Why Latvia Does Not Always Receive Cheap Electricity from the North 0 8

Last year, the average price in Estonia was €80.39 per megawatt-hour (MWh), while in Latvia it was €85.73/MWh; in the year before last, the average prices were the same, and the largest difference was observed in 2022, when electricity was particularly expensive, according to data from the "Nord Pool" exchange. One of the reasons for the price differences is the transmission capacity of the networks between the two Baltic countries, as well as cheaper electricity produced in Finland.

"Transmission capacity constraints can indeed cause price differences between countries. Any limitation increases the risk that the electricity price in Latvia will be higher. Since the Baltic countries import electricity from Finland, bottlenecks in the transmission system between Latvia and Estonia create price differences, and in the case of a deficit in Latvia, a higher price is formed as more expensive energy sources are used to meet demand," explained Janis Zelchs, head of the business segment at "Ignitis Latvija".

He notes that in recent years, electricity in Estonia has been cheaper than in Latvia due to strong interconnectors with Finland, and this trend is expected to continue into 2026. However, this year, the average electricity price in Latvia is currently slightly lower than in Estonia (in Estonia - €167.56/MWh, in Latvia - €166.76/MWh), as, for example, at the end of January, the higher electricity price in Finland had a stronger impact on the Estonian market, while due to limited interconnection capacity, it did not reach Latvia in full volume.

At the end of last year, Estonian electricity producers expressed dissatisfaction with the maximum transmission capacity planned for this year for connections with Latvia. The head of energy trading at "Enefit", Tiit Höbeögi, noted in a conversation with Estonian public media that, according to market participants' expectations, after the completion of network reconstruction works related to synchronization, the available transmission capacity from Estonia to Latvia was supposed to increase fully - to 1400 megawatts (MW). Therefore, the information about capacity limitations in 2026 came as a surprise to him.

It should be noted that in 2025, Estonia received about half of its consumed electricity from Finland. Limited transmission capacity means that in situations where electricity prices in Latvia and Lithuania are higher than in Estonia, Estonian producers will not be able to increase production and exports. Similarly, Latvia and Lithuania will not be able to fully receive cheaper electricity from the north, Höbeögi explained.