Electricity prices increased in May, but solar energy production in Latvia has seen an unprecedented surge

In May, the transition to the summer season continued in Latvia’s electricity market, bringing warmer weather and longer daylight hours. However, the average electricity price in May reached 8.23 cents per kilowatt-hour, which is approximately 43% higher than in April and 21% more expensive than in May of last year, according to data compiled by the energy company Enefit.

Price differences in the Baltics due to interconnection restrictions

A key factor driving higher prices in Latvia was the restrictions on electricity interconnections between Estonia and Latvia, which block the flow of cheap Nordic energy through Finland to the Latvian and Lithuanian markets. For this reason, the average price in Latvia and Lithuania was the same (8.23 cents/kWh), but nearly 37% higher than in Estonia.

Decline in hydro and wind power generation

Romāns Tjurins, Head of Portfolio Management and Market Research at Enefit, explains that the price increase was also driven by local production dynamics: "In May, we observed a significant decline in both hydroelectric and wind power generation. Production at Latvia’s hydroelectric power plants fell by nearly half—to 223 GWh—thereby covering only 14% of demand, compared to approximately 25% in April. Wind generation in the Baltics also fell by nearly a fifth. This naturally forced the region to rely more on more expensive alternatives and contributed to rising prices."

Despite the decline, wind power still managed to provide 27% of Baltic consumption, while renewable resources as a whole covered 75.1% of the entire Baltic region’s demand. Since Latvia’s power grid is closely interconnected with the rest of the Baltics, this renewable energy coverage fully applies to our country as well.

Latvia’s solar energy production breaks records

Although other renewable energy sources declined, solar energy production continues its rapid rise. In May, solar power plants in Latvia generated nearly 216 GWh of energy. Lithuania was the leader in the Baltic region with nearly 320 GWh, while Estonia recorded the lowest figure—around 164 GWh.

"Latvia’s rapid growth in solar energy deserves special mention—during the period from March to May, when solar energy production is at its peak, production volumes in Latvia reached 182% of last year’s levels, or nearly doubled. This influx of cheap energy is having a significant and positive impact on all Baltic markets, allowing solar energy to cover nearly 34% of Baltic demand overall—the highest figure ever recorded," emphasizes Romāns Tjurins.

Market Forecasts: What to Expect in June?

Solar energy production in June is expected to remain at a similar level to May or decrease slightly, as historically, solar energy production volumes reach one of the highest levels of the year in May. During the day, electricity prices will continue to follow a U-shaped curve—they will be higher in the mornings and evenings but will approach zero during the hours when solar power generation is at its peak.

Although the end of the spring flood season and the subsequent drop in production at Latvia’s hydroelectric power plants, as well as a reduction in wind capacity, may slightly raise regional prices, access to Nordic energy via Estonia and Lithuania, combined with solar and wind power in June, will still keep prices lower than what we are accustomed to seeing in other months.