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Is energy in Norway really 'free' when prices enter negatives?

Robin-Ivan Capar
Robin-Ivan Capar - [email protected]
Is energy in Norway really 'free' when prices enter negatives?
Energy prices in many parts of Austria are expected to see a permanent reduction starting July 6th. Photo by Rose Galloway Green on Unsplash

After almost two years of high bills, consumers in Norway are now seeing energy prices enter negatives at certain times. However, it doesn't mean the energy you are receiving is totally free.

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In the last year and a half, an energy crisis has left households in Norway dealing with record-high prices.

There is, however, a rare situation that can be seen as the exact opposite of what most have become accustomed to: households getting money off their bills to consume power.

What do negative energy prices mean for consumers?

It doesn't happen often, but when it does, it makes the domestic headlines.

When electricity prices in Norway fall below zero in a certain part of the country, the residents of the area in question "get paid" for using electricity, as energy producers have to pay to sell electricity when the prices enter negative.

As Flow Power explains, negative prices refer to times when too much energy is generated. This has two effects: generators are discouraged from producing energy, and consumers are encouraged to use more power. The end result is that supply and demand are usually swiftly balanced out.

In order for it to take place, usually, several factors need to align: an abundance of snow in the mountains, heavy rainfall, limited electricity exports, lower energy consumption than usual (due to, for example, warm weather and summer vacations), or high energy imports (such as imports of nuclear power from Sweden).

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You still have to pay grid rent and other fees

Electricity bills in Norway consist of multiple parts (electricity used, grid rent, and taxes/fees), and it's important to note that negative prices refer only to the electricity used; they do not include the electricity companies' surcharges, such as grid rent and other taxes/fees.

Grid rent is paid to the company that owns the electricity grid you are connected to, and it consists of a fixed part and a variable part that depends on how much electricity you use (regardless of what the electricity you use costs).

In addition, the vast majority of people in Norway have to pay a set amount in electricity tax to the state for every kilowatt hour they use, as well as VAT on this.

So, for it to actually pay for a consumer to use electricity, the negative price would need to be lower than the said tax plus the VAT on it, plus whatever you pay in grid rent – as well as any potential surcharges.

Furthermore, as negative prices are usually short-lived, the negative balance tends to end up lowering your average price, so the consumers don't actually get paid.

Instead, electricity companies take the negative price into consideration when they calculate the average price per kilowatt hour you have used in the period covered by your bill (provided you're on a spot contract).

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Recent instances of negative energy prices

Negative energy prices have been seen in Norway several times during 2023. September 19th, saw prices in southern Norway enter negatives. July also saw days when energy prices entered into minus figures. 

In mid-May Norway saw the longest period of negative prices it had experienced, the energy sector outlet Europower reported at the time. 

"The negative prices in certain hours are mainly due to low consumption of electricity in combination with high production," power analyst Tor Reier Lilleholt at Volue Insight told the newspaper E24.

"The main reason why there are negative prices now is solar production in Europe. This leads to massive imports. At the same time, there is a lot of snowmelt in the mountains and a lot of water in the rivers," Lilleholt said.

Periods with negative energy prices in Norway also occurred in July and November of 2020, as well as October 2021.

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