Imagine that you are selling apples in the market square. You have had a good harvest, and your sales stall is overflowing with apples. The whole town comes to buy apples from you and you make good money. You can even sell some apples to the neighboring town. Then comes the next season. There are still many people who want to shop with you, but due to low rainfall you have fewer apples. What can you do to still make a lot of money? Raise the price. The customers agree to the price increase, because they must have apples to be satisfied. They could buy oranges from the neighboring town, but the producer has just invaded another town; so you are not quite on speaking terms. You also wonder if your apples will be worth more in a few months. It’s a bit like that with electricity prices too, but not quite as simple. Much is controlled by algorithms. Let’s go through some key things. news has spoken to these experts: In working on this article, news has spoken to the following experts: Yngve Birkelund, professor at the Department of Physics and Technology, UiT Norway’s Arctic University. Marius Holm Rennesund, partner THEMA Consulting Group AS. Dag Harald Claes, professor at the Department of Political Science, University of Oslo. Mette Helene Bjørndal, professor at the Norwegian School of Economics. What affects the electricity price now? In Norway, a large part of the electricity we produce comes from hydropower. Then it is bad news that there has been little rainfall in the south, according to the measurements by the Meteorological Institute. Electricity customers will still have electricity, but there is little water in the reservoirs. Thus, it is natural to raise the price, just like with the apples. Further north in the country, there is a lot of water in the reservoirs. It can be turned into electricity, but that electricity is difficult to transport south because there is poor transmission capacity between the parts of the country. OVERFLOWING: At Storvannet in Håkvikdalen in Narvik, there is so much water that the reservoirs cannot take it all away. Here, people are warned against small streams that have turned into rivers. Frida Brembo An alternative is to buy electricity from other countries in Europe. In Europe, gas is an important source of electricity, and gas prices have skyrocketed. This is due, among other things, to the war in Ukraine and weather and wind conditions. This means that electricity prices in southern Norway will also be higher. But why is that so? How is the electricity price set? Norway is part of the Nordic power market. We are also connected with countries such as Germany and England, through submarine cables. The purpose of a common power market is to ensure that there is always enough electricity available, and that it can flow from where it is cheapest to most expensive. It can be beneficial for Norway when it is cold in the winter and there is little water in the reservoirs. Then we can, for example, benefit from a lot of wind in Sweden. But when it is expensive to produce electricity in both southern Norway, England, Sweden and Germany, it becomes difficult to keep prices down. The electricity price in Norway is set on the power exchange Nord Pool. Imagine the fruit market in the square again. Some sell fruit and others want to buy. The price depends, among other things, on how many apples you can or want to grow, at what price you can do it for and what the customers are willing to pay. Do you want to know more about how the electricity price is set? You may have heard of Nord Pool AS. It is a stock exchange for power, where power producers, electricity suppliers and private customers can participate. All the power exchanges in Europe are linked together in an auction system. On the exchange, supply and demand are entered in each area before 12 o’clock, and the crossing point in this area for each hour becomes the next day’s spot price. The production curve (the sale of electricity) is created by summing up the available volume that is available as a function of the price offered. The higher the price, the higher the volume of electricity offered. Consumption (purchase of electricity) is also entered at the same time, and the crossing point of the curves goes to the electricity volume to be balanced. This point becomes the electricity price in the area. Thus, for example, area NO4, which covers northern Norway, could get completely different prices than in the south. Adjustment of the price between areas is done on the basis of the quality of the power grid. A homeowner usually has an agreement, either a spot price or a fixed price, with an electricity supplier. The electricity supplier is obliged to be able to supply the electricity you need. Electricity is a fresh commodity, so there must always be a balance between consumption and production in all areas. Do you find all this difficult to understand, or simply unfair? It gets worse. The power producers cannot decide how much of their power is exported, they can only decide how much they want to produce and at what price. They also only bid in their price range. What the electricity price will be and where the electricity flows are mainly determined by an algorithm called EUPHEMIA. The purpose of the algorithm is to ensure that the socio-economic profit is maximized for everyone who participates in the stock exchange. You can read more about what it actually means here. However, whether the algorithm distributes the costs fairly is something that can be questioned. But why are the price differences so large between the north and south of Norway? In Northern Norway, it is currently cheap to produce electricity and the electricity price is low. However, this has little to say for the electricity price in southern Norway and Germany. The power producers in Northern Norway may well say that they can produce a lot of electricity at a low price, but it is of little help when it cannot be transported further in an efficient manner. Norway is divided into five price zones. Photo: Energi Norge If electricity could be transported seamlessly between all countries in Europe, several areas would have the same electricity price. But it is not so. There are several limitations in the transmission capacity, especially between Northern Norway and Southern Norway. The electricity price in southern Norway is therefore more influenced by the prices in Germany and England, because it is easier to transfer electricity from these countries than from northern Norway. So if Germany had produced cheap gas and had full operation in its nuclear power plants, it would probably lower the price in southern Norway. But that would have had little to do with the price of electricity in Northern Norway. Can the politicians decide the price? Can’t the government just decide that the electricity price in southern Norway should be lower? Let’s say they had introduced a maximum price. Norway would still be part of the European electricity market. The way the system works, it is likely that more electricity would then be exported, because electricity must constantly flow from where it is abundant and cheap to where it is scarce and expensive. This in turn could lead to even less water in the reservoirs, which in the long run could push the price even higher. But with a high price in Norway, it is less likely that much electricity will be exported. The debate about the maximum price is still ongoing, and the politicians disagree about the solution. For whom should the maximum price apply: Those who produce the power or those who sell it to private electricity customers? The debate has several different points of view and opinions. Several European countries have introduced various measures to solve the energy crisis. Is there a perfect solution that fixes everything overnight? Probably not. In the water reservoirs in the south, the amount of water in the reservoirs is lower than it has been in 20 years. This in turn leads to record high electricity prices. Here from Blåsjø in Agder. In the north, the reservoirs are overflowing. Nordkraft warns about traveling near rivers that flow in and out of the reservoirs and prices are historically low. In week 30 with a weekly price of 2 øre/kWh. Full water reservoir at Balvatn in Nordland. Can there be restrictions on how much electricity we can use? The government has said that the electricity subsidy for households will be strengthened. From 1 September, the electricity subsidy will be increased from 80 to 90 per cent when the electricity price is over 70 øre per kilowatt hour. Since the state takes part of the bill, this can mean that we will use more electricity since we are not facing the real prices of power. This can increase the risk of power rationing. During the Second World War there was a shortage of certain goods, and households, for example, were only allowed to buy a certain amount of coffee each week. This can be the case with electricity too. This may mean that companies or private individuals are only allowed to use a certain amount of electricity. Rationing of electricity can take place if you want to ensure electricity for important customers. That means healthcare, police, defence, communication and supply. Oil and Energy Minister Terje Aasland cannot promise that households will be saved in the event of rationing. ILLUSTRATION PHOTO: If there is too little electricity, we may have to keep an extra eye on consumption. Photo: Erik Johansen / NTB
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Gas, war in Ukraine, little water and nuclear power plants in Germany – news Troms and Finnmark
