Norwegian electricity rates set new record: Why are prices still going up? 

Frazer Norwell
Frazer Norwell - [email protected] • 22 Aug, 2022 Updated Mon 22 Aug 2022 11:50 CEST
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Energy prices will continue to rise this winter despite several price records being shattered already. Pictured are energy meters. Photo by Doris Morgan on Unsplash

Monday will see the highest daily energy price recorded in parts of south Norway, with steeper costs forecast throughout the colder winter months. 

On Monday, the NO2 energy region (covering southern Vestland, Rogaland, Agder, Telemark and old Vestfold) will see a daily price of 5.35 kroner per kWh and a maximum price of 6.08 kroner per kWh between 6-8pm, according to figures from energy exchange Nord Pool. 

The daily price for NO2 is a record, with the previous highest price coming last Thursday. In addition, the peak hourly price has only been higher twice, once in March and once again in December. 

Several other areas will also have their most expensive day of the year for energy on Monday. The Oslo area (NO1) and Bergen area (NO5) will see prices of 3.89 kroner per kWh- the second most expensive day on record for the cities. 

Record prices have been a mainstay over the past year in Norway, and prices could rise even more this winter, according to a forecast from energy firm Gudbrandsdalen Energi. 

"Based on our recent price forecasts, we estimate that electricity prices in the southern part of Norway will continue to remain at an abnormally high level and rise further," the firm wrote on its website

"The winter months of January and February are now likely to be the most expensive months, with prices around five kroner /kWh excluding VAT. Including VAT, this gives an electricity price of around 6.25 kroner/kWh. These are the months we use the most electricity in Norway," the forecast added. 

There are several reasons why the price will continue to rise. One of the main factors is record-low filling levels in Norwegian reservoirs. The level of filling of Norway's hydropower reservoirs in parts of the country remains at a record low, which adds to concerns. In the east and south-west Norway, the filling rate hasn't been lower in the last 27 years.

READ ALSO: What would energy rationing in Norway look like? 

In Norway, electricity production is dependent on hydropower. Therefore, there needs to be enough water in the reservoirs to have sufficient energy through the winter- otherwise, the country will need to import much pricier power from the continent. Essentially, record low filling levels will lead to record high energy prices. 

Additionally, the war in Ukraine has created uncertainty in the European energy market, which has contributed to high gas prices. Despite Norway being reliant on hydroelectric power, uncertainty surrounding gas can be felt in the Nordic country as it is connected to the European energy market via cables that transfer electricity. 

"Therefore, the prices are a lot higher in the Oslo area, the Bergen area, and the southern market zones (than in the north). These are connected to the UK and Germany by cables, so we see the influence of European prices feeding into Norwegian prices there," Nathalie Gerl, the lead power analyst at Refinitiv, told The Local previously. 

High energy prices are an issue that is only affecting the south of Norway. In the north, energy prices are much lower, as reservoirs are filled to higher levels, and the area is producing more energy than it needs. 

However, Norway doesn't have the infrastructure to move large quantities of power from north to south to help alleviate high prices.

"As you know, there are five electricity price zones in Norway, and there are extreme price differences between the north and the south. The electricity price in Northern Norway is pretty low, but the transmission capacity isn't large enough, so all the excess hydropower can't be sent to the south," Gerl previously explained to The Local. 

As a result, energy from the north is often exported to north Sweden before it is moved south and imported back into Norway. 

"It is often the case that power is exported from northern Norway to northern Sweden and imported from southern Sweden to southern Norway, and lately it has at least been like that," Ann Myhrer Østenby from the Norwegian Water Resources and Energy Directorate (NVE) told public broadcaster NRK earlier this month. 

 

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Frazer Norwell 2022/08/22 11:50

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