The Electrical Pricing Balancing Act

The Electrical Pricing Balancing Act 

In February this year, the Norwegian government announced it had set-up an expert committee to assess the current system for setting the country’s electricity price. The so-called ‘Strømprisutvalgets’, or ‘Electricity Price Committee’ in English, was tasked with assessing which measures in the short and long term could ensure lower and more predictable prices. 

Lene Hagen, Senior Analyst at Insight by Volue, was part of the expert committee. Following months of work, the final report was presented to the Norwegian government in October this year. As we come towards the end of 2023, the report is now being reviewed in detail by politicians and stakeholders alike. With that context in mind, we recently caught up with Lene to discuss her work on the committee, outline some key findings from the report, and speak about how she found the process.  

The Balancing Act  

The report contains three main themes: a description of today's wholesale and retail markets, an overview of key trends with significance for electricity prices, and an analysis and evaluation of 50 measures that could contribute to more stable, predictable and competitive prices. 

Lene had this to say.  

“The ‘Balancing Act’ report or, ‘Balansekunst,’ in Norwegian, contains an assessment of the extraordinary situation in the power markets over the last two years, as well as a review of the wider power market in Norway. As a committee, we also analysed a number of proposals for measures in both the wholesale and retail markets which are intended to contribute to stable and competitive prices. 

"The strength of any committee lies not just in the wealth of individual knowledge but in collective expertise, so that when joined together, we can work towards a common goal. Each member brought something to the table, and each left their mark on the final report,” explained Lene.  

Evaluating the Best Possible Solutions  

We asked Lene how she found working as part of the committee.  

Lene noted: "It has been an interesting and inspiring project to be part of, working on what is such an important and complex issue. Evaluating the best possible solutions going forward for the Norwegian power market closely connected to the European market development has been a journey of dedication and collaboration, and one that I am proud to have played my part in.” 

The committee discussed and evaluated crisis measures and long-term reforms related to electricity pricing in the European power market. It also assessed the effects of proposed measures in the EU and European countries on power pricing in Norway and considered alternative measures in response to changes in market design. 

Additionally, the committee evaluated proposals for lower and more stable prices, including the creation of a separate auction zone for electricity transmitted through international connections, differentiation of spot markets, non-spot market contracts, measures to increase consumption flexibility, and various scenarios on power exports. 

The Evolution of Norway’s Power Market  

“As we navigated the intricacies of the dynamic pricing landscape, we not only addressed the challenges at hand but also unearthed new possibilities that have the potential to reshape the energy sector. Our collective efforts highlighted the importance of interdisciplinary cooperation, strategic foresight, and a shared commitment to a sustainable energy sector,” explains Lene.  

She added: “Together, we have not only contributed to what I hope will spark further evolution of the Norwegian power market but also possibly have played a vital role in shaping the broader narrative of energy transformation on a European scale. For me, this experience reaffirms that the dedication and collaborative spirit of a committee can become the catalyst for meaningful change, paving the way for a more resilient, sustainable, and interconnected electrical future." 

The report was submitted to the Ministry of Petroleum and Energy on 12 October 2023. The Ministry of Petroleum and Energy then submitted the Power Price Committee's report, which can be read in here, for wider consultation.