prices in recent times. This makes it a volatile market and therefore worth discussing the factors driving this volatility. Figure 6 shows the violin plots of the Day-ahead prices in Finland from January 2023 to May 2024. Note that the outliers of -500 EUR/MWh from Nov 23 and prices from Jan 24 above 500 EUR/MWh are eliminated from the plot.

Figure 6: Violin plot of Finland Day-prices from 2023 until May 2024 by month (outlier of -500 Eur/MWh from Nov’23 and prices from Jan’24 above 500 Eur/MWh are eliminated from the plot)

To better understand the situation of this year’s negative price count and the high volatility in the spot market, let’s look into how this is impacted by nuclear availability, wind and solar production, demand pattern, interconnector capacities and other factors.

Nuclear availability and its impact on market dynamics

Olkiluoto 3 was taken offline on 2nd March 2024 for planned maintenance. At the same time, there was significantly less wind power generation compared to the previous week - as highlighted in the Figure 7. Out of about 5.9 GW of wind capacity installed in Finland, the maximum wind generation was 677 MW in that week. As a result, the dependence on gas-fired power plants soared, with generation reaching 615 MW at 10:00 on 8th March - more than twice the levels of generation in the previous week (before the outage). The negative temperature in Helsinki further constrained the situation.

As a result, spot prices soared in Finland. They averaged 31 EUR/MWh from 24th Feb - 1st Mar, before hitting 80 EUR/MWh on average between 2nd Mar - 8th Mar.

Finland was exporting to 358 MW to Estonia in the week before the outage. It then started importing a similar level on 2nd March after the outage. Generally speaking, due to an outage on the Estlink 2 interconnector between Finland and Estonia until 31st August, it will not be possible to import further.

Figure 7: Market dynamics as a result of Olkiluoto 3 annual maintenance from 2nd March 2024

Suomenoja production plant, the last coal-fired unit used for district heat production in Finland, was shut down on 28th April. The Day ahead price in Finland on 2nd May 24 stayed above 200 EUR/MWh for five hours straight, peaking at 397 EUR/MWh at 9 am EET. This was after the holiday on 1st May, when the demand ramped up by around 800 MW on 2nd May as shown in Figure 8.

Figure 8: Finnish market on 2nd May 2024 after Olkiluoto 2 went for maintenance and Olkiluoto 3 was also on maintenance

Wind production was around 75 MW for 2nd May morning hours. Finland was heavily relying on imports too. Oil power plants had to start at 9 am EET to support the morning peak hour demand just after the holiday, aligning with the day-ahead market spike of 397 EUR/MWh.

Further imports were also performed on the intraday market. Due to a low proportion of variable renewable energy sources on the supply side, the imbalances were lower.

Return of Olkiluoto 3 in Finland

On 24th May 2024, Finland overtook SE4 to be the price zone with most number of hours with negative day-ahead prices.

Figure 9: Effect of ramping up of nuclear power output on the Finnish market

With the return of Olkiluoto 3, which slowly started ramping up from 16th May 2024, Finland experienced 52 hours of negative day-ahead power prices within a week. This shows the combined effect of increased nuclear, wind, and solar generation. Nuclear does get bid in as must-run for a large part, while wind and solar still manage to make positive revenues due to the GO prices.

Because of the low prices resulting from excess generation, Finland has been able to net export up to 2 GW in the past few days.

Correlation of net imports/exports vs nuclear and wind, solar generation

Figure 10: Comparison of scatter plots of net imports vs nuclear and wind, solar until May 2023 and May 2024

Comparing the scatter plots of net imports vs nuclear from the data collected until May 2023 and May 2024, we observe that power exports from Finland were higher when the nuclear power plants were producing in 2023. This year, exports have been limited partly due to the line outage on Estlink 2. This has been further supported by the fact Olkiluoto 3 was unavailable from 2nd March until 16th May and Olkiluoto 2 has had an outage since 28th April - also spanning the period when domestic demand drops as the temperature rises. Nuclear availability, coupled with interconnector capacities and weather pattern has lead to higher market volatility.

The Variable Renewable Energy Sources (RES) plots show that the threshold for Finland to export, while producing through wind and solar, has been pushed higher to around 2 GW. By comparison, last year it was exporting at much lower RES generation - around 200 MW on certain occasions.

