In recent weeks, electricity prices have skyrocketed in Northern Norway. Last week, Northerners experienced the highest average price in history. Elkem Rana has fixed price agreements for electricity. They do not pay more than agreed. Now electricity is so expensive that it pays for them to switch off the ovens. Why? They earn more by selling the power on to others than by producing ferrosilicon. Plant director at Elkem Rana, Frode Johan Berg, says they would rather produce and employ people than sell the electricity on. Photo: Frank Nygård / news It shouldn’t be like this Silicon is an important semiconductor – and has been called the new oil. There have also been warnings that there could be a shortage of the important metal. Nevertheless, the power situation is now such that Elkem Rana chooses to halve production. – Just as it is now, it is a situation where we are actually making money by selling the power instead of using it to make our products, says Elkem Rana’s plant director, Frode Johan Berg. One of the two furnaces used to produce ferrosilicon has therefore been switched off. Although they are still making money, Berg believes this is a clear sign that something is wrong with the market situation. Silicon production is halved at Elkem Rana because it is better for the shop to resell the power than to make its own products. Photo: Frank Nygård / news – This may help to show the complexity of the power market. We are in NO4 where there is a surplus of power, but still you see prices similar to what we have seen in the south of Norway, says Berg. He adds: – This is not how it should be – and this should be arranged so that conditions improve. This does not only apply to Elkem, but to private individuals who also experience very high prices. Buying power to gain predictability Elkem Rana uses 0.8 terawatt-hours on the two furnaces during the year. This corresponds to approximately 0.5 percent of Norway’s power production. In other words, not an insignificant amount of power that is now resold. Elkem Rana is an important workplace in Mo i Rana. Even if the ovens are turned off, there is work to be done – including maintenance. Photo: Frank Nygård / news Tor Reier Lilleholt, head of analysis at Volue Insight, tells news that the contracts large industrial companies sign with power companies often extend over many years. – They often enter into what is called a PPA contract that applies between producer and consumer. The contracts often have a duration of 10–15 years. Tor Reier Lilleholt says it is not entirely unusual for industry to resell power after buying it from power producers. Photo: Asbjørn Odd Berge / news – The industry often has a good overview of consumption, which in many cases is flat. Either the ovens work, or they don’t, explains Lilleholt and adds: – This way they can estimate how much they need and get a fixed price for it. But shouldn’t one think that the power producers want to sell most of the price at spot price? The power producers in Norway often sign long fixed-price contracts with the industry. Photo: Ingrid Lindgaard Stranden / news Lilleholt explains that they do not always have a choice – and must enter into long agreements to ensure that money comes in. – It is very common for banks to require that a certain proportion of the volume must be sold. The power producers then receive fixed income, which is a security and predictability for the banks. – Contributes to a very tight power market Frode Johan Berg in Elkem Rana says they cannot go into details in the power agreements. How much power they can sell, and at what price, also depends on how the market develops. But he emphasizes that it is unusual for them to reduce production in order to sell electricity. – It is a completely new situation. The metal silicon has been referred to as the new oil. Photo: Dynatec Engineering Berg hopes that their resale of power can help mitigate a tight power market. At the same time, he emphasizes that it is not the resale of electricity that they really want to continue with. – We want to create products and jobs. It should not be the case that it is more profitable to sell raw power than to produce the products we want to make. ALSO READ:
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Elkem Rana closes furnaces that produce ferrosilicon – earns more by selling power – news Nordland
