Power trade

Skagerak Kraft’s core activity is the production and sale of self-produced renewable hydroelectric power. Skagerak Kraft also sells green electricity certificates and is an important player in power trade for small-scale power plants across Norway.

What affects the price of electricity in the Nordic countries?

Prices in the power market are determined by supply and demand. The more power available, the lower the price. Correspondingly, a high demand for power will lead to higher prices.

It is also important to note that the price in the power exchange is not only influenced by actual conditions, but also by the expectations of those buying and selling power, in the same way as in other markets.

What affects electricity prices in the Nordic countries?

Main factors
Factor	Brief context
Amount of precipitation	A large proportion of the Nordic power market is supplied by hydroelectric power. Therefore, the amount of precipitation is hugely important to the prices in the Nordic power market Nordpool. High precipitation provides more water for power production, which in turn increases the supply on the power market and drives the prices down.
Temperature factors	In the Nordic countries, heating of homes is largely based on electrical power. For this reason, the temperature has a direct effect on the supply. The lower the temperature, the higher the demand, which in turn causes the prices to increase.
Activity level in the economy	The Nordic power market is affected by fluctuations in other commodity and currency markets, mainly in Europe, but also to some degree all over the world. General economic fluctuations such as downturns and upturns also affect power consumption and thereby trade.
Coal prices	When the coal price increases, it becomes more expensive to produce coal power in Europe. Unlike wind power or hydroelectric power, for which the ‘raw material’ is free, the coal plants in Europe need to purchase coal in order to produce electrical power. If the coal price rises to a level at which it is unprofitable to burn coal for power production, production is stopped in the coal power plants. A high coal price gives lower production in coal power plants, which in turn decreases the supply and gives higher power market prices.
Gas prices	Europe has a number of gas power plants. Like the coal power plants, these plants are dependent on purchasing ‘raw materials’ in order to produce power. A low gas price will give higher production in European gas power plants, which will in turn increase the supply and give lower prices in the power market.
Nuclear power	There are several large nuclear power plants in the Nordic region. Whether the region will have more or less nuclear power in the future is largely a political question. Sweden is planning to shut down some of its nuclear power plants, while also upgrading its existing plants. Finland is planning to develop a large new nuclear power plant which will give a significant increase in supply for the Nordic power market.
The US dollar	A weaker US dollar will give lower coal prices, as coal is priced in US dollars. A weak US dollar will improve conditions for instance for German coal power, which in turn can give increased export from the German to the Nordic power market.
Exchange with non-Nordic countries	The Nordic market is also linked to power markets in other countries. Power is transferred from countries such as Russia, Germany and Poland. Therefore, the supply and demand on the continent will also affect the Nordic prices. The differences in price between daytime and nighttime are much greater on the continent than in the Nordic countries. The forces in the European power market secure cheap nighttime power from Germany and transport as much of it northward as the network allows, while as much daytime power as the network is capable of handling is purchased cheaply in the Nordics and transported southward. This exploits the Nordic hydroelectric power plants’ efficient regulation capacity. In years with high precipitation, power leaves the Nordic region for the majority of hours in the year, and in dry years, power enters the Nordic region for the majority of hours.
CO2 prices	From 1 January 2005, carbon credits were implemented for CO2 emissions. As a result, power plants emitting CO2 need to purchase carbon credits to cover their emissions. These credits are traded in a separate market, and if the price of carbon credits rises to a certain level, it may be unprofitable to produce power from fossil fuels. A high carbon credit price may give a lower power market demand, which in turn will lead to higher prices.
New production capacity	If the production capacity is extended, the supply of power will increase. Prognoses show that it will cost around NOK 0.25-0.30 per kWh to develop new power plants. For this reason, it is reasonable to expect that this will be a maximum average price level in the power market over time – given that it is possible to extend production capacity to cover the demand.
Power consumption over time	In Norway alone, power consumption is rising by around 1-1.5 TWh per year. 1 TWh is enough power for approximately 50,000 households. In the last 10 years in Norway, consumption has risen five times more than the increase in production capacity. Increased consumption gives higher power market demand, which in turn leads to higher prices.

