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Executive summary

Background and mandate

On behalf of the Nordic Council of Ministers, Nordic Energy Research has commissioned an evaluation of the electricity retail markets in the Nordic countries. Oslo Economics, together with Sweco, Gaia and Respons Analyse have conducted the analysis.

The aim of the project has been to evaluate how well the retail markets function in the Nordic countries, including an analysis of the regulatory framework, the competitive landscape and customer satisfaction. The close resemblance between the countries in terms of market organization and structure suggests that there could be a potential for more Nordic collaboration on how to address market issues and learn from the best practices of each other.

The European energy crisis caused by the war in Ukraine has led to a price shock for consumers in the Nordic countries and impacted the market players’ financial situation and ability to hedge price risk. The study was also intended to examine the behaviour of market participants, especially households and non-households, and their responses to changing market conditions during the winter 2022/2023. The overall objective of the study is to help policymakers and market participants make informed decisions about how to address the energy crisis, raise awareness of the level of competition in the retail markets, and help identify and remove barriers to a well-functioning electricity retail market.

The European Union has been working on an electricity market design reform (EMD) to address challenges in the electricity retail market, and in December 2023, a provisional political agreement on the electricity market reform was reached between the Council and the European Parliament. The electricity market reform aims to create better protection for consumers, shield customers from price spikes, ensure more stability for companies and increase green electricity. Better protection for consumers includes improved availability of fixed-price and fixed-term contracts, increased flexibility in choosing dynamic pricing through multiple or combined contracts, and improved information to customers before entering into agreements. The Nordic countries will likely need to adapt to new regulations concerning the electricity retail markets once the EMD reform is enacted as EU law. At the time when our analysis was conducted, the details in the EMD reform had not been agreed upon. Our recommendations should therefore be viewed in accordance with the propositions from the final electricity market reform.

Methodology and data collection

The study is based on the following empirical foundation:

Five country studies (Denmark, Finland incl. Åland, Iceland, Norway and Sweden), consisting of findings from general and country specific desk research of relevant literature and regulations, interviews with relevant market actors, and a survey conducted among household consumers in all the Nordic countries. In total, 42 interviews were conducted as part of this study. The survey was conducted among 500 participants in Iceland, and between 1,000 to 1,500 participants in each of the other countries. Åland was not covered by the survey.
A comparative analysis of the country studies, focusing on the regulatory framework and organization of the markets, the competitiveness and functioning of the markets, customer awareness and satisfaction, and the prevalence of challenges for consumers and retailers. An internal workshop with the entire project team from Oslo Economics, Sweco and Gaia was conducted as part of the work with the comparative analysis.
Recommendations, based on the identified challenges in the different countries. A second internal workshop with the entire project team was conducted as part of this work.

Understanding the Nordic electricity retail markets

Except for Iceland, the Nordic countries have a similar organization of their electricity retail markets. The markets underwent a liberalization in the 1990s, involving the separation of the original monopoly, the electricity grid, from competitive activities, such as electricity production and trading. Denmark, Norway, Sweden and Finland have a common wholesale marketplace, Nord Pool Spot, where electricity producers, traders, and consumers can buy and sell electricity across the Nordic and Baltic regions. Additionally, electricity retailers, producers and other actors can trade financial contracts on the Nasdaq exchange.

In all countries, the end-users can choose their electricity supplier. The suppliers are responsible for buying electricity on behalf of their customers in the wholesale market and to invoice the costumers for their power consumption. In addition to the payment of electricity to the chosen electricity supplier, customers must also pay a grid fee and taxes to their local DSO for the distribution of power. The DSOs are responsible for the physical delivery of electricity and for enabling customers have access to the market by connecting to the electricity grid. Furthermore, various regulatory and consumer actors play essential roles in ensuring fair competition, consumer protection, and the overall functioning of the market.