Correlation of day-ahead, intraday and imbalance prices

Since we discussed about the negative day-ahead prices, it is also interesting to take a look at the traded range of intraday market prices. From Figure 11, we can observe that when the DA price is negative, it is likely that the lowest traded intraday price for that hour is also negative. However, this may not be true the other way around. For example, it might happen that the accurate wind forecast shows more production, which is then sold on the intraday market. Also, if the DA price is positive, it is more likely that the lowest intraday price is equal to or lower than the DA price.

Figure 11: Scatter plot of Day ahead, lowest and highest intraday and Imbalance prices in Finland from 2023 and 2024.

Generally, intraday prices are based on the expectation of imbalance prices. The lower two plots in Figure 11 show the relation of the highest and lowest traded intraday price with imbalance prices.

The highest traded intraday price can be interpreted as the price a buyer is willing to pay in the intraday to avoid paying at the imbalance price. This explains why a larger part of the dataset also indicates the highest intraday price to be higher than the imbalance price - based on their expected value at that time. For the lowest intraday price, it is the lowest price at which one is willing to sell at instead of getting the imbalance price. As a result, there are more data points on the lower half of the first quadrant.

Impact of system imbalance on intraday and balancing markets

Wind forecast errors can also play their part. On 27th Feb 2024, from 13:00 to 16:00 EET, imbalance prices went all the way up to 399 EUR/MWh. They remained at that level for three hours - as shown in Figure 12. It is important to highlight that the rest of the Nordic countries had stable imbalance prices in these hours. The high price is partly explained by wind and solar forecast errors with large mFRR volumes activated in Finland in these hours.

The relation of intraday prices to the imbalance price in the hour 15:00 to 16:00 EET is quite remarkable, as the intraday price spiked to 388 EUR/MWh, which is the higher than other countries in the intraday market. Where high imbalance prices occur, it is often that market participants start trading more aggressively towards gate closure times in order to close their positions and avoid high imbalance. Sometimes this can result in high intraday prices. In this case, most of the intraday volumes were traded domestically in Finland.

Figure 12: Describing wind error, reserves, and imbalance and intraday prices on 27th Feb 2024

Imbalance prices of the future

The Finnish market, just like other Nordic countries, has been relying on the net system imbalance and mFRR energy market prices to determine imbalance prices in cases of non-zero imbalance. The hours with zero net imbalance would receive imbalance prices equal to the day-ahead prices. Part of this is going to be updated from 12th June 2024 when an aFRR energy market is going to be introduced in Finland.

The imbalance price will then be set by both mFRR and aFRR activation prices. Once PICASSO is launched in Finland later this year, the aFRR energy market will be coupled with other countries in Europe participating in PICASSO. PICASSO prices will therefore influence the imbalance prices in Finland. At the moment, the PICASSO activation optimization algorithm is being studied by ACER to address the issues of countries like Italy (who have left the project temporarily) and those who have delayed their joining due to concerns of frequent and uncertain price spikes.

It will be interesting to follow the impact of aFRR energy market and PICASSO in Finland on other Nordic countries that also have combined markets like aFRR capacity markets and common mFRR energy market. 


The changing supply-demand dynamics in Finnish energy market make it one of the most volatile market in Europe right now. Whilst the rapid renewable energy growth sets Finland to be at the forefront of combatting climate change, it does also bring along challenges from the market perspective leading to negative or high prices. Energy storage and demand side flexibility can play an important role in alleviating the high levels of market volatility. However, it will need a combination of market mechanisms and enhanced technical capabilities, in order to respond to the challenge of negative price signals.

New market changes to follow up in future

Some of the other market design and implementation changes to watch out in the future in Finland would include:

1) Flow-based Market Coupling in the Nordics: this could mean better intercoupling of Finland to rest of Europe.

2) Intraday Auctions: there will be three intraday auctions introduced at pan-European level apart from the continuous market.

3) Modernized Area Control Error (mACE): changing from frequency-based balancing for the entire Load frequency control (LFC) block collectively, to ACE based balancing each LFC area (bidding zone) individually. There will be cross border activation of imbalance netting and balancing reserves (aFFR and mFFR).  

4) Platform for the International Coordination of Automated Frequency Restoration and Stable System Operation (PICASSO) and Manually Activated Reserves Initiative (MARI): this will lead to better intercoupling with other balancing markets within Europe.

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