Increasing need for flexibility
Onshore wind and PV gained momentum in 2022 due to high electricity prices and supply security concerns. However, regular negative power prices reveal the challenges of integrating wind and solar energy.
The surge in power prices during 2021 and 2022 also made the market more responsive than ever. The events following the the start of the war in Ukraine highlighted Nordic resilience, but also underscored the need for further action to ensure flexibility and resilience in the Nordic energy system.
In response, countries, companies, and municipalities are now developing carbon accounts, including Scope 3 emissions, and setting requirements for sub-suppliers. Environmental, Social, and Governance (ESG) considerations are likely driving these changes.
Large increase in hours with negative prices
Electricity market prices can become negative during periods when electricity production exceeds consumption. In these instances, producers must pay to feed electricity into the grid, while consumers are paid to use it.
The number of hours with negative electricity prices in the Nordic countries has risen from fewer than 100 to nearly 1,000 hours annually. This increase is largely due to the rapid expansion of wind and solar generation capacity, which often benefit from other revenue streams that reduce their incentives to react to price signals. Their growth has outpaced the development of flexibility measures needed to balance the grid.
Negative price hours create business opportunities for implementing flexibility solutions. The estimated value of these hours has grown from a few million euros to almost 50 million euros. However, this still represents only about 0.4% of the total market volume.
Data source: Price data from ENTSO-E. Estimated value calculated from hourly prices and total load. This method assumes that all electricity goes through the markets overestimating the value.
Note: The market event with –500 EUR/MWh prices in Finland in 2023 cleaned from the figure.
Note: The market event with –500 EUR/MWh prices in Finland in 2023 cleaned from the figure.
New trend: sky high electricity prices
Simultaneously the number of hours with high electricity prices has risen significantly.
Before 2021, there were only a few hours with prices exceeding 200 €/MWh, but this has become regular occurrence in 2023 and 2024.
oAverage of 90 hours in Nordic countries in 2023 simultaneously, the number of hours with high electricity prices has risen significantly. Before 2021, there were only a few hours with prices exceeding 200 €/MWh, but these became much more frequent during 2021 and 2022 due to the energy crisis. Although the number of such hours has decreased since then, they still occur regularly, with 90 hours recorded in the Nordic countries in 2023 and 50 hours in the first nine months of 2024.
oAverage of 50 hours in the first 9 months of 2024
The years 2021 and 2022 were particularly exceptional, marked by very high electricity prices.
Similar trends are observed with prices over 100 €/MWh and 300 €/MWh.
Data source: ENTSO-E
Increasing flexible electricity demand
Policies aiming for peak demand reduction and recent high prices have increased price response and demand-side management according to Nordic Transmission System operators, though there are no common metrics to measure the development.
Statnett, Norway, found 3% demand reduction during high-price hours in households in their 2019 study. The flexibility market in Norway has developed significantly since and EuroFlex flexibility market opened on the 1st of January 2024 providing short- and long-term demand reduction and load shifting.
Svenska Kraftnät, Sweden identified a 5% reduction in demand during high price peaks compared to projections in their 2023 study
Finland: A recent market analysis estimated that the volume of price-elastic demand bids has increased from the level of 1000 MW in 2021-2023 to the level of 2000 MW in 2024 [Litmanen, 2024].
In the spotlight: Euroflex
Euroflex is a local flexibility market in Norway aimed at managing electricity demand during peak periods. It involves grid companies like BKK, Elvia, and Glitre Nett, who buy flexibility services to either reduce consumption or boost production. Initially focused on the Agder region, Euroflex has now expanded to include Oslo, enhancing grid stability and efficiency by utilising consumer flexibility. (Nodes)
The Euroflex flexibility market is already open and will open for trading on the NODES platform in late 2024, with Elvia and Glitre Nett opening their entire license areas for trading, representing over 1.2 million electricity customers. The initiative is seen as a significant step towards utilising spare grid capacity and supporting Norway's NetZero targets. (Nodes)
Figure: Nodes