Prevalence of challenges for consumers and retailers

As with the European power markets, the Nordic power market was significantly impacted by the energy crisis during the winter 2022/23. The crisis resulted in a price shock for customers, prompting the implementation of electricity support schemes in several countries. The energy crisis also contributed to straining the liquidity in the financial markets, adding to a long period of gradually reduced activity at the exchange. The lack of liquidity in the financial market reduced the robustness of the future prices and increased transactions costs, thereby negatively impacting electricity retailers' ability and costs related to hedge their portfolios. This made it more challenging for electricity suppliers to offer attractive fixed price agreements to their customers.

Electricity retailers’ challenges

The lack of liquidity at the organized financial market, where producers, consumers and retailers hedge against the risks associated with future price fluctuations, has negatively impacted all the Nordic markets, except for the Icelandic market, which does not have an organized financial market. To provide fixed price contracts, electricity retailers have shifted from using financial markets to bilateral agreements (OTC trade). This allows producers and retailers in the same price area to contract on the area price, providing advantages over exchange-contracts based on the system price. Since the OTC transactions are unobservable, the shift from the organized market to OTC has reduced the robustness of the future reference prices, which gives valuable information to all market players. The result may be higher transaction costs both in the organized and in the bilateral market for hedging.

OTC trade gives the possibility of tailored hedging products, but it can increase search costs, give less flexibility for suppliers rapidly to change positions, and may provide a ‘thin’ market in each price area. Thus, for a retailer it may be costly and inflexible to rely solely on OTC hedging, implying that it may not support competitive fixed price contracts for consumers. Retailers with integrated production in areas where they want to offer fixed price contracts, are not necessarily facing the same costs of hedging as the increased costs are mainly associated with market imperfections and transaction costs. This may translate into market power within the supply of fixed price contracts. Overall, having a liquid and efficient financial market improves the conditions for efficient competition in the end-user market and may reduce transaction costs related to hedging, hence increasing the supply and reducing the premiums on fixed price contracts, or contracts with a fixed price element.

Asymmetric information is a challenge for electricity retailers in all countries. The markets have been characterized by insufficient or inadequate information available to consumers, partly due to the complexity of the market, and partly due to a historical lack of customer awareness due to low electricity prices. For competition to function effectively, consumers need sufficient information to make rational and active choices. Asymmetric information therefore translates into a challenge for serious electricity retailers to signal seriousness, and to compete on parameters such as price and quality. This may, in particular, be a challenge for new electricity retailers as they have no track-record to prove seriousness. Instead, it could encourage short – sighted retailers pursuing hit-and-run strategies to enter the market leading to an increased risk. The result is less efficient competition and a worse outcome for consumers.

The electricity retail market has some inherent properties, which implies that asymmetric information to some degree is unavoidable. Electricity can generally be described as a homogeneous subscription product with low customer interest. However, the product sold is composed by both electricity and additional services provided by different suppliers, and the consolidated bill includes charges for electricity, grid services, and other fees. With numerous retailers in the electricity market offering various types of contracts, each with distinct features, pricing elements, and additional services, it becomes challenging to compare products and choose what is in one’s best interest, especially when costumers often have limited awareness of their individual power consumption. The prevalence of asymmetric information, coupled with low barriers to entry, makes scope for unserious players. Such challenges appear to have had the most adverse effects in Denmark and Norway. Norway has attempted to address this issue by introducing stricter regulations and enforcement to reduce the prevalence of unfair business practices, which to some degree, combined with increased awareness due to the rising electricity prices, have reduced the information problem.

Some of the interviewed market actors in Sweden, Norway, and Denmark raised concerns regarding as to how certain regulations may impede the development of various types of contracts. For instance, Norway and Sweden have regulated notice periods, which is the time in advance a retailer must inform customers about price changes in a contract. The earlier the price information is required to be sent to the customer, the greater the financial exposure and uncertainty for the electricity supplier, thereby influencing the price that can be offered to the customer. The customers’ benefit from early information should therefore be weighed against the costs, which the customer faces through increased premiums on the contracts. In Denmark, the legal framework strongly favours consumer rights, particularly concerning their ability to opt out of fixed price agreements. While this approach on the one hand is consumer friendly, it can on the other hand act as a disincentive for electricity retailers to provide fixed price contracts. However, the legal framework anchoring consumer rights applies to all sectors and changes may therefore be difficult to implement.

