Norway has been self-sufficient for a very long time, but due to the Acer agreement with EU Norway is in practice forced to export electricity until the price balances out at both ends (https://www.nrk.no/ytring/energien-var-strommer-ut-1.1605630...). There's no way that the surplus in production can cover the current needs of Europe. In summer the domestic need is very much lower than during winter (no domestic A/C necessary, bright days etc), so normally you try to save as much water as possible during summer so that you have sufficient resources for winter. But now the hydro power plants are in practice forced to empty out the reserves during summer, and buy electricity from the continent during winter, completely reversing the practice before Acer - which was basically that the surplus was sold and exported, and when e.g. Denmark has too much wind power available you turn down the hydro a bit and import from Denmark, and when there's low wind you export to Denmark (Norway's hydro is one reason Denmark can rely on wind power that much).

The only thing (the only thing) that limits electricity exports from Norway is capacity. Prices in the north of Norway are lower than in the south, simply because there's not enough capacity to transport that much to the south. That's actually a good thing, and would be a good thing for the cables from the south to the continent and elsewhere as well, because what's happening now is insanity. It makes no sense to dry out the water resources during summer and buy in the winter, from coal and whatnot.

It also has a lot to do with not enough transmission capacity to get the electricity from north to south. At this very moment the spot price in north most pricing region Tromso is a lot cheaper than in Oslo region (~1/10th). Sweden has the same problem.

If I was from Norway or Sweden I would demand the national grid to massively invest into the transmission lines to make all the electricity produced in the country actually usable anywhere in the country. Basically work to get rid of these pricing regions within the country. This is how the network here in Finland works

Also why they are now talking about adding new lines from south of Finland to Sweden (also mentioned in the article) so the electricity produced in north Sweden can be sold to south Sweden through Finland as the national grid of Sweden just can't get it done.

edit:

You can go to https://www.nordpoolgroup.com/en/Market-data1/Dayahead/Area-... to check the day ahead prices in different price regions.

Transmission capacity is a classic example of a neat economics problem.

If there was a benevolent dictator making ideal decisions, they would build enough transmission capacity to minimize generation+transmission costs while still serving all users in the country.

However, if there is a private company building a transmission line, they have an incentive to under-build capacity to maximize their profits - since if they overbuild, then the price in all the regions is identical, and their profits by transporting energy are nil.

Yet, due to the nature of transmission lines, it doesn't make sense for 50 companies to build 50 independent transmission lines on the same route to compete on transmission pricing - the total cost of fifty 1 megawatt lines is far higher than one 50 megawatt line.

It's a good example of an economics problem where the free/restricted market doesn't work anywhere near as well as the benevolent dictator model.

There are lots of similar problems - for example shipping goods from a place where they are less valuable to a place they are more valuable.

There has been massive investments into transmission capacity in Sweden. The capacity has not increased that much though. One of the reasons are that nuclear power plants have been closed. Large turbines contributes to an increased transmission capacity. All the big investments have been necessary just to ensure that the capacity doesn't get lowered due to the closing of the nuclear plants.

"If I was from Norway or Sweden I would demand the national grid to massively invest into the transmission lines to make all the electricity produced in the country actually usable anywhere in the country. " That would be fine if it was only about prices in the country. But due to the way the EU agreement works, higher capacity transmission lines only means that more electricity will be exported and more of those countries would suffer. Norway currently exports more than the surplus. With higher internal transmission capacity Norway would export even more. Which will have to be imported from EU comes winter, at prices which have already closed a LOT of businesses in Norway.

> higher capacity transmission lines only means that more electricity will be exported and more of those countries would suffer.

Build better transmission within the country but not between countries. The transmission lines between countries is how you limit how much electricity you can trade with other countries.

I do not think that effective transfer of energy from the north to the south would matter much. The price in the energy market is set by the actor willing to pay the most at any given moment.

If energy from the north was enough to influence the German or British prices then maybe, otherwise it wouldn't really matter.

Is this because Norway is only energy independent across annual average load, and can't handle peak usage? Or because theres some contractual arrangement where they can't sell electricity cheaper to domestic users?

It's the latter. Domestic users pay the same as those that Norway export to.

So how is the country serving the people?

How can a contract mean you need to raise prices for the citizens? This can only be the case if the government is not acting in good faith, and has planned for this eventuality.

I'm still amazed how people think their government is there to help, especially in nordic countries, when it is plainly just an extraction and control device.

There's plenty of calls to change the pricing rules but I'm amazed that there is so much political resistance. We could be changing this now.

See my other example of effects of the current market rules https://news.ycombinator.com/item?id=32798081

Something is wrong with how prices are formed in this market.

