Category: Power-Deriva’s Analysis

Although Nordic water reservoirs sit at normal levels and early winter is expected to be mild, it’s once again wise to prepare for sharp electricity price fluctuations—especially if renewable energy production falls short. Our experts explain how you can turn the situation to your advantage.

In the Nordics, weather fluctuates just as much as electricity prices do. Along the coasts of Norway and Sweden, the sea moderates temperatures, yet annual rainfall varies significantly. In Finland, maritime and continental climates meet: Atlantic low-pressure systems bring warm, wet air from the west, while high-pressure systems from the east bring cold, dry conditions. Still, temperature is only the tip of the iceberg when it comes to electricity pricing.

“Electricity is typically cheaper in summer than in winter, but there are exceptions. For example, in August 2025, prices in Finland were high as several nuclear power plants were undergoing maintenance simultaneously. If winter is milder and windier than usual, prices may drop. The level of water reservoirs, wind conditions, sunshine, and global events all play a role,” notes Senior Analyst Antti Martikainen.

Electricity prices are driven by many factors, whose combined effects become especially pronounced during winter and with the rise of quarter-hour pricing. The most tremendous volatility is seen within the day.
“Winter can catch the power market off guard just as easily as it does road traffic. Still, the goal isn’t to fear the worst—it’s to prepare as well as possible,” emphasizes Portfolio Manager Ilari Kosonen.

Small Differences, Big Impacts—for Better or Worse

Electricity price fluctuations have a significant impact on both energy companies and the industry. For example, a €10/MWh price increase can amount to about €75,000 in additional monthly costs for a company with 10 MW of consumption. For larger industrial players using 20 MW, the impact doubles to €150,000 per month.
“On the other hand, the earning potential is just as substantial. The question is whose forecasts are the most accurate, and how effectively can that information be applied; day to day, week to week, and month to month,” Kosonen says.

Key Risk Factors in the Power Market

Electricity trading involves several types of risks: market price, volume, balancing power, and profile risks:

• Market price risk increases as renewable energy expands. Wind, solar, and hydropower output varies with weather, highlighting the need for effective hedging. These risks can be managed with derivatives such as Nasdaq futures and options, or bilateral agreements. When hedged correctly, market price risk can theoretically be eliminated.

• Volume and balancing power risks arise when actual electricity consumption or production differs from the forecast used for purchasing, selling, or hedging. For example, if a company has hedged 10 MW but cold weather increases consumption to 12 MW, the additional 2 MW must be bought, often at a higher price. Conversely, in an oversupply situation, if hedges were purchased below the spot price, the surplus can even create profit.

• Volume risks can be managed by distinguishing between temperature-dependent and independent consumption, using options to hedge flexibility, and keeping forecasts up to date. For instance, if an industrial plant is expected to consume 10 MW the next day but must shut down due to a production issue, it can sell the unused electricity back to the market at the best available price.

• Balancing risks are common in weather-dependent production and consumption assets, often resulting in additional costs. Accurate day-ahead production and consumption forecasts are crucial. Updated forecasts and active intraday trading significantly reduce weather-related balancing risks.

• Profile risks relate to how consumption aligns with hourly price variations. Electricity prices can swing sharply within a single day—low at night and significantly higher during afternoon peaks. For companies, the key is how well their usage matches expensive or inexpensive hours. These risks can be reduced with profile hedges and load shifting. An industrial company, for example, can purchase power in advance for hours when production peaks, requiring precise monitoring and real-time market insight. For electricity retailers, fluctuating spot prices introduce a new complexity as customers increasingly shift their consumption. Through detailed analysis, retailers can create flexible price bids for the day-ahead market, ensuring consumption forecasts adjust to demand response and reducing balancing risks.

Power Market Management as a Service

Managing the power market requires resources, expertise, and real-time data. For many companies, the optimal solution is to outsource to a Portfolio Manager who monitors the market, analyzes risks, and ensures operations remain under control.

“At Power-Deriva, the only responsibility left to the customer is decision-making. They can also authorize the Portfolio Manager to make decisions on their behalf,” Kosonen explains.

Cooperation with Power-Deriva begins with an assessment of the current situation, budget, and objectives — including key consumption and production figures and financial targets. The Portfolio Manager then creates a concrete action plan for hedging and trading across different power markets. The plan is based on the EMPS (EFI’s Multi Area Power-Market Simulator) model.

“With EMPS, we can calculate the impacts and risk levels of different market scenarios. The model includes extensive weather and production scenarios and accounts for power plants, transmission capacities, and renewable energy sources. We use more than 40 years of weather and production data, as well as fuel price tracking, adjusted for future conditions,” Martikainen says.

Once the service is running, Power-Deriva’s systems provide the customer with a real-time situational picture. Automation integrates profit and position analytics, tracks market developments, and can execute trades on the customer’s behalf. The service can include consumption forecasting, cost optimization, and minimization of balancing errors.

“Ultimately, it’s essential to find a Portfolio Manager you can trust. Power-Deriva’s strengths include our proprietary modelling system, supervision by the Finnish Financial Supervisory Authority, over 20 years of experience in the power market, and numerous long-term customer relationships. We’ve seen many crises and learned from all of them,” Kosonen concludes.

• Read more about Porfolio Management Services 

• Read more about Power Deriva’s Forecasting and Multi-Market optimization

Suora yhteydenotto

• 

  Ilari Kosonen

  Portfolio Manager

  +358 45 113 0844
  firstname.lastname@power-deriva.com

• 

  Antti Martikainen

  Senior Analyst

  +358 50 467 3575
  firstname.lastname@power-deriva.com

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