Residents of this generally expensive country long enjoyed relatively low rates on at least one thing, electricity. Hydroelectric power and a regulated market kept energy bills downright cheap, but recent deregulation gave Norwegians a rude reminder this week about the law of supply and demand. Suddenly they’re paying among the highest electricity rates in Europe.
An extended period of sub-freezing temperatures, surprisingly little snow in the mountains and demand on reservoirs that were full just last autumn sent electricity rates in Norway soaring this week, from less than one krone per kilowatt hour to more than NOK 11 in some areas.
The shocking jump in rates was also tied to deregulation of the Norwegian power market and the emergence of a new Nordic market, which means that lower production and higher demand in Sweden, for example, also affects Norwegian rates. With one of Sweden’s nuclear power plants operating at half capacity, and temperatures just as cold there as in Norway, high demand and low supply sent prices on an upward spiral.
Rates hit a record high NOK 11.32/kwh in many parts of the Nordic region during the busy morning hours on Monday. Average prices for central and northern Norway, Sweden and Finland landed at NOK 4.10 throughout the day, reported newspaper Aftenposten. That’s up from around NOK 0.50 earlier this month.
Heavy rain last summer and autumn lulled many into thinking that full reservoirs in the mountains would keep electricity rates low this winter, but the entire Nordic area is experiencing one of its coldest and driest winters in decades and market dynamics changed.
Officials now fear that low water levels in some reservoirs may even mean water shortages, and the city of Bergen (known for its rain) is facing water restrictions.
The higher electricity rates prompted several industrial concerns (including Hydro and Elkem) to cut production to save money. Analysts predicted that if temperatures stay low, Norway may continue to have among the highest electricity rates in Europe through the spring.