Consumer challenges

Electricity is a low-interest subscription product, where the consumer, unlike in many other markets, does not have to make an active choice of supplier and contract each time he buys the product. Furthermore, when consumers sign an electricity contract with a retailer, both their future consumption and the price they pay can be uncertain. These uncertainties may be even more prevalent in the electricity retail market, compared to other subscription markets. Understanding the relationship between the contract terms and future prices may be difficult for the consumers. The characteristics of the market, and the product complexity, reduce the consumers’ incentives and ability to seek information and actively participate in the market. Because of the information asymmetry, inactive consumers have a high risk of entering into contracts with unfavourable terms. Also for active consumers, the complexity and variation of product structures may impede the consumers’ ability to identify the contracts that are in their best interest, which in turn may reduce the electricity retailers’ incentives to compete on price and quality. In addition, contracts are often sold through channels that provide customers with limited information at the time of purchase, such as telemarketing and stands. Norway and Denmark stand out with the most telephone sales and aggressive marketing strategies.

The complexity of contracts and variations in price structures are also challenging when designing price comparison tools, which is an important source of information to consumers in the Nordic retail market. When the tools are well designed, they can reduce the search costs for consumers and increase information about suppliers and contract terms, making it easier to identify favourable contracts and avoid unfavourable contracts. Some of the tools, however, have been less trustworthy and have in part been used as marketing platforms for suppliers and contracts that may be cheap in the short run, but not favourable for the consumers in the long run. Currently, Denmark in particular faces challenges with their tool, and its usage is less prominent compared to the other Nordic countries.

The electricity retail markets of Finland, Denmark and Sweden offer versions of spot, fixed and variable price contracts. The Icelandic market only offers variable price contracts. The Norwegian market offers mostly spot price to households, while SMEs have access to both spot and fixed price agreements. As of today, variable price contracts are currently not available in Norway, but there are still around 4 percent of customers who hold these 'old' contracts. For some time during the energy crisis, fixed price contracts have not been available for Norwegian households, and the few fixed price contracts available today are sold at a high premium and are most likely not an attractive offer for most customers. The absence of certain contracts may pose a challenge for customers, but does not necessarily do so:

In Norway, the demand for fixed price and variable price contracts has traditionally been low compared to the other Nordic countries. This tendency has been reinforced with the implementation of the electricity support scheme, which in practice implemented a soft price cap at a rather low level. Hence, the lacking supply of such contracts to households is probably mainly explained by a lack of demand. There may be a higher underlying demand for fixed price contracts in the SME segment, and for this segment there is also a higher supply of contracts with fixed price elements. However, for the moment spot prices are low, relative to the cost of hedging, translating into a rather low expressed demand also in the SME-segment.

There are only variable price contracts available in Iceland as there is no wholesale market for spot prices, and the national power company Landsvirkjun sets the wholesale electricity price. The lack of spot price contracts is not necessarily a weakness in the market that has been unfavourable for consumers, given the current low and stable prices in the Icelandic market. However, the need for a transparent spot market and contracts based on spot prices may be more evident with a development towards increased demand, and potentially also integration of variable energy production, hence also increasing the value of more flexible consumption responding to efficient price signals.

In Denmark, there are only long-term fixed price agreements available for SMEs, and not for households. The lack of long-term fixed price contracts for households is at least partly explained by the increased price variations in the market combined with the consumer’s right to opt out of a fixed price agreement, something which significantly increased the risk of offering such contracts. As a result, households were mostly limited to signing three-month fixed price contracts. The absence of favourable fixed-price contracts, along with long-term contracts for households, may be a weakness for the customers who seek fair deals that also offer predictability. However, these issues may be temporary as long-term fixed price agreements existed for Danish households before the crisis and thus may return when market conditions stabilize.

