Norway's Statnett ordered to review power price protection options

Norway's power system operator Statnett has been ordered to investigate measures to improve power price protection options across the country's five bidding zones.

State energy regulator NVE-RME wants Statnett to explore measures that move away from long-term transmission rights between bidding zones and towards more transparent financial power markets.

"RME believes that transmission rights are not a suitable instrument for price protection in the Norwegian power market, and is therefore asking Statnett to investigate other measures," the regulator said Feb. 16.

Norway has five power price zones, with power typically flowing from hydro-rich northern zones to higher demand southern zones. In the four weeks to Feb. 19, spot prices in the two northerly price zones were Eur22.15/MWh lower on average than those in the three southerly zones.

"In Norway, both physical and financial power trading takes place to a large extent via the stock exchange," said RME director Tore Langset.

This contributed to efficient price formation and transparent prices in both the physical 24-hour power market and the financial power market.

"RME therefore believes that measures implemented to improve price protection options should support the organized financial power market," Langset said.

The regulator particularly wants Statnett to look at auctions of electricity price area differential (EPAD) contracts and support for market makers, he said, noting that power price hedging options in the Norwegian market were currently insufficient.

Boosting liquidity and providing a market option would lead to more stable income and lower risks for power producers, while making it "more attractive to offer fixed price agreements to customers who want it," the regulator said.