Abstract
Electricity prices in Norway increased to new levels, never seen before, starting in the late summer of 2021.
Electricity prices in Europe were even higher and Norway, as part the European electricity market, exported
electricity even if reservoir levels were rather low (cf. Figure 5 week 30 onwards). The paper summarizes the
experience from the period since the summer of 2021 and focuses on some of the investigative analyses that
the authors have contributed to as part of the government's analyses [1] to understand and implement
possible relieving measures. The Norwegian electricity market is challenging as more that 90 % are based on
hydropower with long-term storage. The current value of stored water, used for dispatch decisions, depends
very much on what market actors believe about the future.
The first part describes the Norwegian electricity system as part of NordPool and the European electricity
market and shows observed prices from the relevant period. Chapter 2 focus on the Norwegian experience
and discusses some of the measures and investigations the government has initiated to handle the situation.
Two of the authors has done some of these investigations. Chapter 3 comments on the model used in these
investigations and chapters 4, 5 and 6 summarise results from three different investigated subjects. Chapter
4 concerns the observed reservoir operation for the south of Norway during the fall of 2021. The following
question is analysed: is observed reservoir operation consistent with socioeconomic optimal operation.
Chapter 5 discusses what effect the two existing HVDC cables to Germany and UK had on the electricity prices
in Norway during the high price period. Finally, chapter 6 comments on the calculated consequences of one of
the measures that have been discussed, i.e., implementing artificial reservoir constraints to increase security
of supply and reduce export.
The main conclusions from this investigation are:
• The believe during fall 2021 that European prices will be lower 2022 is the main reason for the
observed reservoir operation in the fall of 2021.
• The HVDC cables to UK and Germany contributed significantly to higher prices for the period August
2021 to December 2021.
• Reservoir constraints have a cost but can give an "insurance" against different types of special events.
Electricity prices in Europe were even higher and Norway, as part the European electricity market, exported
electricity even if reservoir levels were rather low (cf. Figure 5 week 30 onwards). The paper summarizes the
experience from the period since the summer of 2021 and focuses on some of the investigative analyses that
the authors have contributed to as part of the government's analyses [1] to understand and implement
possible relieving measures. The Norwegian electricity market is challenging as more that 90 % are based on
hydropower with long-term storage. The current value of stored water, used for dispatch decisions, depends
very much on what market actors believe about the future.
The first part describes the Norwegian electricity system as part of NordPool and the European electricity
market and shows observed prices from the relevant period. Chapter 2 focus on the Norwegian experience
and discusses some of the measures and investigations the government has initiated to handle the situation.
Two of the authors has done some of these investigations. Chapter 3 comments on the model used in these
investigations and chapters 4, 5 and 6 summarise results from three different investigated subjects. Chapter
4 concerns the observed reservoir operation for the south of Norway during the fall of 2021. The following
question is analysed: is observed reservoir operation consistent with socioeconomic optimal operation.
Chapter 5 discusses what effect the two existing HVDC cables to Germany and UK had on the electricity prices
in Norway during the high price period. Finally, chapter 6 comments on the calculated consequences of one of
the measures that have been discussed, i.e., implementing artificial reservoir constraints to increase security
of supply and reduce export.
The main conclusions from this investigation are:
• The believe during fall 2021 that European prices will be lower 2022 is the main reason for the
observed reservoir operation in the fall of 2021.
• The HVDC cables to UK and Germany contributed significantly to higher prices for the period August
2021 to December 2021.
• Reservoir constraints have a cost but can give an "insurance" against different types of special events.
