Negative Prices in the Nordics: The New Normal?

By Katinka Bogaard

Quite the ride for Nordic power producers over the last year, climbing from record highs last year to record lows below zero this year in the hourly spot market. This year, the Nordics have seen a substantially higher number of hours in the spot market for power dipping below zero compared to Germany and the Netherlands.

Finland has the clear lead (excluding the negative hours caused by the bidding error for the spot delivered November 24th, 2023) with 449 hours below 0.0 EUR/MWh, compared to Germany and the Netherlands with 228 and 271, respectively.

Despite the high number of negatively priced hours, the average negative price for the Nordics is substantially less negative than for Germany and the Netherlands. The averages in the range of –2.6 EUR/MWh in NO5 to –35.1 EUR/MWh for the Nordics, -35 EUR/MWh for Germany and –55.4 EUR/MWh for the Netherlands.

Why did prices so often dip below 0 in Finland?

The past year, the market dynamics in the Nordics have changed. Finland shifted from having a negative power balance to a positive on during this spring, when Olkiluoto 3 came online. This new nuclear reactor, combined with a missive development of wind and solar power, resulted in a need to export power from Finland. Combining this with massive pressure in the hydro areas in Sweden and Norway there was simply not enough outlet towards the Baltics and other neighboring areas.

Why did prices so often dip below 0 in the Nordics?

  • After periods with extreme levels of precipitation, the Nordics saw a surging oversupply of hydro power, especially NO1 and NO5. The oversupply was enough to cover all demand in non-hydro areas in the Nordics (Denmark, Southern Sweden and Finland)
  • Normally, when the hydro-dominated areas had an oversupply, they were able to send the excess hydropower to Finland. With Finland being self-sufficient, the excess power simply had nowhere to go
  • It is also interesting to note the difference between the negative prices in NO1 and NO5. NO1 saw more extreme negative prices through its interconnection with NO2 and dipped down to –61.84 EUR/MWh, while NO5 maintained control and saw much more moderate negative prices, only dipping down to –6.62 EUR/MWh throughout 2023.

What differentiates Nordic negative power prices from Continental ones?

  • Negative prices in the Nordics driven by Nordic price areas are often in the range of –6 to 0 EUR/MWh, with the stable lower boundary coming from the price level of the GoO, which allow Nordic producers to bid negative down to the current GoO price (e.g. 6 EUR/MWh) into the spot market without taking a loss. With the GoO, if the producer bids in at –4 EUR/MWh and gets, for example, 6 EUR/MWh for the GoO, the producer still makes a profit of 2 EUR/MWh.
  • Continental negative prices are driven by renewable assets unable to turn off their product units and therefore can only look to export the oversupply of renewables, causing the negative territory to be much larger for Continental prices.

When will negative prices return in the Nordics?

During periods with reduced demand, like Easter, and when the melting season picks up in the Nordics around March or April, the Nordics could see negative prices again. This is clearly dependent on the level and timing of unregulated hydro production and temperatures, alongside reservoir filling levels prior to the start of Spring. We could also see prices pushed below zero in Southern Norway and Southern Sweden on high intermittent renewable generation from the Continent and low demand. One thing is for certain, prices will dip below zero again in the different Nordic price zones, when this happens across the Nordics (e.g. in all price areas at once) is uncertain.