The price of electricity and energy saving became the top national topics last winter. But why did prices rise, what kind of electricity contract should one choose and how can the energy crisis be solved?
Energy prices reached peak levels last winter, and the rise in electricity costs was painfully felt in the pockets of both private individuals and businesses. Why did electricity become so expensive?
– The price of electricity rose to a very high level, the main reason for which is Russia's invasion of Ukraine, says the CEO of Turku Energia Timo Honkanen.
When affordable electricity is no longer imported from Russia, the electricity needs of Finns must be met by other means.
Honkanen explains that the market price of electricity is determined daily on the electricity exchange. The price is influenced by how much electricity is consumed. Daily electricity demand is first met with low-cost energy sources such as hydropower, wind power, and nuclear power, but once their capacity is exhausted, more expensive power generation methods using combustion technology are used. Therefore, the more electricity is used, the more expensive it becomes. For example, during hard frosts, the price of electricity is at its highest.
Power outages are possible if electricity consumption exceeds supply.
– If electricity runs out, power outages must be rotated, otherwise the entire power grid will collapse, explains Honkanen.
– For people, this is a new thing, but energy companies have been prepared for various exceptional situations, so this is nothing new to us. We normally conduct a couple of crisis exercises a year, and last year several major exercises were carried out in cooperation with, for example, rescue services. So, there is readiness for exceptional situations, says Honkanen.
What kind of electricity contract should one make – is a fixed-term contract the safest, or should one try exchange electricity? How does one know at all what kind of electricity to buy?
– You can't know that from anywhere. Only afterwards can you see what was worthwhile, says Honkanen.
– Exchange electricity is not a bad option at all, especially if a large group of people use it, because then electricity is used less when it is expensive and more when it is cheap.
Businesses have similar contracts as private individuals, but their fixed-term contracts can be longer than those of consumers. That is why some companies are still operating on cheaper electricity. It may be harder for companies to play with exchange electricity like consumers do, but they may have access to demand response contracts. Through these, companies can stop using electricity for, for example, a few hours when electricity is expensive.
“Global energy consumption is growing exponentially.” Timo Honkanen, CEO of Turku Energia.
– We have been asked why we cannot offer a price cap for electricity. Unfortunately, that is not possible, because we ourselves as a company are dependent on exchange electricity. About 30–50 percent of the electricity we sell is our own production; the rest we buy. If we set a price cap that is below the price at which we buy electricity ourselves, we will quickly be in trouble.
Energy consumption in the world is currently growing exponentially, so the need for electricity is not decreasing anywhere. So, how do we move forward from the energy crisis?
– The fastest way in an acute crisis is for everyone to examine their own electricity use and try to limit it: for example, turn off the lights whenever leaving and only take a quick shower when washing. People in Turku have already saved electricity significantly, as the consumption curve for the beginning of the year has been about 16 percent lower than at the same time last year, even though the temperature is about the same.
– In the longer term, the issue will be solved by increasing electricity production using methods that are affordable. Hydropower can hardly be built more in Finland, but wind power can. Many new wind farms are coming to Finland, and we at Turku Energia are involved in a project that will double our wind power capacity.
Honkanen says that Turku Energia's goal is to be carbon neutral in 2029. The company has made significant investments over the last 20 years and invested in renewable energy. Turku Energia owns, among other things, a share of a hydropower plant in Norway and is involved in building wind farms in Finland.
– Sometimes people ask why we don't build wind or hydropower plants in the Turku area. Such investments must be made where there are the best conditions for such power plants. Their return then benefits the people of Turku.
Turku Energia and Turun Seudun Energiantuotanto also have a lot of energy production in Turku, including the Oriketo bio-heating plant, the Artukainen steam heating plant, and heat pumps in Kakola.
Turku Energia
Industry: energy
Established: 1998
Employees: 330
Revenue: €260 million (2021)