Which type of energy agreement in Norway is the most expensive and why?
Households in Norway paid much more or much less for electricity last year, depending on the agreement they inked with an energy firm, newly released figures reveal.
High energy bills have been at the forefront of many consumers’ concerns over the past 18 months, making choosing the best deal more important than ever.
READ MORE: Food and energy prices drive unexpectedly high Norwegian inflation figures
Figures from Statistics Norway have revealed that the price households paid for their energy last year depended greatly on the type of deal they penned.
Energy deals in Norway come in three forms. Variable deals are where the price is fixed for a short period (typically 14 days). A spot price agreement sees users pay current market prices for energy. And finally, there are fixed-price arrangements where the energy cost is set for a more extended period.
Last year, the most expensive deal for consumers was a variable price deal. Households signed up to this kind of agreement paid 162.7 øre per kilowatt hour for energy on average, according to figures from the national data agency Statistics Norway (SSB).
Consumers themselves must have realised that these deals were a detriment to their finances as the proportion of those on these agreements fell from 19 percent to eight percent throughout 2022.
Prices in Norway are affected by a number of factors, such as demand, energy prices on the continent, the weather, gas prices and how full the hydroelectric reservoirs, which meet the majority of the country’s energy needs, are.
These factors mean prices in parts of Norway, such as the south, east and west, can fluctuate greatly. Unfortunately, consumers can get locked into abnormally or record-high prices and not benefit from subsequent dips.
However, this effect can also reverse, with consumers being locked in for lower or more moderate prices and avoiding peaks.
Comparatively, the most common energy price agreement, a spot price deal, was slightly cheaper, averaging 153,6 øre per kilowatt hour throughout 2022. The downside is that the extreme fluctuations mean households go through spells of paying very high prices followed by lower ones.
This can make it hard for households to plan, budget and guestimate their energy bills. Still, as they pay the raw price for energy, they aren’t locked in at above-market prices to hedge any potential losses for an energy firm. By the fourth quarter of 2022, 87.4 percent of households were on a spot-price deal.
By far, the cheapest option last year was fixed-price agreements. These will lock in the price consumers pay for a year. This means they may be required above market prices when energy prices are low, but it also protects them against rising prices. Having a fixed price also makes it easier to anticipate energy bills.
Last year, energy on a fixed-price deal cost an average of 91.7 øre per kilowatt hour. This was for contracts that would last up to one year. Longer running deals were much cheaper, costing between 52 and 53 øre per kilowatt hour.
Due to the fluctuating prices seen over large parts of the country, these deals are far less common than they used to be, and many firms have stopped offering them altogether. They were still offered in some parts of the country, though, such as where there is a significant energy surplus, meaning an area produces much more electricity than it can consume.
This also helps to explain why the average figure is so much lower compared to those on other types of deals, as fixed-price offers are not available in parts of the country, like southern Norway, where the prices are highest. For example, the average energy price in southern Norway was 200 øre per kilowatt hour last year.
Over the last 18 months, the cheapest energy in Norway has been found in central and northern Norway, which are also the only parts of the country where fixed-price deals are being offered to consumers.
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High energy bills have been at the forefront of many consumers’ concerns over the past 18 months, making choosing the best deal more important than ever.
READ MORE: Food and energy prices drive unexpectedly high Norwegian inflation figures
Figures from Statistics Norway have revealed that the price households paid for their energy last year depended greatly on the type of deal they penned.
Energy deals in Norway come in three forms. Variable deals are where the price is fixed for a short period (typically 14 days). A spot price agreement sees users pay current market prices for energy. And finally, there are fixed-price arrangements where the energy cost is set for a more extended period.
Last year, the most expensive deal for consumers was a variable price deal. Households signed up to this kind of agreement paid 162.7 øre per kilowatt hour for energy on average, according to figures from the national data agency Statistics Norway (SSB).
Consumers themselves must have realised that these deals were a detriment to their finances as the proportion of those on these agreements fell from 19 percent to eight percent throughout 2022.
Prices in Norway are affected by a number of factors, such as demand, energy prices on the continent, the weather, gas prices and how full the hydroelectric reservoirs, which meet the majority of the country’s energy needs, are.
These factors mean prices in parts of Norway, such as the south, east and west, can fluctuate greatly. Unfortunately, consumers can get locked into abnormally or record-high prices and not benefit from subsequent dips.
However, this effect can also reverse, with consumers being locked in for lower or more moderate prices and avoiding peaks.
Comparatively, the most common energy price agreement, a spot price deal, was slightly cheaper, averaging 153,6 øre per kilowatt hour throughout 2022. The downside is that the extreme fluctuations mean households go through spells of paying very high prices followed by lower ones.
This can make it hard for households to plan, budget and guestimate their energy bills. Still, as they pay the raw price for energy, they aren’t locked in at above-market prices to hedge any potential losses for an energy firm. By the fourth quarter of 2022, 87.4 percent of households were on a spot-price deal.
By far, the cheapest option last year was fixed-price agreements. These will lock in the price consumers pay for a year. This means they may be required above market prices when energy prices are low, but it also protects them against rising prices. Having a fixed price also makes it easier to anticipate energy bills.
Last year, energy on a fixed-price deal cost an average of 91.7 øre per kilowatt hour. This was for contracts that would last up to one year. Longer running deals were much cheaper, costing between 52 and 53 øre per kilowatt hour.
Due to the fluctuating prices seen over large parts of the country, these deals are far less common than they used to be, and many firms have stopped offering them altogether. They were still offered in some parts of the country, though, such as where there is a significant energy surplus, meaning an area produces much more electricity than it can consume.
This also helps to explain why the average figure is so much lower compared to those on other types of deals, as fixed-price offers are not available in parts of the country, like southern Norway, where the prices are highest. For example, the average energy price in southern Norway was 200 øre per kilowatt hour last year.
Over the last 18 months, the cheapest energy in Norway has been found in central and northern Norway, which are also the only parts of the country where fixed-price deals are being offered to consumers.
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