According to our survey results and interviews, the increase in electricity prices has contributed to raise the general customer awareness in the Nordic markets, with Iceland being the exception. Finland stands out with a notably high share of active customers, followed by Denmark, Norway, Sweden, and Iceland. In Norway and Sweden, the activity was often triggered by the consumer’s desire to find a more competitive contract. In contrast, the main reason for switching in Iceland, Denmark, and Finland was that a seller contacted the customers. This could imply that in practice, customers in Norway and Sweden are more actively engaged in the market. This trend may be attributed to the substantial prevalence of spot price contracts in Norway and variable price contracts in Sweden, coupled with higher household electricity consumption per year compared to other Nordic countries.

Results from our survey shows that around half of the households in the Nordic countries felt well-informed when switching contracts, except for Finland where around 70 percent felt well-informed. For most consumers, the main motivation for switching contracts in the Nordic countries is to get a better price, which may suggest that many households are adept at identifying competitive electricity contracts since many of the respondents report taking well-informed decisions. However, the results also imply that a large share of household consumers did not feel well-informed when switching contracts, and the share of households who felt poorly informed or somewhat informed were particularly high in Denmark, and to some degree Norway.

The degree of awareness may be higher for SMEs, since businesses should have better incentives to pay attention to their contracts as they often have higher consumption, and their costs for electricity may influence their ability to compete in the market. In addition, as businesses do not necessarily have the same consumer rights as households, they have at the outline, stronger incentives to make sure they understand the deal they are entering into. However, many small SMEs share the same characteristics as households, with low awareness and competence regarding their power consumption, and have difficulties in identifying favourable contracts.

Discussion and recommendations

Based on the findings from this study, our overall assessment is that the electricity retail markets in the Nordic countries are well-functioning. In general, the competition in the Nordic electricity retail markets seem sound, although Denmark and especially Iceland have a higher prevalence of challenges related to competition than the other Nordic countries. Information asymmetry and insufficient enforcement of the existing regulations stand out as the main challenges for well-functioning electricity retail markets in the Nordic countries, both when it comes to the competitive landscape and to the customer awareness and satisfaction. In the following section, we shall discuss the need for addressing the various identified challenges in the Nordic electricity retail markets. We shall also provide recommendations regarding how to address some of these challenges if we believe that our gathered information and analysis provide sufficient basis for doing so. It is important to note that the survey and interviews were made in the context of the energy crisis and thus the responses and findings are influenced by this crisis.

Enforcement of regulations and sanctioning

Generally, the regulations covering the Nordic electricity retail markets seem sufficient, both related to marketing and consumer rights. We have not been able to identify any evident gaps in the legal framework in any of the countries. However, the regulations are distributed among several authorities in all countries and enforcement of the regulations have been upheld to a varying degree. In addition, economic sanctions seem to be fairly weak and other sanctions may not be severe enough. When enforcement and interpretation of the legal framework are limited, electricity retailers may not have a clear understanding of the legal boundaries and may unintentionally be operating in a legal grey area. Furthermore, electricity suppliers may also consider it profitable to operate in the legal grey area, if they find the chances of being caught as low, and the fines minimal. This also makes it difficult for serious actors, who comply with the legal framework, to compete with actors that can take advantage of the legal grey area and use unfair business practices.

The characteristics of the electricity retail market may necessitate a more robust enforcement of regulations compared to other markets. This stems from consumers signing contracts before consumption takes place and prices are set, low customer awareness, and electricity being a homogeneous product, requiring retailers to differentiate themselves to gain a profit. Such characteristics may foster valuable innovations and business models, but can also open the door to 'innovation in deceiving customers', posing a risk that less informed customers may enter into less favourable agreements.

Based on the concerns described above, we generally recommend increasing the enforcement of regulations and ensuring that economic sanctions are sufficiently high to remove the incentives to operate outside the regulatory framework. Enforcement and active interpretation of the regulations reduce the ambiguities and uncertainty about the legal boundaries and the possibility to operate in a legal grey area. The relevant authorities can also consider informational measures to communicate clearly to retailers how the existing regulatory framework is to be interpreted. An example of such an informational measure could be the establishment or, if already existing, the further development of a shared guideline or a practice document that provides information to enhance the electricity retailers’ understanding of existing regulations. As an example, such a document could clarify how general sector regulations such as marketing regulations and other consumer protection laws apply and are to be interpreted in the context of the electricity retail market. Several actors could have roles in developing such documents, e.g. the consumer authorities, market regulators and/or industry organizations. The practice or guiding documents should be maintained and updated, for example when new case law or administrative practice is established, or with the introduction of new actors, contract types, or offering of new additional services in the market.

