Now we pay to send expensive electricity to Sweden
When there is a lack of power in an area, the price of electricity rises. We have noticed this to our advantage in southern Norway. Here, more electricity is produced than we consume. Because there are still net exports.
Now, on top of it all, a seemingly absurd phenomenon has appeared in the foreign trade in electricity. A phenomenon that does not concern the much-discussed direct current cables to the continent and Great Britain, but the alternating current cables to Sweden.
Even though there is a shortage of electricity and thus sky-high prices, in some hours when Eastern Norway could have imported the next free power from southern Sweden, electricity has been sent instead from Eastern Norway to southern Sweden.
In other words, completely contrary to what we have been told about the liberalized power markets, that power will always flow to where it is best paid, something The online newspaper and Europower have uncovered.
EU mandate for the Nordic power market
What happened?
In its energy market packages, which are constantly being developed, the EU has created a new scheme to make the international electricity markets more efficient, which aims to achieve the same price level throughout the common market.
Norway is following along as a result of the EEA agreement.
For Norway, it is therefore about giving up a competitive advantage, sufficient access to renewable power at a low price.
The new scheme, which will enter into force next year, is called “flow-based market linking” and aims to make international trade more efficient. The scheme is intended to increase utilization of network capacity.
Together with its sister companies in Finland, Sweden and Denmark, Statnett has already introduced parts of the system, and calls it “sum restrictions”.
The terms alone are enough to alienate us mortals.
It all stems from an EU regulation (a regulation is an EU law that must be implemented verbatim in national lovers). It springs from what we call the EU’s 3rd energy market package, which the Storting majority, after much discussion, decided to introduce in Norway in 2018.
The EU’s energy market agency Acer has been given authority to manage the markets for electricity and gas, via an intermediary also in Norway.
And it was Acer that decided on 30 October 2019 that the Nordic system operators, as it is called, should cooperate on “long-term capacity allocation between the bidding areas in the Nordics”.
Managed by the EU, Acer and an office in Copenhagen
That this is controversial is evident from the fact that the operators in the Nordic region were not the only ones in their time. Acer then used its power of attorney to decide the case and design the technical details that govern the market for power exchange in Norway.
The Swedes sell electricity on to Denmark, where the price is even higher than in Norway.
According to those at the time, this decision meant oil and energy minister Kjell-Børge Freiberg that the calculation of capacity for trade in power must be fluid.
The floating Nordic market is coordinated from an RCC office in Copenhagen, which has developed an IT system for intricate calculations of capacity. The office was inaugurated on 1 July this year.
This is how Statnett describes what flow-based market linkage eh. Warning: Heavy material!
A flow from Norway via Sweden to Denmark
So let’s take a current example of how the regulation on network codes and guidelines for an integrated flow market for electricity works.
Just as electricity has been sold from southern Norway to southern Sweden, even though the price is higher than in Sweden, as I said, a break with what we have believed: That power would flow to where the price is highest.
On the morning of 20 August, for example, electricity flowed from Eastern Norway, where the market price was NOK 3.65, to Southern Sweden’s price level of NOK 0.70 per kWh there.
In the evening of the same day, electricity again rushed east despite the fact that the price in Eastern Norway was NOK 3.57 and NOK 0.62 per kWh in southern Sweden. Defies logic. Apparently.
But if we look at Statnett’s map of the flow of electricity in the Nordic electricity market, we discover something interesting. The Swedes sell electricity on to Denmark, where the price is even higher than in Norway, namely 4.85 in this case.
How will the cash flow be then? We have learned from Statnett and the foreign system operator in the second part distributes electricity exports. The income comes from the price difference between the two markets.
What then when electricity goes from an expensive price range to a cheap one?
Then there will be a negative bottleneck income, explains senior communications advisor Håkon Smith-Isaksen Holdhus at Statnett when I ask him.
So an expense. Statnett pays to have expensive electricity exported.
Does Statnett share in the positive income when the Swedes then sell power more expensively on to Denmark? No.
Why does Statnett do something like that if it’s just money out the window?
Statnett’s explanation is that the scheme all in all provides greater capacity on the connection between Eastern Norway and Southern Sweden, and overall provides greater flow from Sweden to Norway.
Caught in the EU’s market net
Europower writes that a flow-based market will reduce price differences between different price ranges, but is informed by Statnett that the consequences for Norwegian electricity prices are not known.
They were not estimated beforehand, nor have they been calculated afterwards.
The website also points out that the increased capacity has occurred at the same time as power exchange abroad is a politically sensitive topic in Norway. Among other things, the construction of the cables to Germany and England has been controversial.
Now the exchange capacity has been increased by the system operators as a kind of “flow tunnel” from Norway to Denmark. This despite the fact that the Hurdal platform states that the government will not “… approve new international connections to abroad during this parliamentary term.”
State Secretary Elisabeth Sæther in the Ministry of Petroleum and Energy denies to Europower that the increased exchange capacity is to be considered a new international connection.
The Storting passed scheme on 11 June last year, against the votes of Frp, SV, the Center Party and Rødt.
This is how the Center Party’s parliamentary representative characterizes it Per Olaf Lundteigen the floating market link now that the effects are starting to show:
“The Norwegian Storting is now caught more and more in a net that we have not understood the consequences of and from which it is becoming increasingly difficult to get out”.
The electricity market is a phenomenally complicated system. It is almost incomprehensible that the power producers at all times manage to spit out just enough electrons to satisfy each individual point of consumption, not only in Norway, but in many countries.
The chain of command for the market is the European Commission-Acer-ESA-RCC office in Copenhagen. They create their governance mechanisms in the form of increasingly complicated codes and algorithms that are not comprehensible to either parliament politicians or citizens.
But the mechanisms have a purpose; to streamline the free flow of energy to a European brand so that there is the same price level in all countries.
The words of honor about democratic control of Norwegian natural resources are constantly gaining new meaning.
Thomas Vermes writes in ABC Nyheter on Sundays. Read more of his comments here.