Power cable cuts, supply issues open up Nordics to price zone arbitrage

02 September 2016 15:36 Source:ICIS

Wide discrepancies between Nordic zonal prices on power exchange Nord Pool continued across the region in week 35, latest data showed on Friday.

The wide spreads, which opened up cross-border arbitrage opportunities, were driven by nuclear and wind power supply issues and cross-border cable capacity cuts.

And this looks set to continue. An essential 2.1GW interconnector between Norway’s NO1 bidding zone in the southeast and Sweden’s SE3 is expected to run at only 900MW until 15 October, according to Nord Pool market data, limiting Swedish imports of cheaper Norwegian hydropower.

On 5 September, prices may move closer to being coupled in some zones however as an interconnector between southern Norway’s NO2 and Denmark’s DK1 is set to reach almost full 1.5GW capacity from the current 800MW. This will allow Denmark to export into Sweden’s high consumption zones in the south.

The limitations on export capacity have created congestion in Norway meaning cheaper power prices in bidding zones that have a large hydro power production, such as Bergen.

For example, the Bergen bidding zone price was just €16.89/MWh for Friday delivery, while the Finnish bidding zone was 68% higher at €28.36/MWh on the same day. Bergen zonal prices are typically considerably cheaper than Finnish ones, though not usually to that extent. In 2015 the average Finnish premium was 50%. The previous year it was 33%.

Prices were also above €28.00/MWh in Sweden’s four zones. This is because Sweden has been heavily exposed to reduced nuclear availability, low wind production and maintenance on interconnectors both within the country, and on links to Norway.

The Nordic system price – the volume-weighted average price of all price zones – has been stable despite the volatility between borders. This stems from the region’s relatively heavy reliance on hydro power, which can be regulated to adjust for increased consumption or supply disruptions elsewhere on the grid.

“The market has reached some kind of equilibrium around €25.00/MWh. The producers seem to be quite happy with these price levels,” one trader said.


In week 35, combined Nordic hydro stocks were up to 78%, from 77%, and able to provide nearly 95TWh of electricity, according to data from Nord Pool. The figure was close to the median for the period between 1990 and 2015.

In Norway, infill to reservoirs has been aided by snow melting in the mountains, particularly in West Norway, as opposed to Sweden, where infill to reservoirs has plateaued.

A Stockholm-based trader said Swedish hydro plants did not benefit from snow melting, and added that soil is drier in Sweden, which makes it harder for the rain to flush down to the reservoirs.

Sweden has a total installed capacity of 16GW of hydro reservoirs, which accounts for 28.5% of the Nordics’ total hydro power capacity, according to ENTSO-E production figures for 2016.


Nordic near-term contracts were slashed in value on the last trading day of August. The move was not reflective of any change in fundamentals, but rather the sentiment of some participants in the market, one trader said.

September ’16 came down from €25.15/MWh to €24.55/MWh, followed by Q4’ 16 which fell from €26.25/MWh on 30 August to settle at €25.72/MWh on the last day of the month, data from futures exchange Nasdaq showed.

On Thursday 1 September, however, the market ticked up again on the back of drier weather forecasts, which offset the losses from the day before.

The weather outlook turned even drier on Friday with precipitation expected to be close to zero early in week 36, the Danish trading house Energy Denmark noted on Friday morning.

Traders may have been taken by surprise, as September usually heralds more rain across the region, supporting the build-up of hydro stocks. herman.moestue@icis.com

By Herman Moestue