The Norwegian Energy Act is based on the principle that electricity production and trading should be market-based, while grid operations are strictly regulated. The power market ensures that effective use of resources and reasonable prices on electricity. Electricity transmission and distribution is Contact online >>
The Norwegian Energy Act is based on the principle that electricity production and trading should be market-based, while grid operations are strictly regulated. The power market ensures that effective use of resources and reasonable prices on electricity. Electricity transmission and distribution is a natural monopoly, and not subject to competition.
Electricity differs from other goods in the regard that it cannot easily be stored. There must always be an exact balance between generation and consumption. In the wholesale market, prices are determined for each separate hour of the following 24-hour period, based on bids and offers from many different participants, and given the availability of grid capacity. This short-term market adjustment ensures that the production resources with the lowest cost are used first. Electricity prices also provide investment signals because they indicate where there may be a power supply deficit.
Norway introduced market-based power trading in 1991. Instead of planning a gradual transition to market-based solutions, as many European countries did, Norway opened the market to all customers from the very beginning. Hence, Norway was the first country to provide universal market access.
The power exchange Statnett Marked AS (now Nord Pool AS) became an important element of the market. Even before this, fluctuating hydropower production in different parts of the country created a need for market-based solutions and electricity trading. In 1971, Norwegian producers established a power exchange for spot power (known as Samkjøringen). Samkjøringen was formalised as early as 1931, and was a result of many years of cooperation and power exchange between power plants.
Norway is part of a joint Nordic power market with Sweden, Denmark and Finland, and is in turn integrated into the wider European power market through interconnectors to the Netherlands, Germany, the Baltic states, Poland and Russia. The last two interconnectors from Norway to Europe became operational during 2021. The Nord Link cable to Germany was put into ordinary operation in May 2021. In addition, the North Sea Link cable to the United Kingdom was put into trial operation in October 2021.
The EU is taking steps to improve integration of the internal energy market and coupling of the European markets. Market coupling in Europe has previously been based on voluntary cooperation and regional initiatives. The Nordic power exchange, Nord Pool, was established at an early stage.
Market coupling functions through implicit auctioning, which involves simultaneous calculation of prices and electricity flows between areas in the day-ahead market. Market participants on opposite sides of national borders can make bids and offers hour by hour for the next 24 hours, and do not need to reserve grid capacity in advance.
The EU''s third energy market package was adopted in 2009, and consists of five legal acts that reinforce and continue the development of the internal markets for electricity and natural gas. These replaced the legal acts contained in the second energy market package.
The main elements of the third energy market package are concerned with unbundling (reducing vertical integration), strengthening independent regulation of energy markets and developing cross-border infrastructure and security of electricity supply.
The third energy market package also provides the legal authority to adopt supplementary provisions, network codes and binding guidelines. The EU has adopted 8 network codes and guidelines, in the first instance concerning connection and system operation and market design. The figure below provides an overview of electricity network codes and guidelines
In November 2016, the European Commission put forward a new package called ''Clean energy for all Europeans'', which includes proposals amending the third energy market package, together with a new regulation. All the legal acts under the "Clean Energy for all Europeans"-package, consisting of 8 new laws, was adopted in the EU in May 2019.
Power supplied to the grid follows the laws of physics and flows down the path of least resistance. It is not possible to separate different power deliveries from each other. A consumer who switches on the power has no way of knowing who produced the electricity or how far it has been transported through the grid. The grid companies keep account of how much power each producer delivers and how much each end user consumes, and this forms the basis for settlement. Producers are paid for the volume of power they deliver, and end users pay for their consumption.
The power market can be divided into wholesale and end-user markets. Large volumes are bought and sold in the wholesale market by power producers, brokers, power suppliers, energy companies and large industrial customers. Power suppliers trade on behalf of small and medium-sized end users and small-scale businesses and industry.
In the end-user market, individual consumers enter into agreements to purchase electricity from a power supplier of their choice. Norway''s end-user market consists of about one-third household customers, one-third industry and one-third medium-sized consumers such as hotels and chain stores.
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