Robert Ness, Nordea’s chief investment officer, worked in energy sales from 1993-1994 for Bergen Lysverker at the time. During this period, Ness was responsible for the company’s energy sales.
He. She Happy Investment Manager I now looked at average energy prices for the period 2006-2020. At that time, the differences between the different price areas in Norway were minimal. Sometimes the North was more expensive and some days the South, but over time the prices were the same.
When Næss worked hard, there were also different price zones in Norway, but the differences were small. The big changes are no longer the case, they came last fall. This year, the price differentials between the various five Norwegian energy regions have been massive.
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european power crisis
– The most important reason for this is the electricity crisis in Europe. This means that prices in Europe were unusually high, and spread to southern Norway, Nys tells Netavisen Okonomi.
Few believe that the price of energy will be resolved immediately. This means we should expect price differences of more than one krone between the south and the rest of Norway, he continues.
There are bottlenecks in the Norwegian electricity grid that some people use: Sweden.
Nice took a look at the daily exchanges so far this year. He came to the conclusion that Sweden had earned over two billion kroner by buying cheap electricity in northern Norway and then selling expensive energy to southern Norway.
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Surprised
– They came to a gross profit of just under 2.3 billion crowns, then they have to give about 0.5 billion of that profit to Statnett.
– It surprised me when I calculated the numbers. I imagined that we in Norway were winning on all levels by selling out to Europe. In addition, we sell energy when it is expensive and buy back when it is cheaper.
Nice says Sweden is also experiencing capacity problems in its network with large price differentials between the south and north.
– But the challenges are less than in Norway. Thus, this year they were able to buy 1.7 terawatt-hours (1.7 billion kilowatts, editor’s note) from us in the north and then sell them to us in the south at a higher price, says Ness.
Big difference in price
Statnett also gains from jams. At 11-12 on Monday, the price of energy in central Norway was 15 øre low, which is what sellers get. In the south, buyers had to pay 194 euros per kWh. Earning 179 øre for every kWh that goes to Statnett.
Statnett is now regulated, so higher revenue means you must lower other revenue. By the end of March, Statnet had received just over NOK 1.5 billion in that revenue, Ness said.
If Statnett gets rid of the bottlenecks, it will lose that revenue. The biggest financial winner will be the energy producers in Central and Northern Norway.
Typically, central and northern Norway produces 56 TWh – 56 billion kilowatts – of electricity in a year. This corresponds to about 40 percent of Norway’s total energy production, but in the north producers have to sell energy much cheaper.
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73 billion more
– If we take the price difference so far this year of NOK 1.3 as a starting point, this means that energy producers will get an extra NOK 73 billion annually if they achieve the same price in the south. That’s well over a billion crowns a week, says Ness.
The figure is obtained by multiplying 56 TWh by 1.3 NOK per kilowatt hour. Ness believes that in the short term revenue cannot be increased by the same amount. The reason is that a large number of industries have perpetual contracts.
The increased profits that the energy producer receives, of course, must be paid by customers. So a large part of the increased income will be the transfer of money from consumers to energy producers, Ness points out.
Ness says he has looked at annual reports and articles, but has not found a figure on the cost of eliminating bottlenecks in Norway’s power grid. The book value of all Statnett’s assets, including the Norwegian network and submarine cables, is NOK 69 billion.
– So, many billions may not be needed to relieve Norwegian bottlenecks.
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Ridiculously loud
Ness says that in calculating profitability, it would be natural to compare annual income to required rate of return. Statnett usually requires 6-7 percent of the return on the capital it is using.
This means that with NOK 70 billion in additional revenue, Statnett can defend spending up to NOK 1,000 billion in investments. This is a ridiculously large amount.
Næss speculates that we’re talking about a billion dollars in investments to get rid of the bottlenecks.
– So it is very profitable to save 70 billion a year. Given the climate, it doesn’t make sense for parts of the country to consume electricity at prices much lower than there is real demand for it in the rest of the world.
– When you pay up to 3 øre per kWh for the power portion, it’s easy to imagine that you’re not saving enough energy.
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