Words and expressions in the power industry

There are many words and expressions in the energy sector. Here, Skagerak Energi will provide you with an explanation of some the most common expressions.
Expression	Explanation	Abbreviation
Ampere (electrical power)	Unit of measurement for electrical power. Electrical power is measured in ampere (A, often shortened to ‘amps’), which is a measure of the amount of electricity that flows through the cables. (This can be compared to the amount of water flowing through the garden hose)	A
Generating unit	A device used to produce electrical energy comprising an electric generator and a turbine.
Wave power plant	A power plant operated by wave energy.
Dam	A structure that dams up water in a reservoir and makes it possible to regulate the water flow in a watercourse. The root is the base of a dam and the crest is the top.
Operating centre	Centre for monitoring and control of transmission facilities and for monitoring, control and coordination of power plants.
Distribution network	Common term for local distribution network and main distribution network.
Run-of-the-river (ROR) power plant	Power plant developed in a river where the water flow cannot be regulated to any degree by means of a reservoir connected to the plant.
Distribution transformer	An electrical transformer that provides the final voltage transformation to bring energy to the consumer (230 volts or 400 volts).
Gas Power Plant	Heat power plant using gas as fuel.
Generator	Rotating machine that transforms mechanical energy into electrical energy.
Gigawatt	GW= gigawatt (1,000,000 kW)	GW
Gigawatt-hour	GWh = gigawatt-hour (1 mill. kWh - one million kilowatt-hour)	GWh
Horsepower	A unit of power (hp). One horsepower is equivalent to 0.736 kW.	HP
Main distribution network	Electrical cable network with voltage level 66-132 kV, which connects the local distribution network (see this) and acts as a main network (see this) within each particular part of the country. The main distribution network is the connector between the nationwide main network and the local distribution networks.
Hydrology	The science of the occurrence, cycles and distribution of water on earth. In a broader sense, hydrology also includes the physical and chemical properties of water.
High voltage	Electrical energy with a voltage higher than 1,000 V alternating current and 1,500 V direct current (in Norway).
Intake reservoir	The reservoir from which water is conveyed down to the power plant.
Joule	Joule 1 J = 1 watt-second, i.e. 1kWh is equivalent to 3.6 million J. Internationally recommended and adopted as Norwegian Standard (NS 1024). Common unit for energy in the form of thermal energy, mechanical energy and electrical energy. kWH, MWH etc. are still used for electrical energy.	J
Underground cable	Electrical power cable for burying underground.
Earth current	Electrical power that flows in the ground.
Power line	Electrical power lines above ground including foundations, masts, lines, isolators, earth lines etc. The terms power line and overhead power line are also used interchangeably.
Power company	A company that produces electrical energy and/or carries out wholesale distribution.
Power station	Buildings and installations for the production of electrical power.
Co-generation plant	Co-generation plant producing both electrical energy and heat (in the form of steam or hot water) for instance for heating of houses. A co-generation plant is usually the same thing as a combined heat and power (CHP) plant.
Power plant	Facility for production of electrical energy. A power plant may consist of several power stations, reservoirs and tunnel systems
Kilowatt	Kilowatt (1,000 watt) (output).	KW
Kilowatt-hour	A kilowatt-hour is the amount of energy a 1,000-watt heater uses when it is switched on for one hour.	kWh
Low voltage	Electrical voltage of up to 1,000 volts for alternating current or 1,500 volts for direct current (in Norway). May vary from country to country. See also high voltage and medium voltage.
Direct current	Electricity in which the current flows continuously in a single direction, as opposed to alternating current.
Local distribution network	Electrical cable network that transfers energy from the distribution network (see this) to each subscriber. The voltage level in this network varies from 230 V at the lowest setting to 22 kV at the highest. Most subscribers are connected to the network at the 230 V level, while large consumers are supplied at a higher voltage level.
Reservoir	Natural or artificial lake, in which water is collected during periods of high inflow and low consumption. When consumption is high, the reservoir water is utilised.
Megawatt	Megawatt (1,000 kW). One megawatt is 1,000 kilowatts.	MW
Megawatt-hour	Megawatt-hour (1,000 kWh)	MWh
Ohm	Unit of measurement for electrical resistance
Transformer	A machine that transforms electrical energy of one nature into electrical energy of another nature, e.g. alternating current at 50 Hz to 162/3 Hz (railway transformer) or alternating current into direct current.
Pumped storage power plant	Power plants used either for power production or to pump water up into the intake reservoir for later use.
Regional grid	Se main distribution network.
Central grid	Nationwide transmission network with a voltage equal to or higher than 220kV.
Sea cable	A power line in or on the seabed.
Solar cell	A device that produces power from the sun’s rays.
Waste heat	Heat energy that has not been used and which is emitted to the surroundings e.g. in industry, heat power plants etc.
Supply cable	Cable from distribution network to homes.
Live electric line	The part of the power line conducting electrical power. Usually an aluminium line with a steel core or a copper line.
Transformer	A device that transforms electrical alternating current of one voltage to alternating current of a different voltage.
Transformer kiosk	A network station where all electrical equipment is placed enclosed in a weather-proof and protective construction.
Transmission network	See central grid
Turbine	The turbine is part of the generating unit. It is a circular disc with spoon-shaped buckets mounted on it, and is fastened to a rotating shaft. Water turbines cause magnets inside a generator to rotate and create electricity. Turbines installed in heat power plants run on the same principle, but use steam rather than water to spin the turbine.
Terrawatt	TW = terrawatt (1,000,000,000 kW)	TW
Terrawatt-hour	One terrawatt-hour is one billion kilowatt-hours.	TWh
Drought year	A year with less precipitation than normal.
Volt	Voltage between two points in a power circuit. Can be described as electrical ‘pressure’ (This can be compared to water pressure in a garden hose).	V
Hydroelectric power plant	A power plant that transforms the potential energy of water into electrical energy. In the broadest sense, this also includes tidal power stations.
Energy conversion efficiency	The ratio between the amount of energy output from a power plant in the form of electrical power and the amount of energy that is produced e.g. in the form of heat in a heat power plant. In a gas power plant, this ratio can reach around 50 per cent. In other words, of the heat that is generated, half is transformed to electricity while the other half is transferred out of the power plant along with the cooling water. The energy conversion efficiency in a hydroelectric power plant can be over 90 per cent, meaning that more than 90 per cent of the water’s potential energy is converted to electrical energy.
Wind turbine	A device used to produce electrical power from wind energy.
Watt	Unit of measurement for electrical output. A watt is the output produced in a conductor conducting electrical power equal to 1 ampere, in which the voltage drop over the conductor is 1 volt.
Watt peak	Indicates the maximum output of a solar cell	wp

Power trade

What affects the price of electricity in the Nordic countries?

What affects electricity prices in the Nordic countries?

Words and expressions in the power industry

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Links

What affects the price of electricity in the Nordic countries?

What affects electricity prices in the Nordic countries?

Words and expressions in the power industry

Documents

Links

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