Consumers in Norway have the freedom to select their energy supplier. Small end users typically enter into contracts with power suppliers operating on the end-user market, while larger industrial customers may purchase directly in wholesale or negotiate bilateral agreements with power producers.
Variations in water inflow to storage reservoirs exert an outsized influence on Nordic power prices, and its impacts are evident on Nord Pool’s day-ahead market where prices are calculated hour by hour. To learn more about the Nordic energy marketplace, read on.
Norway’s end-user marketplace is a big component of its energy system, encompassing households, companies and public institutions that consume electricity. Through alle strømleverandører to choose from with various contracts available, consumers can certainly find one suitable to their needs. This market connects to an energy distribution network operated by Norwegian distributors who can be chosen by each end-user as their network transmission partner.
Norway produces most of its energy needs via hydropower due to the country’s steep valleys and rivers, and more than 1000 hydropower storage reservoirs with total capacities exceeding 865 TWh. Norway also boasts high levels of renewables production as well as low-carbon fuel production.
Water inflow to storage reservoirs is one of the key influences on prices in Norway’s energy sector, as this fluctuation translates into fluctuating spot market prices determined each day by supply and demand. When rainfall decreases significantly, electricity costs increase sharply; when precipitation rates spike significantly however, prices fall again.
In order to lower fixed-price tariffs for electricity, companies that provide them must find it easier and cheaper to hedge their risks. At present, this requires them to buy and sell power on multiple markets with differing price zones, making it hard for them to accurately observe a price for power – altering this could help lower fixed-price tariffs for Norwegians.
Electricity prices in Norway are set daily by marketplace mechanisms that take into account predicted demand and projected production from power companies; then these prices are passed onto consumers through electricity companies – meaning Norwegians receive two separate electricity bills; one from their power company and another for transmission system operators (TSO).
TSOs have various duties related to transmission grid operation, congestion management and network codes and guidelines in the internal energy marketplace. They must create market-based solutions which promote resource utilization efficiency as well as international power trading, while at the same time maintaining frequency regulation to maintain an instantaneous balance of their power supply system.
As Norway experiences wide fluctuations in electricity production and consumption, the grid system must be capable of moving energy across regions as well as between Norway and other countries. Local peaks in energy demand due to cold days should be managed effectively while also permitting importation from other regions when production drops and consumption soars.
The Day-Ahead Market (DAM) is an hourly forward electricity marketplace where prices are set one hour in advance. It connects willing buyers and sellers of energy in an open, transparent way while accommodating network security constraints; additionally it serves as a platform for hedgers looking to mitigate price volatility Real Time as well as provide congestion costs relief and offset possible spikes due to ancillary services causing power costs to spike.
The day-ahead market is another component of Nordic energy sectors, and has been since 1971 when Samkjoringen was established in Norway. Statnett SF manages this day-ahead market as system operator; producers submit bids on how much energy they are willing to produce at certain prices that closely reflect production costs; these bids are then compared with end user demand and dispatched accordingly.
Other markets operate closer to real time than just the day-ahead market, such as intraday and balancing markets which help manage peak demand by shifting supply and consumption; these markets play a particularly critical role with so much intermittent generation such as wind and solar power.
Market mechanisms are integral in providing an excellent level of grid reliability, particularly by eliminating costly emergency capacity needs and encouraging production and consumption adjustments through price signals from day ahead, intraday and balancing markets. This mechanism gives producers and consumers incentives to adjust consumption and production accordingly.
Nord Pool DAM (www.nordpoolgroup.com/en/Market-data1/Dayahead/Area-Prices) is an automated trading and clearing solution that enables participants to trade at an hourly local marginal price (LMP). The DAM includes a list of electrically similar settlement points (ESSPs), used for all market processes and transactions; this list is regularly updated to account for changes to network topology or outages; additionally a blacklist contains any ESSPs that cannot be traded.
Power prices in Norway are determined by various factors, including coal, natural gas and emission allowance prices as well as electricity supply system capacity and consumption patterns. Over time these variables will contribute to higher or lower prices depending on market fluctuations and availability of energy resources.
The Day-ahead market is the primary trading system for physical power in the Nordic region, where participants make bids and offers for buying or selling electricity in hourly blocks for the following day. Each auction closes at 12:00 each day and TSOs publish trading capacities for each bidding area before then; prices are then calculated based on all orders received as well as transmission capacity and available power generation capacity.
Future success hinges upon increasing flexibility within the system. This could involve new generation or demand management initiatives; for the latter to work effectively requires cooperation among consumers and grid companies. It will be crucial to invest in additional transmission capacity.
Norway currently enjoys an abundant power surplus. Yet domestic consumption has steadily increased over the years. Therefore, to avoid straining of its system in the short-term it would be prudent to increase renewables production and expand transmission capacities.
Norway participates in both the Nordic market, comprising Sweden, Denmark and Finland; as well as European energy sectors via interconnectors to Netherlands, Germany, Baltic States and Russia. Both Nord Link cable to Germany and North Sea Link cables will enhance Norway’s ability to export or import energy from Europe.