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Should you be worried about a spike in energy prices in Norway?

Robin-Ivan Capar
Robin-Ivan Capar - [email protected]
Should you be worried about a spike in energy prices in Norway?
Will the recent price development be short-lived, or does it indicate an increase that will be characteristic of the upcoming winter period in Norway? Photo by Vadzim Ramanovich on Unsplash

Electricity prices in parts of Norway are climbing to levels that haven't been seen in almost nine months – but are the new prices here to stay?

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On Tuesday, electricity prices in southern Norway surged to their highest levels in almost nine months, reaching a peak of 2.22 kroner per kilowatt-hour (kWh).

This price spike briefly made electricity in southern Norway the most expensive in all of northern Europe – albeit for a short, two-hour period.

Similar price levels are also on the cards for Wednesday when the power exchange Nordpool expects prices of 3.65 kroner per kWh in southern Norway (between 5 and 7pm), and that's before factoring in other fees.

Many people living in Norway are asking themselves: Will this price development be short-lived, or does it indicate that high prices are here to stay?

Low temperatures driving the price increase

Marius Holm Rennesund, a partner at the THEMA Consulting Group, told The Local that the current price increase is closely related to the low temperatures – especially in the southern parts of the country.

"The prices we now see are very much driven by the very low temperatures in southern Norway and also in continental Europe. We will probably continue to see high prices until the temperatures increase somewhat," Holm Rennesund said.

The analyst also noted that this winter could be characterised by several periods with high electricity price levels, especially as the prices in southern Norway follow those in continental Europe.

"We (at THEMA Consulting) expect power prices in southern Norway in periods during the winter to follow the prices in Germany and continental Europe, so – during strained periods – prices will be determined by the power prices on the continent to a large degree.

"This also means that we could see more periods like today during the winter period," Holm Rennesund told The Local.

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How Norway protects consumers from high electricity prices

However, when discussing electricity prices, it's important to note that these figures represent the spot price before accounting for any electricity subsidies, network rental charges, or taxes.

The Norwegian government's electricity subsidy kicks in at 87.5 øre (including VAT) per kWh, with the state covering 90 percent of the cost exceeding this threshold.

In practical terms, this translates to consumers receiving approximately 2.50 kroner in support for every kWh consumed during Wednesday's peak hour.

Consequently, they'll be left with a remaining cost of 1.15 kroner that they'll need to cover.

READ ALSO: How to make sure you aren't paying for a bad energy deal in Norway

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