Russia turns to Nordic neighbour for electricity

In a reversal of the traditional power supply relationship between the two countries, energy will flow from Finland to Russia for the first time on June 14 between 9am and 10pm. Negotiations for the transaction began last year as a result of the falling market prices in the Nordic region, thereby making it profitable for Russia to start importing from its Scandinavian neighbour.

Finland’s tumbling prices can be attributed to the recent upsurge in alternative energy supply

Following the bilateral trade agreement, a substation in Vyborg, a Russian city near the Finnish border, was equipped to import up to 320 MW per hour. It has been agreed Fingrid, Finland’s national operator, will begin with the provision of 140 MW of electricity – a 10th of the hourly supply that can be sent from Russia to Finland.

Finnish electricity prices are determined by the Nord Pool Spot, the region’s electricity exchange model, whereas Russian prices are influenced by a capacity charge, in addition to the Russian electricity exchange tariff. Given the difference in pricing variables between the two states, it is expected Russia’s new source will improve the reliability of electricity supply to the St Petersburg area.

Finland’s tumbling prices can be attributed to a power surplus experienced in the Nordic countries following the recent upsurge in alternative energy supply, namely in hydroelectricity, wind power and nuclear energy.

Finnish imports of Russian energy have gradually decreased in recent years in favour of exports from neighbouring Nordic countries. “For many years Finland has been importing Russian electricity, but that was when there was no direct link to market pricing. Now the market has started to play more of a part in electricity imports, with electricity also being traded through energy stock exchanges”, Timo Kaukonen, Planning Chief at Fingrid, told Finland’s national broadcaster Yle on Sunday.