Every day Hydro trades hydropower on the Nord Pool Spot power exchange. On this exchange, power produced from different sources is bought and sold and is ready for delivery the next day.
How is power bought and sold?
Trading on the power exchange is based on the estimated consumption (demand) of the largest electricity and industrial companies, and the scheduled production (supply) from the power suppliers. Both parties submit their price offers by noon and tomorrow's price is calculated from the offers made by the buyer and the seller.
The physical delivery of power occurs from midnight onwards.
What determines the price?
In the Nordic countries there is one price for the entire Nordic area as well as prices for several regional price areas. One reason why prices vary between the different areas is that the supply and demand for power is not equal everywhere. Another reason can be that there are no transmission possibilities available in the network between different areas. Wind and rain are typical factors that can affect the supply side of energy, while temperature is one that can affect the demand side.
Wind and weather have an impact
Since power production is so dependent on the weather, changes in production can occur that are difficult to predict. For example, it can be windier than expected so wind power production increases, or the temperature can drop more than forecast so consumption increases. Purchases and sales of this type of unplanned production or demand usually occur continuously throughout the day.
Balance between production and consumption
In the core time for the purchase and sale of electricity, the system operator Statnett is responsible for balancing the relationship between production and consumption.
Many consumers and producers need to have a more predictable electricity price for the future. On the Nasdaq OMX exchange, power is traded for the coming weeks, months and years. The price from Nord Pool Spot is often used as a reference for future prices.
At the same time, many other factors play a role, such as changing weather conditions, power transmission between areas and the price of fuel for thermal-fired power plants. All this helps to influence the price that is agreed by the buyers and sellers of electricity.