That contract you mention is basically that you transmit electricity from where it's cheaper until the price balances out at both ends. That's when you stop (unless capacity limits you before that happens). It's a horrible contract, there's no consideration for rational planning of e.g. seasonal availability (which is enormously different in Norway compared to the continent). Ref. a link in my other comment (nrk.no) which explained this (in Norwegian. Translate can probably handle it). The sad thing is that politicians, including the former prime minister, seems to not understand the nature of the contract they signed. They still thinks it's about exporting surplus and importing from surplus, which it's not at all about.

How is the country, or the EU serving the people, when they are contractually bound to increase the prices, even when there is no necessity?

I don't want to go into that much politics, but if you look at it from high above there's a little more energy coming into the pool (by using that pricing method to squeeze more export out of Norway), and as a result the net total for all of EUs citizens will be a tiny bit lower. Even though it creates havoc in Norway (prices going up maybe 1500% or, some days, an order of magnitude more). Obviously there's an energy crisis in Europe so I'm not sure EU can be blamed for how it affects Norway, the fault is on Norwegian politicians alone for signing a deal which was such a misfit for how the Norwegian power production works. Unbelievably naive, not even realizing that the already existing methods did everything they wanted - sell surplus when it was safe to do, buy when you could, optimize how hydro resources were used (a lot of the rivers and lakes, the majority in fact, also have fish - and the unwanted high output at the bad time creates havoc - not enough water). The Acer setup, as such, is probably fine for the majority of the continent, but I don't know enough about power production in most of EUs member states.

> This can only be the case if the government is not acting in good faith, and has planned for this eventuality.

Because during normal times it actually leads to cheaper prices. It has only really been an issue now due to the crisis.

Also this is mostly a consequence of the free market. In the late 90s and early 2000s the Nordic countries freed the electricity markets of the very tight government control. The markets then over time decided that they can make more money by combining each other by joining nord pool (originally a Norwegian company)

There is not just one way to have a free market. The market rules determine market outcomes, and different methods for how prices are formed could be used.

Sure, electricity is in some sense a pretty artificial market with the auctions and system operator etc etc. OTOH, commodities generally price at the margin, and the rules for the electricity market have been designed to mimic this price finding process that comes about more naturally in other commodity markets.

So while currently there are certainly big issues with how the market functions due to Putin, anyone suggesting any major reform will have to think long and hard what the market mechanics are supposed to be, and what could be unintentional side-effects of that mechanism. At the moment there is a lot of political pressure to do something, anything, and it's very likely such hasty proposals will be throwing the baby out with the bathwater.

The gas situation may be a major stress to the system at this time, but prices were gradually rising even before this current crisis.

EU regulations forbid most subsidizing of goods withing country borders in general. There are some exceptions, like for example agriculture.

There were a lot of reports made before the cables were created indicating that prices would not change much. I believe these were created in good faith by incompetent people.

People in Norway are currently paying full price, but the government is refunding 90% of the cost above ~0.7 USD / KWh.

You could argue that all domestic energy infrastructure could be nationalized and energy sold at cost to domestic users, but then where does the money come from for investment?

Government funds would have to finance it. Cheaper electricity is a benefit to domestic industry (manufacturing and computers included) - tax money derived from this and public-private partnerships for investing in increased energy supply.

As far as I know, they have not built the infrastructure to move the cheap excess power down south and some are using the EU as a scapegoat. Don't take my word for it, though.

There has been a lot of talk about building more infrastructure between the North of Norway and the south. I personally don't think that it would make much difference except increase the prices in the north. The North of Norway produces about 17% of all the electricity in Norway in 2017 with about 10% of countries population. It's also colder for a lot longer up there. Ongoing joke: Missed the summer this year, had to go to the loo.

The latest news was that most of the excess capacity will be used up within the next few years because the oil and gas industry is mandated to connect their plattforms to the electrical grid instead of producing their own power from gas.

EU is not used as a scapegoat except for those who use EU as a scapegoat for everything - there's always someone.

The 'scapegoat', if you will, is the Acer contract - and that's not really a scapegoat, it's the real issue: Exports must continue until prices balances at both ends.

> some are using the EU as a scapegoat

What's the argument there? I'd think that since Norway isn't fully in the EU, they'd have more leeway in internal matters?

Norway is in the European Economic Area (EEA) which means that one strong party (EU) in that treaty dictates a lot of market rules for Norway.

It's questionable how much better transfer capacity would help prices (it would help the grid, though).

I think it's more true that the situation you are mentioning insulates northern Norway from continental prices, than the opposite.

