News, electricity prices | The cold shock causes a sharp jump in electricity prices

(Netavisin): Large parts of the country are expected to witness extreme cold in the first week of the year. Temperatures are expected to drop to as low as 22 degrees below zero in eastern Norway on Thursday and Friday, and to 35 degrees below zero in parts of Finnmark.

Then electricity consumption rises dramatically, leading to higher prices:

Consumption is what weeps in itself. We're getting consumption about 10,000 megawatts higher than usual, which is having a heavy impact on the price, says Benjamin Thomassen, energy analyst at Volue Insight.

It is estimated that the price per kilowatt-hour could be as low as NOK 1.50, and possibly as low as NOK 2, depending on how prices are set in other Nordic countries.

Saved by cables

Disputed foreign cables are often blamed when electricity prices rise. But this time, it is precisely the cables that are keeping prices from rising, the analyst points out:

– Without imports, prices would have been much worse. Here the Netherlands, Germany and perhaps Great Britain help us.

On the continent, the weather is expected to be milder than usual, and the winds are usually good. Hence we can import power via cables. Lower prices in the countries we import are offset by higher prices in the Nordic countries.

– The stronger the winds in Europe, the better for us. The cold can fall approximately 15-20 degrees below normal in Norway and other Nordic countries. Meanwhile, the temperature is expected to be 5 degrees higher than normal on the continent. So what mitigates prices is Europe. If they also had a little bit of cold wind, it would have been rock 'n' roll, Thomassen says.

Same prices throughout Norway

The analyst emphasizes that due to the extreme cold, electricity prices will also be high in northern Norway when the cold actually begins.

The price will be the same because consumption will be very high. This applies to the entire northern region

– We are excited to see how Nordic manufacturers can solve this problem. Finland and the Baltics also get very cold, and depending on how the price is set there, we can get up to 2 NOK at the most expensive prices, in the middle of the day, but at lower prices at night.

When record electricity price numbers were set in December 2022, the biggest impacts came when a nuclear power plant in Finland was forced to halt operations. If something similar happened now, at the same time that the cold is hitting Europe, there could be completely different and much higher prices of NOK 1.50 to NOK 2 per kilowatt hour.

Change energy support

As the New Year's weekend approaches, electricity prices are becoming more moderate. On Friday, they ranged in age from 43 to 76 years.

In any case, the electricity subsidy will protect the bill from severe impacts when the price rises. As you know, electricity subsidies will change starting from the new year. The “floor” in the plan is raised, Which Nettavisen mentioned recently.

Since the electricity subsidy was introduced in December 2021, it has covered parts of the electricity price above €87.5 (€70 plus VAT). From the new year, the minimum electricity subsidy will be increased to €91.25 (€73 plus VAT) – or “price adjustment” as the government calls it.

This means that 90 percent of the pure electricity consumption bill above this is paid by the state. For example, if the price of electricity rises to NOK 2, the effective price to the consumer, including VAT, will be NOK 1.07.

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Renting is more expensive online

But in addition to that, there's grid rent, which is what we pay to “deliver” electricity to the home. When consumption is high, online rental expenses increase sharply, because this is not a cost covered by electricity subsidies.

Posted by Elvia, the country's largest online rental company Prices for 2024. Their customers must now pay €39.6 per kWh during the day. This is the so-called energy link, the current consumption price.

Therefore, the actual electricity price rises quickly to around NOK 1.50, and that too when electricity subsidies are taken into account, when the kilowatt-hour price approaches NOK 2.

In addition, there is a constant link associated with consumption. This is calculated from the average of the three hours in which you used the most electricity in the month. For Elvia customers, these fees range from NOK 120 to NOK 535 per month for the vast majority of households.

Extremely low temperatures increase the risk of ending up with a more expensive 'fixed rate' tier, since heating makes up a large portion of Norwegians' electricity consumption.