The Impact of German Power Market on the Finnish Power Price

Finnish and German power prices have historically correlated well despite the lack of a direct interconnector between the countries. This article first analyses the historical link between the prices and the reasons explaining the link. Second, the article analyses the future role of the Central Western European power markets in setting the Finnish power price using PLEXOS simulation software. In addition to a Base scenario representing a best guess market outlook until the end of 2025, the article analyses sensitivities in fuel and emission prices, and in German, Dutch, British and Polish power prices. The results indicate that the Central Western markets, particularly Germany, impact the Finnish power price significantly also in the future, despite the current and foreseen spread between the prices that started as a result of the notable increase in natural gas price in 2021. The results help understanding the dynamics of power price formation in Finland.