People are often found rather surprised about the amounts on their electricity bills, simply because they don’t understand the factors that affect the prices. They simply see fluctuations in the prices and the actual bills, which results in them thinking that it is sometimes all quite random and that the prices are changing the way the providers see fit, without any kinds of rules or regulations. This, however, is not true at all, because there are rules and there are regulations.
Meaning, there are also specific factors that affect the price, which further goes to show that there are reasons for the increases you may be seeing. The previous year, and the year before this one has basically been colored by Norwegian people wondering about the prices and being unsure of why those have increased quite a lot, and why there have been extreme fluctuations. Read more about those record high rates and possibly about some of the reasons for them.
Today, you could say that the price has actually stabilized to some extent, but the truth is that it has stabilized at a very high level. So, you can hear reports about electricity price increasing by 300% compared to the same periods in, say, 2019. That really does sound worrying and frightening, and while you understand that the situation with the power costs isn’t good in the entire world, you still want to understand what it is that is driving the price in Norway specifically.
Understanding how the price is formed and what affects it can give you a clearer idea about what to expect from your bills in the future, as well as about why those are higher right now than what they were in the past. And, as you will see, it really isn’t all up to the provider, because there are other important factors, and inevitable ones, that are clearly affecting the costs and that will always continue to do so. It is time for you to get acquainted with those factors and to, thus, get a much better understanding about why they are so high right now.
Before we get to that, though, let me just quickly explain the electricity trading process in Norway. Put simply, electric energy is traded on the Nord Pool, the Nordic power exchange. On the Nord Pool, the power is sold by the electricity companies to the power suppliers, after which the suppliers deliver it to the customers.
It is worth mentioning that the Nord Pool is the exchange used by other countries in Northern Europe as well. And, of course, the electricity price is announced every day at 13 p.m. by the Nord Pool, allowing you, thus, to see and track the changes day after day.
Anyway, let us now get back to our main topic for the day. Sure, you get where you can see the changes and track them, but you are actually confused about what it is that produces those changes. As explained above, you want to understand the factors that affect the prices, and below I will get you familiar with those. Listing the factors, I’ll help you get a clearer idea on how the prices are ultimately formed, which will help you understand your specific bills much better as well.
- The Season
You understand already that the consumption of electric energy is different in different months of the year. People use more of it in the winter, when the weather is colder, and when heating homes is absolutely necessary. On the other hand, they use less during the spring and the summer, when the weather outside is nice and warm. While this is clear to you’, chances are you’re wondering how the seasons affect the prices specifically?
This has to do with the important concepts known as supply and demand – concepts I’ll mention below as well, given their influence on the costs. Without getting into details, though, for now you simply need to understand that the prices will be higher when there is greater demand, that is, when people are more in need of electric energy. Since everyone is in need of more power during the winter, you are bound to see the bills increase in those months.
- The Weather
Did you know that the weather also affects the costs of electric energy in Norway? And no, I am not talking about the fact that more energy can be consumed when there is, for example, snowfall. I am referring to a different concept here and to the fact that the weather affects the production of electricity in this country, which is why prices fluctuate. Once again, this has to do with supply, which we will get to explaining in a minute, but here’s what you need to know about the weather now.
Basically, Norway uses hydropower to produce electricity. Rainfall and snowmelt can lead to the reservoirs being filled, which can increase the amount produced and thus lower the costs. On the other hand, when the amount of water in the reservoirs is low, prices are bound to go up, especially when you couple that with high demand.
- Supply and Demand
I’ve mentioned supply and demand already, and I suppose that this is a concept known to pretty much everyone today. Nevertheless, let me give you a clear explanation on how those two things affect the costs of energy in Norway. When the demand is high, usually during the fall and winter months, the prices are bound to go up, and that goes especially if the year hasn’t been very rich in rainfall and snowmelt. Why? Because, in such cases, the supply will be low. And, as on any other market, low supply and high demand lead to price increases and vice versa.
- Your Region
Did you know that the region you are in can also affect your bills? As you’ll see at bestestrøm.no – dagens strømpriser vary from region to region. Norway is divided into 5 of those, with the Northern Norway usually having the lowest, and the Eastern and South-West Norway having the highest prices. This is because both the production capacity and the demand vary from one region to another, and so does the transmission capacity.
- The International Electricity Market
I have mentioned already that Norway is not the only country trading on the Nord Pole. In fact, as many as 19 European countries do this, and the exchange trades around 85% of energy consumption in Europe. There is absolutely no doubt, then, that the international electricity market will also affect the costs and that changes in prices in other countries are also bound to result in changes in Norway.
Furthermore, since gas and coal are used for the production of power, the increase in prices of these raw materials will definitely result in an increase in energy prices themselves. So, the next time you start wondering about the strømpriser i dag, remember that there are numerous factors affecting it and that the increases are there for legitimate reasons.
- Your Provider
We cannot, however, deny the fact that the provider you’re working with can affect the amount you’ll see on your bills as well. Despite the fact that they buy electricity at the same price on the exchange, different providers can set rather different rates for the power they are selling to the end consumers. A surcharge is usually added, which will further increase your bills.
While you can’t affect things like the weather and the rates on the exchange, what you can do is regularly assess your current power contract with your current provider. This way, you will get to compare your contract to the other ones existing on the market, aiming at checking if you have a favorable one, or if you should make a change yourself. If you’re not happy with the current provider and the costs, feel free to search for a contract that will be more suitable for you.
