(Montel) The launch of new interconnectors to Germany and the UK helped cause a recent rise in spot prices in southern Norway, analysts told Montel.
The NO1 and NO2 bidding zones in southern Norway have seen average spot prices of EUR 46.20/MWh and EUR 44.46/MWh, respectively, so far this year. That is higher than the common Nordic system price of EUR 40.51/MWh and even further above the northern Norway price (NO4) of EUR 35.12/MWh.
“Area prices in southern Norway are a bit higher than normal right now because of a cold start to the spring, but the underlying price level also clearly reflects the start of the Nordlink and NSL cables,” chief analyst Sigbjørn Seland of StormGeo told Montel on Monday.
Nordlink (1.4 GW) was commissioned late last year and has already led to increased price convergence between southern Norway and Germany.
The NSL link (1.4 GW) to the UK is set to start trial operation only in October, but it already has had a price impact since it has given hydropower producers an incentive to save water in reservoirs in anticipation of even higher prices in the autumn, said Seland.
“It seems obvious that the owners of large hydropower reservoirs in southern Norway have quite high expectations for prices this autumn,” he said.
Positive outlook
The financial outlook for southern Norwegian hydropower producers is the most promising since record low spot prices in 2020 amid wet weather, said Olav Botnen, senior analyst at Volue Insight.
Nordlink has increased the price correlation with a German market which has itself been inflated by record high carbon prices, he said. Also, NSL would link southern Norway to a UK market with even higher prices and no major export restrictions, Botnen said.
Flows out of Norway on Nordlink have been limited due to bottlenecks in the German grid.
The local price differences across the Nordic region have been expected for some time, said Montel’s Energy Quantified analyst Eylert Ellefsen. This is due to the expansion of wind power in the north pressuring prices there, combined with the new interconnectors and limits in the Swedish national grid.