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The Finnish power market: Are imports from Russia low-cost?

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  • Ochoa, Camila
  • Gore, Olga

Abstract

Electricity market integration of high- and low-price areas is expected to bring benefits to the consumers in a high-price area. However, these potential benefits are highly dependent on the market characteristics and the policy interventions. We use simulation to study the effects of different alternatives for the expansion and operation of the interconnector Finland–Russia on the Finnish market (a high-price area). Our results show that the current trading arrangement, where a single trader owns the transmission rights, and limits the trade during peak hours to avoid capacity charges in Russia, is beneficial for Finland at the current interconnection capacity. However, if the interconnector is expanded, the behaviour of the trader would create significant distortions in the Finnish market. We also analyse the pros and cons of maintaining a strategic reserve in Finland in combination with the different scenarios of interconnection expansion and trading arrangements. We conclude that in the absence of trust in imports, the need for a strategic reserve is undeniable. This will slightly reduce the economic benefits of integration for Finnish consumers, but it will significantly improve reliability.

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  • Ochoa, Camila & Gore, Olga, 2015. "The Finnish power market: Are imports from Russia low-cost?," Energy Policy, Elsevier, vol. 80(C), pages 122-132.
    • Handle: RePEc:eee:enepol:v:80:y:2015:i:c:p:122-132
    DOI: 10.1016/j.enpol.2015.01.031
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    Cited by:

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    6. Zimmermann, Florian & Bublitz, Andreas & Keles, Dogan & Fichtner, Wolf, 2019. "Cross-border effects of capacity remuneration mechanisms: The Swiss case," Working Paper Series in Production and Energy 35, Karlsruhe Institute of Technology (KIT), Institute for Industrial Production (IIP).
    7. Herrera, Milton M. & Dyner, Isaac & Cosenz, Federico, 2020. "Benefits from energy policy synchronisation of Brazil’s North-Northeast interconnection," Renewable Energy, Elsevier, vol. 162(C), pages 427-437.
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