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Finland to Test First Electricity Exports to Russia in 2013

Dec. 4 (Bloomberg) -- Finland plans for the first time to test sending electricity to Russia, paving the way for trading in both directions with power flowing to the market where prices are more expensive.

Fingrid Oyj, the Nordic nation’s grid operator, is poised to carry out technical tests early next year to make sure flows function via the Vyborg station connecting the Finnish and Russian networks, Juha Kekkonen, executive vice president at the grid manager, said yesterday in an interview in Helsinki. Exact dates and flow details are still to be confirmed, he said.

Since high-voltage electricity transmission from Russia to Finland began in 1982, the Nordic country has imported more than 10 percent of its annual needs from its eastern neighbor. Two-way trading may benefit consumers in both countries as suppliers will get access to cheaper power.

“We still need to agree on commercial terms, the principles and mechanisms for trading, capacity allocation and information exchange,” he said. “It will take time for Russia to modify its regulations and rules accordingly.”

Vyborg, which has four converter stations of 350 megawatts each, has never been used to ship electricity in the other direction because of technical restrictions. One of the units has been modified to make Finnish power exports to Russia possible, Kekkonen said. Finland imported 10.8 terawatt-hours from Russia last year, according to Fingrid.

‘Dead Zone’

Russia levies a capacity tariff of about $33 a megawatt-hour for power exports during morning and afternoon peak demand, which restricts shipments to Finland and may also limit flows in the other direction if two-way electricity trading eventually happens, according to Fingrid.

“If Finland does not receive a capacity payment, if and when it one day sells power to Russia, there will be a dead zone where exports are unviable due to asymmetrical regulation,” Kekkonen said.

Russian power for baseload delivery today cost 844.57 rubles ($27) a megawatt-hour in the Central, Ural and South Hubs, according to data compiled by Bloomberg. That compares with 61.43 euros ($80) in Finland, according to data from the Nord Pool Spot AS exchange.

Russia’s capacity fee may hamper trade in either direction, Jussi Maekelae, senior analyst at SKM Market Predictor AS, said today by phone from Helsinki.

“There will be a threshold of more than 20 euros for it to become viable for either country to sell power to the other, as a result of the capacity payment in addition to cross-border tariffs,” he said.

To contact the reporter on this story: Torsten Fagerholm in Helsinki at tfagerholm@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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