Strengthening the enforcement of regulations and ensuring sufficient supervision and sanctioning should be a particular priority in Denmark as the challenges with unserious actors and unfair business practices appear to be most prevalent in Denmark compared to the other Nordic countries. At the same time Norway, Sweden, and Finland should continue their work in this area, and Iceland should be aware that issues regarding interpretation of regulations might arise when developing a more competitive market.

Enhance information given to customers

Measures that can enhance the information given to customers may reduce the underlying problem with information asymmetry in the market, and hence improve competition and innovation as well as the customer’s welfare through better choices of contracts. There is, however, a balance between giving sufficient information and having detailed information requirements, which could potentially impede innovation or increase costs. Relevant measures to consider could be stricter requirements towards the suppliers regarding their information to the costumers about features of the different contract types and key differences between them. This may be more important in Finland, Sweden and Denmark, since the markets are more complex than in Norway and Iceland, due to the prevalence of different types of contracts to consumers.

There may also be a potential to improve the format and design of the electricity bills, especially in Denmark and Norway, where the challenges for consumers to understand the bills seem to be more evident than in Finland and Sweden. Several adjustments have recently been made regarding the information requirements on electricity bills in Norway, and one should review the impact of these adjustments before considering new changes. Generally, we recommend that regulations should ensure that electricity bills present information in a clear and concise manner, making sure that the language is easy to understand for customers. Requirements regarding what type of information electricity retailers must provide to their customers, and in what format, will likely be included in the updated Electricity Market Directive.

Before changing the information requirements, the regulator should carefully consider what type of information that is valuable and whether or not it is necessary to tie the information requirements to the bill, or if other channels better suited to give dynamic information could be allowed. In Sweden, electricity suppliers find the requirement to inform customers about prices and other contract terms 60-90 days ahead of delivery (when a fixed-term contract is automatically renewed after the contract period has ended), an important challenge for product development.

Further development of Price Comparison Tools

A price comparison tool can be a highly effective way to decrease search and switching costs for customers. It does, however, require that the portal actually makes it easier for customers to find, compare, and evaluate what contract, including their current contract, is best suited for their needs. Price comparison tools can be harmful if they are not of a sufficiently high quality. Consequently, it is important that all Nordic countries invest in developing and maintaining well-functioning price comparison tools.

According to the survey results, the price comparison tools are widely used by customers in the Nordic countries to compare contracts. The price portal seems to work relatively well in Norway, Sweden, Finland, and Iceland, while the Danish price portal faces challenges and has potential for improvement. The Danish price portal should be adjusted to correct the issues in the portal today, and the Danish regulatory authorities are already working to solve these issues.

However, the development of the price comparison tools should be a continuing task for all the Nordic countries to ensure that the information within the portal is reliable, and that the offers are not deceptive. There may be changes and developments of both the supply and demand side of the market that necessitate changes in the portal. For example, it is important to ensure that the contracts, which are compared, are relevant to customers and that there are no loopholes for the suppliers to exploit in order to push their deals higher on the list unless they are genuinely favourable. Ensuring that the price portals function properly can address several challenges related to information asymmetry in the market.

A need for Nordic collaboration to develop a functioning financial market

The electricity retailers’ ability to hedge in the financial market became a greater challenge during the energy crisis due to poor liquidity at Nasdaq OMX. With vast fluctuations in the area prices, the system price contracts were no longer sufficient to hedge the price risk. This combined with a market that is not liquid or non-existent for EPADSs to hedge the remaining area price risk, as well as rising costs for necessary collaterals, leading to a rapid decline in the trade at the exchange. Yet, based on the availability of fixed price contracts in Sweden, Denmark, and Finland, the illiquidity of the market does not seem to hinder the offering of fixed price contracts completely. The declining trade in the financial markets is at least partly replaced by OTC-trade, where electricity enters into bilateral agreements with producers or intermediaries. However, relying on bilateral markets is a less favourable solution for electricity retailers as it involves higher transaction costs for hedging. At the same time, the electricity retailers with integrated production within their conglomerates have an advantage as they can avoid these increased transactional costs.

