Rise in fossil fuel-based electricity generation led to high electricity prices in February

Electricity prices in February were nearly 65% higher than in January, reaching 151.8 euros per megawatt-hour (15.2 cents per kilowatt-hour). Compared to February 2024, prices were nearly twice as high, up by 101%. The higher prices were due to the increased use of fossil fuels across the Baltics (in both oil shale and gas plants), exceptionally low wind production, higher consumption due to cold weather and transmission capacity limitations.

In February, wind production was much lower than forecasted and, instead of relying on renewable energy, the entire Baltic region depended on carbon-intensive fossil fuel-based generation, which in turn had a significant impact on prices. Compared to February of last year, wind power generation in the Baltics was nearly 30% lower, despite the addition of several new wind farms in the region. While approximately 418 gigawatt-hours of electricity were produced from wind in the Baltics in February 2024, this year the figure was only 300 gigawatt-hours. At the same time, it is clear that when wind conditions are favourable, wind power generation helps lower prices across the region.

Hydropower production, which was nearly 43% lower than last year, totalling 220 gigawatt-hours compared to 387 gigawatt-hours in February of the previous year, also contributed to the low renewable energy output.

At the same time, fossil fuel-based production (gas, oil shale) across the Baltics was significantly higher compared to both the previous month and the previous year. Compared to February 2024, fossil fuel-based generation increased by nearly 56% in February of this year, reaching 944 gigawatt-hours (up from 604 GWh in 2024). Rising gas prices can also be seen as a contributing factor to the increase in electricity prices, as nearly 67.5% of the total fossil fuel-based electricity generation in the Baltic States came from gas power plants in Latvia and Lithuania. Compared to February of last year, natural gas prices were 95% higher: 25.7 euros per megawatt-hour in February 2024 versus 50.2 euros per megawatt-hour in February 2025.

On 8 and 9 February, the Baltic electricity system was desynchronised from Russia and synchronised with the Continental Europe Synchronous Area. Following the disconnection, transmission capacities between the Baltics and other countries were limited and the entire Baltic system operated in island mode. Due to limited interconnection capacities, there were hours in February when wholesale electricity prices fluctuated by up to 30–50 EUR/MWh due to supply and demand variations of 20–30 MW. This sensitivity largely subsided after the restoration of transmission capacity with Sweden and Poland, though some sensitivity remains due to restrictions related to maintaining frequency reserves.

In addition, the absence of the Estlink 2 connection continues to impact electricity prices as it reduces the interconnection capacity of the Baltics with the Nordic countries. The price impact of the absence of Estlink 2 may be greatest in the summer when solar energy production declines at the end of the day, requiring the activation of more expensive dispatchable generation units.

This February illustrates how low renewable energy production across the Baltics, limited transmission capacities and high levels of fossil fuel-based generation impact our electricity prices. For March, we anticipate a recovery in wind power generation and a significant increase in solar energy output, which could help lower electricity prices overall.

Compared to January, wind energy consumption in Estonia was nearly halved, making up 10.7% of the consumer portfolio, whereas in January, this figure was 23%. Despite the recent addition of the Sopi-Tootsi wind farm to the market, which added more than 200 MW of wind capacity to the Estonian network, the share of wind energy in February was lower than last year due to poor wind conditions (wind generation accounted for 12.3% of consumption in February 2024). The share of fossil fuels in consumption increased by 50% in February: while fossil fuels accounted for nearly a third of consumption in January, their share rose to 44% in February. However, the volume of imported electricity decreased due to transmission capacity limitations.

In our previous energy market overview, we noted that electricity prices in February would remain high during the morning hours of 07:00–09:00 and the evening hours of 16:00–18:00, while being lower during the night hours of 23:00–04:00. This trend held true: during the previously mentioned morning hours, the electricity price in February 2025 was 32% higher than the monthly average and, in the evening hours, it was as much as 45% higher. During night hours, the price was 33% lower than the monthly average.

A similar pattern is expected to continue in March, but the increase in solar energy will shift the average peak evening hours to 17:00–19:00. Last year, the aforementioned morning hours were 26% more expensive than the monthly average, while the evening hours were as much as 43% more expensive. Night hours were 24% lower. While March of last year does not predict this year’s March, it provides a good indication of how to manage consumption and save on electricity prices.

February brought several surprises for European gas prices: cold weather, political decisions and geopolitical uncertainties. In February, the average price of natural gas (TTF) was 50.2 euros per megawatt-hour, nearly double that of a year earlier.

At the beginning of February, North-West Europe experienced a cold wave, which increased heating demand and, in turn, gas consumption. The rise in gas prices was also fuelled by the overall low wind energy production across Europe, which forced electricity producers to rely more on gas-based generation.

As a result, storage capacity quickly dropped to 51%, well below the level seen at the same time last year. The suspension of gas transit between Ukraine and Russia in January, along with reduced Norwegian exports due to maintenance work, also contributed to the price increase in the market. As a result, gas prices surged to their highest level in two years in February, reaching 59 euros per megawatt-hour.

Mid-February brought some price relief as speculation about negotiations between Russia and Ukraine raised market hopes for an easing of tensions, the European Union discussed relaxing its gas storage requirements and temperatures in Europe rose. This led to a rapid decline in natural gas prices, which fell by around 30% from their peak between February 12 and 26. In the final days of the month, tensions between Ukraine and the United States caused natural gas prices to surge.

Carbon allowance prices remained relatively high at the beginning of February, averaging 81 euros per tonne. However, prices fell over the course of February. The price drop was driven by a sharp decline in natural gas prices and strong selling pressure from carbon trading institutions. Additionally, hints from European Union officials about a potential future relaxation of allowance requirements also influenced the price. By the end of the month, the price of carbon allowances remained between 70 and 71 euros per tonne, marking a decline of around 15% throughout February.

Karl Joosep Randveer, Energy Trading Analyst at Eesti Energia

The market overview has been compiled by Eesti Energia according to the best current knowledge. The information provided is based on public information. The market overview is presented as informative material and not as a promise, proposal or official forecast by Eesti Energia. Due to rapid changes in the regulation of the electricity market, the market overview or the information contained in it is not final and may not correspond to future situations. Eesti Energia is not liable for any costs or damages that may arise in connection with the use of the information provided.