Market development

In early 2016, many commodity prices reached long-term low price levels. This marked the bottom of a downward trend that had continued for many years. In February, coal prices1) were as low as USD 36.50 per tonne. This also heavily impacted Nordic power prices with the Nasdaq OMX forward price for 2017 dropping to as low as EUR 16.30 per MWh.

From February to December the markets were characterised mainly by increasing prices and high volatility, as markets peaked in early November. Coal prices almost doubled (USD 70.25 per tonne at year end), resulting in increasing power prices. At the same time, prices for CO2 emission allowances (EUA) fluctuated between EUR 4 and 6 per tonne for most of 2016 and ended at EUR 6.5 per tonne at the end of the year, down from EUR 8.1 per tonne at the beginning of 2016. This added to the price volatility on the Nordic power market.

The hydrological situation changed to the drier during 2016 due to low precipitation in the Nordic area and high hydropower production mainly in Norway. Precipitation in Sweden was low during 2016 resulting in lower hydropower production compared to 2015. At the beginning of 2016, the Nordic water reservoirs were at 98 TWh, which is 15 TWh above the long-term average and 18 TWh higher than a year earlier. By the end of the year, reservoirs were 8 TWh below the long-term average and 23 TWh lower than at the end of 2015.

The Nordic spot power prices at the beginning of 2016 were lower than in 2015. Due to increasing coal prices and the tightening hydrological situation, the spot prices increased above the 2015 levels from the middle of the second quarter and stayed above the 2015 levels throughout 2016. The average system spot price during 2016 was EUR 26.9 per MWh, with the area price in Finland at EUR 32.4 per MWh and in Sweden SE3 (Stockholm) at EUR 29.2 per MWh. The increase was especially evident in the third quarter when the system spot price almost doubled from the exceptionally low level in 2015. The very low prices in 2015 were caused by high inflows and late snow melt.

1) API 2 Index for year 2017