When Norway sells electricity across the new cables to the UK we share the profits with the brits. Makes sense, since the risk and cost of building the cables was shared.

It reminds me of the App Store model where Apple takes 30% of the revenue instead of charging a charging a fixed fee of some sort.

Would be very interesting if there was a transfer fee for the new cables instead of a profit share model. Even more interesting if there was a bidding process for the transfer capacity like there is for actual electricity.

Or put another way, Norway doesn't have enough north/south interconnect capacity to supply cheap electricity from generating capacity in their north to their south.

What about when the hydroelectric power plants aren’t running — I assume there’s some seasonal variation here?

Exporting more power than you import on a yearly basis might still mean they you need to import power in certain periods during the year.

Most hydro power is always running.

Same with Finland and Sweden - electricity prices would be much lower in the Nordics if they cut off from the European grid, but that’s not politically acceptable

That is not how the system works. If you have extra production in case of high energy prices, you can make a profit by selling it to the eu. If prices increase domestically, it must mean, that the domestic production is not sufficient and energy is bought from the eu, or your domestic production plants use the opportunity to increase profits. The connected network is and always will be a good idea, just like the open internet :)

Right, so here is one example of what happens in southern Sweden and why prices are pushed up. This is an example to show how the mechanics work.

Sweden is divided into four price regions for electricity, SE1..4 from north to south.

Demand for power in SE4 (most south) comes from domestic use, and from export from SE4 to Denmark, Germany, Poland (typically, flows can also reverse).

The most expensive supplier sets the current price. Let's say domestic supply is 2 GW. Domestic demand is 1.7 GW and export demand (Denmark, Germany, Poland) is 0.7 GW.

The missing supply is solved by importing from Lithuania to SE4 (1.7 + 0.7 - 2 = importing 0.4 GW); this becomes the most expensive power supplied at this instant and sets the current electricity price in SE4 for domestic users and for those that receive the export. (So we have cheap Swedish electricity for the most part, but the expensive Lithuanian production sets the price in this example.)

In this way, SE4 has enough domestic supply to cover domestic demand. Imports are smaller than exports, but the imports still push up the price for everyone.

Note that import/exports are both on the synchronous grids where applicable as well as using HVDC connections.

It’s not as simple as that. There isn’t be enough energy in Central Europe (especially Germany and Italy) to meet demand as long as gas imports from Russia are cut off. Building enough new alternative production will take years.

In practice the loss of cheap gas from Russia results in higher demand (and price) for alternative sources of energy, including electricity, in those countries that relied on Russian gas. And since they are connected to the Nordics via the grid, it also spikes electricity prices in the Nordics. For energy producers this is great, but for consumers in the Nordics it is not good at all.

The analogue to the internet fails in the sense that you don’t have constraints with domestic production with internet data like you have with energy.

"Always a good idea" for whom?

If country A has plentiful production but country B hasn't, the companies of country A are better off exporting to country B, but this will make prices go up in country A.

Definitely not a good thing for the average citizen of country A, which would be better off with a disconnected grid.

Is this because of greed/profit/capitalism? Like we have enough energy for ourselves but we can make a lot of money if we profit now of this bad situation, double our yachts length.

Yes, it's truly evil to want to save your neighbor from power shortages.

I am saying it is because of greed, the cost to produce the power did not changed so they increased the prices, is there a risk that the locals will protests and some price caps on profits will be put in place?

Something is super weird with this price increases all over Europe, they don\t make sense, I wish someone will start following where all this profits go and take care of those bastards.

The cost of gas has increased, because it turns out that one of Europe's gas suppliers was a hostile power. Europe is having to buy gas on the open market, which means outbidding the rest of the world for LNG shipments. This is not difficult to understand if you seek out high-information sources.

The profits are going in part to induce LNG tankers to come to Europe. You can ban this, but then the LNG won't come and Europe will freeze. The rest of the profits are going to those companies that had the foresight to invest in non-gas power generation. There is some argument to seize those profits since the current price levels were surely unforeseen, but Europe has rule of law so such a seizure would need to be justified and would be challenged in the courts.

The petrol and diesl prices increased too, causing food prices to increase, also electricity prices increased and the math does not work to blame the gas especially in countries like Romania where there is almost no Russian gas import.

Fuel is fungible, and traded on a global market. Power is fungible and traded on an intra-European market. It doesn't matter whether individual countries were relying on Russian gas; Europe as a whole was.

I understand where you’re coming from but do understand that in about three months time Nordic politicians will be trying to explain why they’re bailing out foreigners for their poor planning at the expense of their countrymen. Not generally a vote getting line of argument.