There are many reasons for high electricity prices – Europe-wide price increases due to reduced availability of natural gas, dry and cold weather and general economic uncertainty.
Only one third of the price of electricity is actual electrical energy. In Finland, you also have to remember taxation and electricity transmission. These parts make up the the final amount of the electricity bill.
Sähkölasku muodostuu kolmesta osa-alueesta:
1. Taxes
One-third of the price of electricity goes to electricity and value-added tax (10%). The government reduced VAT from the previous 24% to 10% in December 2022. Finland has also asked the European Commission for permission to tax electricity at 0%.
2. Transmission price
Electricity transmission refers to the transmission price charged by your local electricity company. The transfer fee cannot be tendered, as it is determined by your place of residence. However, the price of electricity transmission cannot be increased by "more than" 15 percent in a year.
3. Electricity
The price of electric energy is formed when the electricity producer sells the electric energy it produces to electric companies. The price is largely based on demand and supply, i.e. general electricity consumption also increases prices.
Electricity price trends in Finland: what does the 2000s look like as a whole?
Next, let's see how the price of electricity has developed in Finland. We state the price in the unit MWh (1 MWh = 1000 kWh).
When we think about the 2000s, the price of electricity has been an average of €37/MWh. In 2000, the price was only €15/MWh.
The biggest price spike was seen in 2010 – 2011, when the average price of electricity was €53.06/MWh.
In 2020, the stock exchange price of electricity was exceptionally low in the Nordic countries. The annual average was only €28/MWh. The main reason for the low electricity price was the high rainfall and exceptionally snowy weather in Norway.
| MONTH / YEAR | 2022 | 2021 | 2020 | 2019 | 2018 |
|---|---|---|---|---|---|
| JANUARY | 13.23 | 6.35 | 3.37 | 6.92 | 4.60 |
| FEBRUARY | 10.05 | 7.08 | 3.05 | 5.80 | 5.38 |
| MARCH | 10.72 | 4.76 | 2.53 | 4.96 | 5.65 |
| APRIL | 9.84 | 4.56 | 2.46 | 5.14 | 4.99 |
| MAY | 16.45 | 5.70 | 2.41 | 4.94 | 4.79 |
| JUNE | 17.37 | 6.96 | 3.50 | 3.81 | 5.85 |
| JULY | 22.83 | 9.77 | 2.51 | 5.69 | 6.70 |
| AUGUST | 32.42 | 8.45 | 5.03 | 6.05 | 6.88 |
| SEPTEMBER | 26.66 | 11.07 | 4.69 | 6.05 | 6.32 |
| OCTOBER | 14.07 | 8.04 | 3.85 | 5.74 | 5.57 |
| NOVEMBER | 24.22 | 10.65 | 3.42 | 5.67 | 6.21 |
| DECEMBER | 23.92 | 23.98 | 4.87 | 4.76 | 6.49 |
Electricity price development in 2022
In the light of history, the development of the price of electricity has seen its bottom line in 2022. The price of electricity has averaged up to €170/MWh, i.e. 17 cents/kWh. The price is many times compared to, for example, the "peak" of the early 2010s.
The average of the summer months has been as much as 24.6 cents/kWh. The reason for the high price was, among other things, a dry summer and economic sanctions against Russia.
In December 2022, electricity cost an average of 23.92 cents/kWh.
Why is the price of electricity rising in Finland?
Many are probably wondering why electricity is so expensive right now?
There is no single reason, i.e. the increase in the price of electricity is the sum of many factors. Next, let's look at five (5) reasons that have increased the price of electricity in Finland.
A few reasons for the rise in electricity prices:
- Rising energy prices (especially oil and gas)
- The amount of nuclear power generation
- The price of emission rights
- Electricity consumption
- Dry and cold weather
Energy price increase (oil, gas, etc.)
The price of energy rose significantly in 2022. Oil and gas prices in particular are at record highs. Before, up to 92% of natural gas was imported from Russia, but the import was stopped in May 2022. Today, the price of gas has increased by up to +450%.
The increased price of energy goes hand in hand with the price of electricity. When the price of fuel starts to fall, it also affects the price of electrical energy.
The amount of nuclear power generation
Using nuclear power is largely a political discussion, which we do not intend to delve into. However, the number of nuclear power plants has been on the decline, which also directly affects the increased price of electricity.
When Olkiluoto 3 starts operating in Finland, it will significantly lower the price of electricity. There are currently four (4) operating nuclear power plant units in Finland. In 2020, only 34% of Finland's electricity production came from nuclear power.
The price of emission rights
European energy and industrial companies trade on how much carbon dioxide they are allowed to emit into the atmosphere. The Emissions Trading System is an EU tool that aims to reduce CO2 emissions. At the moment, releasing one (1) ton of carbon dioxide into the atmosphere costs up to €100 – that's more than ever before.
It goes without saying that the record high price of emission rights is also reflected in the rise in the price of electricity. For the sake of comparison, let's mention that ten (10) years ago the price was only 10 euros per ton of carbon dioxide.
Electricity consumption
General electricity consumption and other consumption increase year after year. For example, in 2021 total electricity consumption increased by up to 6%. The more there is demand, the more electric energy naturally costs. This is a normal phenomenon in the development of society. One good example of this is bitcoin mining which, as a new phenomenon, increases energy consumption around the world.
