The electricity market should really be simple: electricity flows from one price zone to a neighboring one. Where is the cheapest and where is the most expensive?
That’s why the cost of electricity exports in Norway must be higher than in Germany.
This is the reason why electricity occasionally flows from the UK to Norway at the same time as we export electricity to Germany.
Exports to low wage earners
But recently something very strange happened in eastern Norway: a lot of electricity is being exported to Sweden. Low Prices.
This goes against all normal logic in the electricity market.
Last week, Sweden (SE3) was up 25 percent Low Electricity is more expensive (NO2) than eastern Norway, but Norway exported almost 3.5 times more electricity than we imported between the two regions. During weekdays, exports were almost 12 times more than imports.
It was particularly bad on Wednesday. Business website Europower Wrote the following:
– The biggest price difference is seen in the evening in Oslo, which is 500 times the price in Stockholm. Still, more than 200 MW of electricity flows from the more expensive part of Oslo to the less expensive part of Stockholm, they write.
Power transmission According to Nordpool, there was good capacity in the transmission cables that evening, so cheap electricity was imported.
At the same time, Eastern Norway imported large amounts of electricity from Western Norway, which increased the risk level for electricity supply. It is more expensive than Sweden.
The explanation for this phenomenon will make perfect sense to some – and to others a good explanation.
Norway has got a “flow tunnel” through Sweden to Denmark
Normal logic dictates that cheap electricity should be imported, but the reason Norway is exporting electricity to Sweden is because of a new program introduced in March. It currently only applies to eastern Norway.
It is called “Amount control», and is practically a solution where electricity is transferred from Norway to Denmark via the Swedish power grid.
It’s a stealth introduction An entirely new way of calculating electricity prices is called flow-based market couplingIt will be launched next year.
You can think of it as a bridge or tunnel that allows electricity to flow through a low-cost area to a high-cost area.
However, this bridge is not always open. When it is open is determined by the market of power transmission.
Lillihold: – It is not easy to explain the logic behind why power does not flow in the right direction.
Energy analyst Tor Reier Lilleholt in Volue Insight tells Nettavisen that this is a particularly well-known arrangement and that it is difficult to explain the logic of what is happening.
– This is an arrangement for those with deep insight. There you see a part from a larger perspective than just a link, he says.
– For example, power flows from a high-cost region in Norway to Sweden, and then power is transferred via Sweden to Europe. He says it will be more important than the exchange between two countries or regions.
– Doesn’t the price in the middle affect the price of the range?
– It is about building a bridge across this area, not necessarily physically, but as a form of socio-economic optimization, compared to pure exchange between the two areas. It’s hard to imagine you’re looking at multiple areas before upgrading, and that’s the background, he says.
– When it comes to the flow-based market development Nordics in 2023, it will be even more.
– Looks like you’re taking the normal price regime out of the game?
– This is connected to the fact that you need to look at the neighborhood of the area where you are exchanging, because it will be profitable to transport electricity there, and then you should do it. He says that the direction of electricity flow is included in the price calculation algorithm.
– What has actually been done to build a tunnel from Norway through Sweden to Denmark?
– Yes, if the market dictates it, it is not a physical tunnel or cable, and if there is capacity, then electricity should be transported from Norway to Denmark, regardless of the price in Sweden.
Statenet: – Can provide high capacity often
Netavisen asked Statnett if they could explain what this phenomenon is in an educational way. It’s not so easy to understand, but according to Statnett, it’s about the challenges Sweden has recently faced with its power system.
Sweden has long had limited capacity in its network, partly to the great annoyance of Statnett.
– Due to increased east-west flow in Sweden, there is less capacity between NO1 (Eastern Norway) and SE3 (Stockholm). At the end of March, Svenska Kraftnät (SvK) introduced a wholesale control controlling trading in Hasle (NO1-SE3) and Kontiskan (SE3-DK1), Håkon Smith-Isaksen writes by email at Holdhus Statnett. For Netavisan.
– The restriction means that the sum of the flow of two links must be below a certain limit, but at the same time providing additional capacity in the individual links so that the sum is greater than if there had been a restriction. Not used. Until a flow-based market connection is introduced, this solution will ensure more capacity on these lines individually without aggregate restrictions, while operational considerations are addressed in the Swedish network.
– Why did Eastern Norway (NO1) import 58 GWh from Western Norway (NO5) on Monday, but only 1.7 GWh from SE3, when SE3 has a 1 kroner lower electricity price?
– This run on August 15 may be a result of summer restrictions. DK1 had a significantly higher price than NO1 on August 15, leaving SE3-NO1 with little potential. Good capacity NO5-NO1 provides shipments in that direction and equal pricing on NO5 and NO1, a Statenet spokesperson responds.
– A flight against price direction may occur
– What happens in practice when prices are low in the “intermediate area” but export capacity is not yet used – instead a “tunnel” is created for expensive electricity?
– Arrangement means that capacity is used so that electricity flows to where demand is greatest, while one of the various connections can provide more capacity than before. More electricity may flow between aggregate regions, but market conditions will determine how the flow is distributed. If the price in DK2 is higher than the price in NO1 then there is a movement towards the NO1->SE3 price direction, similarly when the price in NO1 is higher than the price in NO1 there is a movement towards the DK2->SE3 price direction. DK2.
– Overall, sum control provides the best utilization of total capacity. This is important if, among other things, there is a high demand for imports in Norway. The alternative is that there was little capacity for flow between Norway and Sweden when we imported them.
– Why don’t you have such a “tunnel” to get electricity from Northern Norway (NO4) to Eastern Norway (NO1) via Sweden?
– Amount restrictions do not imply that electricity is passed through an area. They contribute to a more efficient use of capacity. It is the bottleneck between SE3 and NO1 that controls the flow between eastern Norway and Sweden. Without total restrictions, capacity between Norway and Sweden would be limited as a result of operating considerations on the Swedish network, says Holdus.
– In general, prices and disruption revenues are easy to understand, but what happens when electricity is sent through a low-cost region?
– Congestion revenues are shared 50/50 between network operators on each side of the connection. If there is a flow against the direction of the price, it will be a negative amount and it will be subtracted from the income we get from the flow from the low price to the high price, which is normal.
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