Improving the financial market is a crucial joint Nordic task for several reasons. One reason is the need for efficient price hedging options to be able to offer attractive fixed price contracts with more moderate risk premiums. However, efficient price hedging options are important for all market players, including electricity producers and companies developing and investing in new energy production. Furthermore, accessible reference prices reduce the risk and transaction costs related to hedging, both in the organized and in the bilateral market, and facilitates more efficient and better decision-making among consumers and producers, both in their operations and investments. As the financial market is a common Nordic market, both the future design of the market, possible solutions to increase liquidity and responses to EU proposals require Nordic collaboration.

Reduced liquidity in the financial markets can weaken the competition in the electricity retail market in a situation with vertically integrated players competing with independent retailers

Over the last 20 years, electricity retailers have transitioned from being vertically integrated in energy companies with control of the grid, production, and supply of electricity, to a situation with free competition in the supply of electricity. How far previously vertically integrated actors have progressed in unbundling after the liberalization of electricity markets matters for the level of competition one can expect between companies with and without production. There are both advantages and disadvantages related to vertical integration in the electricity sector. There can be potential efficiencies related to vertical integration, but at the same time this can constitute a barrier to efficient competition in the end-user market. With illiquid financial markets, vertical integration between electricity production and electricity sale may give an advantage when offering fixed price contracts. Furthermore, integration between grid services and electricity sale may give an advantage related to consolidated billing.

Based on the findings from this study, we cannot conclude that increased unbundling is either a necessary or an efficient measure to improve the functioning of the market. Still, we do note that the competitive advantages, which vertical integration can lead to, have become more prominent with reduced liquidity in the financial markets. However, we want to underline that market power related to the supply of fixed contracts may be most efficiently remedied by measures that ensure well-functioning financial markets, which will also have other important benefits to market players. Furthermore, advantages for integrated players that offer consolidated billing can be remedied by these players being obligated to offer other retailers the option of consolidated billing at non-discriminatory terms, or alternatively separating the bills regardless of integration.

Improve customer protection for SMEs

In all Nordic countries, besides Iceland, there seem to be challenges associated with the lack of customer rights for SMEs. There are valid reasons why SMEs are not subject to the same customer rights as households. Strong customer rights can diminish the customer's incentive to choose 'correctly' since the cost of making a wrong choice becomes less substantial, and one party could exploit imbalanced rights and obligations between two commercial actors. Nevertheless, having somewhat stronger customer rights for SMEs may be beneficial due to issues related to information asymmetry in the market, as SMEs are often faced with the same issues related to information asymmetry as household customers. In Denmark, Finland and Sweden, part of the electricity market specific regulation applies both to households and to SME’s. In Iceland, SMEs have considerably similar customer rights as household consumers. In Norway, on the other hand, SMEs have fewer customer rights.

There could be several ways to improve customer protection for SMEs in the Nordic countries. One approach could at least be to introduce a right to withdraw from a contract for businesses of a certain size, similar to the 14-day right to withdraw afforded to consumers under existing consumer rights legislation in many countries. This would provide SMEs the chance to change their minds if they are victim to aggressive sale techniques such as telephone sales, where the buyer has not had much time to think before agreeing to the deal.

Electricity support schemes can have distorting market effects

Due to the sudden rise in electricity prices and the increased volatility during the energy crisis that unfolded in the second half of 2021, numerous governments implemented electricity support schemes. These initiatives aimed to ease the impact of rising electricity costs on households and other relevant entities such as sports clubs and voluntary organizations, as well as the agricultural and greenhouse industries. However, the extent of these support schemes varied among the countries.

