Electricity, Economy and Business | You have to pay a record price for electricity
Throughout the harvest, Norwegian electricity prices have been pushed to new record levels. The reason is that we are connected to the European electricity market where the price has skyrocketed, writes The online newspaper Wednesday evening.
High prices in Europe, give high prices in Norway.
The price of electricity went under the floor
But on Christmas Eve and the first days after the New Year, something happened: electricity prices in Europe went straight to the ground.
At times, the power in Europe was more than free: they paid to get rid of it. On Monday night, Germany, the Netherlands and England both paid us money to receive the electricity they had left over. Denmark sent it over for free.
This is what the situation’s supporters of foreign cables have been tempted to do: We sell the electricity expensively, and then we buy it back cheaply.
The price in Norway hardly changed
But even though the prices to the countries we have power cables to went straight to the ground, prices remained stably high in southern Norway. Throughout Christmas, southern Norway has consistently over Europe’s highest electricity prices.
In the hours when Norway was paid to receive electricity, the spot price in southern Norway was around 122 øre (plus taxes). It is actually a higher level than after the price in Europe went back to about our levels.
How is this possible?
The reason for the particular disease is a combination of who gets the money when Norway gets paid to receive power, and the fact that Norway mainly uses hydropower.
– I have tried to find an analogy that people can understand. It’s a bit like a fishmonger who gets 800 kg of cod that goes out today, and which he therefore just has to get rid of, and sets the price very low, says communications manager Christer Gilje in Statnett to Nettavisen.
– A little further down the street, there is another fishmonger who has good cod that lasts a few more weeks. He does not have to lower the price as much, because the good fish can be sold in the next few days instead, he says
What happened on Christmas Eve was that an enormous amount of wind power was produced in Europe, at the same time as consumption was low. Since electricity must be used at the same time as it produces, these prices pushed to the bottom.
– When Norway receives more electricity from imports, the hydropower producer takes away the most expensive production, but the rest of the hydropower plants that start up do not set the price to a few cents, since the alternative is that they can save water for later.
It is Statnettet that earns on tolls
It is also not the case that you buy electricity from in Norway receive a lot of free electricity they can sell on to you as a customer. The price difference between the price we have in southern Norway, and the one we pick up from abroad, is the owners of the foreign cables who run away.
Statnettet owns half of the power cables abroad, and the other half belongs to the country where the cable goes.
If the electricity is -20 øre in England, and costs 100 øre in Norway, tolls are paid on the transport of a total of 120 øre. Half of this goes to Statnett.
– The gap between very low foreign prices and high Norwegian prices is bottleneck revenues. Half of this goes to Statnett, which in turn leads to lower grid rents, says Gilje.
– That argument is not very relevant, is it? Several foreign cables have resulted in higher electricity prices, and the grid companies have increased their grid rent because increased electricity prices have resulted in higher losses. So the total will be higher, not lower grid rent?
– It may be true in the situation we have reached with very high prices, but this is not normal. Last year we had very low electricity prices, in addition to good bottleneck revenues, which kept the price down, says Gilje.
– Does not this show that new foreign cables mean that we import high electricity prices, but not low prices?
– It is not the case that we would have been unaffected by the situation in Europe without the new cables to England and Germany. We had been affected by the connection to Sweden, the Netherlands and Denmark. Then we had to isolate ourselves completely, but now both Denmark and England say that they will become net exporters of power, and then it would be very stupid to opt out.
– Hydropower means that Norwegian prices are on average constantly lower than the countries around us. When we get very high prices in a few hours, it is because we have no production to cover both domestic consumption and exports, but the norm is that we have much more even prices. We do not get prices that really go to heaven, and we do not get to the bottom.
An example of this can be seen in the electricity price on Wednesday: Between 6 pm and 7 pm, electricity in England costs more than 3.2 kroner per kWh, while in southern Norway it is only marginally more expensive than when we paid 30 øre per kWh to receive the current from just England.