No. 47




Electricity Stock Market Price and Inflation

07 June 2023


RiTo No. 47, 2023

The sudden hike in the price of electricity in 2021 and 2022 caused a stir in Estonia and made electricity a key issue in discussions on economic policy.

Although the general public has tended to blame the Nord Pool power exchange for the increased price of electricity, the root causes are elsewhere, being largely linked to the weaponisation of natural gas. The key factor that has affected energy supply as well as the stock market price over the recent years has been the price of gas. This is based on the fact that the bulk of the so-called manageable capacity is produced in gas-fired power plants.
The price of gas rose steeply in autumn 2021, when tensions between Russia and the West gathered strength. Thus, the price of gas in Europe reacted to news about a “refugee crisis” on the border between Belarus and the European Union. However, the price of gas truly skyrocketed when Russia presented its demands to NATO countries in December 2021. Reducing the EU’s dependency on Russian gas has led to a drop in gas prices, although the price has still remained above the 2021 level.

Although Estonia is not particularly dependent on natural gas, it does have a sig-nificant effect on prices in Estonia, because gas is not used only in power genera-tion, but it also provides an important input in heating and chemical industry.