Correspondingly, you can reduce your own electricity consumption, which lowers the price of the electricity bill. In the long run, it also lowers the price of electricity - if all people acted this way.
Dry and cold weather
Yes, the weather also affects the price of electricity. Dry and cold weather makes it difficult to produce hydropower, and windless weather affects wind power. As we mentioned earlier, the stock market price of electricity was historically low in 2020 – because it was a rainy year.
In general, it can be stated that warm and rainy winters lower the price of electricity. Even the weather forecast can increase or decrease the price of electricity.
Which way is the price of electricity going: a realistic prediction for 2023
The price of electricity will stabilize during 2023, but price spikes of up to 50 cents/kWh are possible in the cold winter months. The highest peak will probably be seen in December of this year, or next year in January-February.
The electricity price forecast for 2023, i.e. the future price for spring is 18 cents/kWh. The future price means that the price in question has been agreed in advance with the electricity seller.
Olkiluoto 3 and the new wind turbines will increase Finland's own electricity production so much that we can be self-sufficient for the first time since the 1960s.
We can talk about a significant issue, because the import from Russia was stopped in May - after it had lasted for more than 30 years.
Electricity price forecast 2023:
- In February and March, the price of electricity is around 10 cents/kWh.
- From April to May onwards, sellers do business at a price of 8 cents/kWh.
- In the summer of 2023, the price of electricity is estimated to be 7-8 cents/kWh.
How to protect yourself from rising electricity prices: here are 8 tips for surviving the energy crisis!
Although we can't do anything about the energy crisis or inflation, you can reduce your electricity bill with a few simple things.
With these eight (8) tips you can save on your electricity bill:
- Tender your electricity contract
Tendering can be done quickly through Sähkösopimukset.com, without additional costs. The easiest way to save on the price of electricity is to choose the cheapest electricity contract
- Take advantage of the electricity company's additional services
A number of electricity companies offer a price - or exchange insurance. With these, even a fixed-term contract can be changed in the middle of the contract period.
- Be careful about the fixed-term contract
The price of electricity is often cheaper in long contracts, but be careful. Experts have predicted a significant drop in the price of electricity in the spring of 2023.
- Don't go to sauna so often
Currently, heating an electric sauna can cost up to 10 euros. Of course, the final cost varies depending on the sauna and the heating time. If you heat the sauna several times a week, you should reduce the sauna a little (at least for the time being).
- Lower the temperature of the apartment
Jos asunnon lämpötilaa laskee yhdellä (1) asteella, laskee se samalla lämmityskustannuksia noin 5 %. Pitkässä juoksussa ero on merkittävä, etenkin sähkölämmitteisessä omakotitalossa.
- Get an air heat pump
In Finland, heating costs can be saved up to 40% with the help of an air source heat pump. Depending on the apartment, annual electricity consumption can decrease by 3,000 – 8,000 kWh. Although the one-time investment of an air source heat pump is large, in the current energy crisis it pays for itself within a year.
- Favor hydro, wind and solar power
The more renewable energy is is used, the better we will do in the future. If you live by a lake, you can generate your own electricity. Solar panels can be installed in almost every detached house.
- Remember common sense
Common sense can save a lot of electricity in the long run, and thus also money. Don't keep the lights on unnecessarily. Avoid 15-minute showers, and always wash clothes on a full machine. Do not turn on the TV as "background noise". Small streams can grow into a larger entity.
Electricity price - Summary
Energy crisis has significantly increased the price of electricity in Finland and elsewhere in Europe. In particular, the cessation of Russian imports has increased the price of energy (gas, oil), among other things - and this is also reflected in the price of electricity.
The price of electricity in 2022 has been an average of 17 cents/kWh, in the summer months even more than 24 cents per kilowatt hour. When we think about the 2000s in Finland, the average price of electricity has been only 3-6 cents/kWh.
The biggest price spike was in December 2022, and in the first quarter of 2023.
However, there is light at the end of the tunnel. The future price of electricity is clearly decreasing as we head towards the summer months. An important factor in calculating the futures price is Olkiluoto 3 and new wind turbines in Finland.
The coming winter will be financially challenging for many Finns, but you can reduce your electricity consumption by taking action. We also recommend tendering your current electricity contract - you can save hundreds of euros a year.
FAQ
Why is electricity so expensive right now?
Many things affect the cost of electricity. For example, rising gas and oil prices have also affected the price of electricity. General economic growth and inflation are also a major reason for higher prices.
Why is the price of electricity rising in Finland?
The biggest reason is probably the general economic growth, which has significantly increased the price of fuel and coal - and that affects the price of electricity. For example, 92% of natural gas was imported from Russia, but in the current situation, gas is imported from elsewhere. And it's more expensive.
How do you protect yourself from rising electricity prices?
The first thing you should do is tender your own electricity contract. Other generally useful tips are getting an air source heat pump, reducing sauna use and using common sense. It's not worth keeping the lights on for nothing - or taking a shower for 15 minutes every day.
In which direction is the price of electricity going in Finland?
In the first days of 2023, the price of electricity was still high. However, in the coming quarters of the year, prices will drop drastically, even below 5-10 cents per kilowatt hour. The increase in Olkiluoto 3 and wind turbines will lower the price of electricity in Finland.
