Will power prices in Norway be as high this winter as they were last year?
By this time last year, power prices in Norway had hit record levels, leading to a cost-of-living crisis and expensive government subsidies. How likely are we to see high power prices again this winter?
How high were power prices in Norway in 2022?
Unprecedented.
Electricity prices had already reached record highs in Norway in 2021, averaging close to 150 øre per kilowatt hour over the year, but in 2022 prices spiked higher still, with the average price for the year, including taxes and network charges, at 235.5 øre per kilowatt hour.
At times, the price in the two bidding zones of southern Norway exceeded 500 øre a kilowatt hour.
What are power prices in Norway looking like today?
Power prices had already started to come down in the first three months of the year, averaging 143.8 øre per kilowatt hour over the period. Although, this was still twice the average for the preceding five years.
By July, Norway prices were back to where they had been in 2020, with the price in the NO1 region of Eastern Norway being just 37 øre/kWh, the lowest seen since December 2020 and half the price compared to June. In the southernmost NO2 region, the price for July was 69 øre/kWh, the lowest price since July 2021 and down 30 percent on June.
READ ALSO: Why do Norway's regions have such different power prices?
What's the outlook for the autumn and the winter?
Marius Holm Rennesund, partner at the Norwegian energy consultancy, Thema, expects prices to increase slightly over the winter but believes that the heavy rainfall that has hit Norway in July and the start of August will keep them relatively low.
"We do expect prices to increase, but with the very high precipitation we've had over over the last three days during the storm, in power equivalent, you actually got 11 terawatt hours of precipitation in Norway and Sweden, which is more than the Oslo uses in a full year," he said.
"And that, of course, has led the price of power in the futures market going down, so the way it looks right now, prices in southern Norway will gradually increase from today's level up to 65 to 70 øre per kilowatt hour during the autumn, and the winter looks more like 80 to 90 øre per kilowatt hour."
As southern Norway has had heavier rainfall than the north this year, the price differences between the northern NO3 and NO4 bidding zones and the southern NO1, NO2 and NO5 zones are also likely to shrink.
Why are prices unlikely to spike over the winter?
As well as the heavy rainfall seen in Norway, another significant factor is the surprising success countries in continental Europe have had in adapting their markets to exclude Russian gas.
"It's mainly due to Europe succeeding in moving away from Russian gas," Rennesund said. "Germany has several floating facilities for LNG imports, and we are seeing more imports coming in by pipeline as well. Gas storage is very high, and demand has gone down with the high prices, as gas-fired power generation is important in Europe. This has lowered power prices across the continent, and that carries over to Norway and the Nordics as well, so we won't see a repetition of the high prices of last year."
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How high were power prices in Norway in 2022?
Unprecedented.
Electricity prices had already reached record highs in Norway in 2021, averaging close to 150 øre per kilowatt hour over the year, but in 2022 prices spiked higher still, with the average price for the year, including taxes and network charges, at 235.5 øre per kilowatt hour.
At times, the price in the two bidding zones of southern Norway exceeded 500 øre a kilowatt hour.
What are power prices in Norway looking like today?
Power prices had already started to come down in the first three months of the year, averaging 143.8 øre per kilowatt hour over the period. Although, this was still twice the average for the preceding five years.
By July, Norway prices were back to where they had been in 2020, with the price in the NO1 region of Eastern Norway being just 37 øre/kWh, the lowest seen since December 2020 and half the price compared to June. In the southernmost NO2 region, the price for July was 69 øre/kWh, the lowest price since July 2021 and down 30 percent on June.
READ ALSO: Why do Norway's regions have such different power prices?
What's the outlook for the autumn and the winter?
Marius Holm Rennesund, partner at the Norwegian energy consultancy, Thema, expects prices to increase slightly over the winter but believes that the heavy rainfall that has hit Norway in July and the start of August will keep them relatively low.
"We do expect prices to increase, but with the very high precipitation we've had over over the last three days during the storm, in power equivalent, you actually got 11 terawatt hours of precipitation in Norway and Sweden, which is more than the Oslo uses in a full year," he said.
"And that, of course, has led the price of power in the futures market going down, so the way it looks right now, prices in southern Norway will gradually increase from today's level up to 65 to 70 øre per kilowatt hour during the autumn, and the winter looks more like 80 to 90 øre per kilowatt hour."
As southern Norway has had heavier rainfall than the north this year, the price differences between the northern NO3 and NO4 bidding zones and the southern NO1, NO2 and NO5 zones are also likely to shrink.
Why are prices unlikely to spike over the winter?
As well as the heavy rainfall seen in Norway, another significant factor is the surprising success countries in continental Europe have had in adapting their markets to exclude Russian gas.
"It's mainly due to Europe succeeding in moving away from Russian gas," Rennesund said. "Germany has several floating facilities for LNG imports, and we are seeing more imports coming in by pipeline as well. Gas storage is very high, and demand has gone down with the high prices, as gas-fired power generation is important in Europe. This has lowered power prices across the continent, and that carries over to Norway and the Nordics as well, so we won't see a repetition of the high prices of last year."
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