In general, support schemes that affect the prices, and hence the consumers’ incentives, such as the Norwegian scheme, should be expected to have adversely distorting effects on markets. For instance, if the consumers do not bear the full costs of their consumption, they may become less price sensitive and reduce their response to high prices, which in turn may soften price competition among suppliers. An example is the complete lapse in the offerings of fixed price contracts to Norwegian households, as the scheme introduced a soft price cap at a relatively low price. Both the Nordic wholesale market and the end-user markets are designed to take advantage of the general market mechanisms, balancing supply and demand of electricity at all times. In these markets, distorted incentives that reduces the costumer’s response to the prices may thus be severe. Given a need to support households or SMEs, this should ideally be done through alternative measures such as flat electricity support payments to customers, which do not affect relative prices. This would have less adverse effects on the functioning of the electricity retail market, the electricity retailers’ ability to come up with innovations in contract types, and the offering of fixed price contracts. There may however be other practical and political reasons for the design of the support schemes, which could partly or fully offset the negative impact on the power market.

Introduction of customer awareness campaigns

Reducing electricity consumption is advantageous for various reasons, offering both environmental benefits and cost savings for consumers by lowering electricity bills. Customer awareness campaigns could be an effective measure to reduce electricity consumption among households and SMEs.

Customer awareness campaigns aiming to reduce electricity usage has seemed efficient in Denmark, Finland and Sweden. All these campaigns focused on consumers making small adjustments in in their electricity consumption and thus have an impact on their electricity bill. The campaigns reached a wide number of customers and may have contributed to increasing customer awareness and reducing electricity consumption. Launching customer awareness campaigns may be an effective measure in all Nordic countries to enable customers to become more active and conscious. Such customers play a crucial role in fostering competition, and implementing initiatives to encourage such engagement could thus be beneficial. Furthermore, customer awareness campaigns can both be a cost-effective measure and contribute to a general reduction in electricity usage.

Country specific measures

There are certain measures that could be beneficial to address country-specific issues. In Denmark, it is common for customers to have pre-payment of their electricity bill, as much as three months in advance. As a result, many customers have been afraid to switch suppliers because they are uncertain about whether they will get their pre-paid money back. Such terms contribute to increasing switching costs and may lead to an inefficient lock-in effect. However, there is a trade-off between the need for working capital for energy suppliers and ensuring that consumers do not provide energy suppliers with an interest-free loan, thereby being reluctant to switch retailer in fear of not getting their money back. The fact that the Danish market has faced such a problem could indicate that competition in the market is not functioning optimally as the market should be able to correct such behaviour. There could be a need to address the issues related to advanced payments in a way that does not create a lock-in effect, and thereby hinder competition. However, findings from the interviews also suggest that electricity retailers are increasingly offering post payment alternatives in order to market themselves to consumers. This could be a sign that the market is in fact correcting this behaviour. Thus, we suggest that one should wait before addressing this concern and monitor whether the market corrects it on its own.

The authority to create regulations in the electricity market varies between the Nordic countries. In Iceland, the NRA does not have the mandate to develop and update existing regulations. At the same time, our findings indicate that the government lacks the capacity to perform these tasks, and several of the interviewed actors have suggested transferring the regulatory authority to the regulators. We do not have sufficient information regarding this challenge to clearly recommend how it should be solved, but giving the NRA the mandate to develop and update existing regulations should be a measure to consider.

As an autonomous state, Åland has control over their electricity retail market, and the market functions differently from the other Nordic countries. The competition in Åland is in practice non-existing, as only two integrated DSOs and retailers operate in the market. New electricity retailers can enter the market, but in practice, the entrance barriers are high both due to language barriers regarding the regulations, and to the market being small. We do not, however, have indications that customer satisfaction is particularly low, and customers appear to have access to relatively competitive contracts compared to the other Nordic countries. Creating an official overview of the relevant regulations, and translating all relevant regulations into either Swedish, Finnish, or both, could lower the entrance barriers in Åland and make the market easier to navigate. However, as the market is small, it is not obvious that this will increase the competition in Åland. As of now, the electricity retail market in Åland appears to function relatively well for the customers, and we suggest not making any major changes as long as there are no obvious challenges on the horizon.