Electricity market
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Comment Theme: Electricity markets. Nordic electricity market expert anwers the theme’s key issues. Integration benefits the nordic countries mikael lundin, CEO of Nord Pool Spot, takes a close look at the Nordic electricity markets, price fluctuations and the progress in the integration of the European electricity market. Jenni Jusslin Tina Poppe How have the Nordic countries benefited from the integrated wholesale electricity market? The nordic electricity markets were integrated in the 1990s in order to optimize social welfare and to improve the security of supply. The advantages include more efficient use of production capacity beyond national markets and boosting the efficiency of production. how would you comment on the criticism that electricity price peaks are caused by markets that are not functioning? Price peaks demonstrate that a market works! Prices will rise for those hours when demand clearly exceeds supply. Simply put, electricity prices are determined on the basis of supply and demand and available transmission capacity. Price peaks have several reasons. Last winter was exceptionally cold in the nordic countries and the amount of precipitation was low; consequently, water reservoirs were lower than normally. also 60 percent of Sweden’s nuclear power production was unavailable. Other concerns were the lack of demand flexibility in the market and sufficient transmission capacity between some areas in the nordic countries. Price peaks are unfortunate, but high prices trigger reduction in power consumption and they accelerate investments in new production. 16 Fortum forAgendA Markets do react to a price peak and prices usually level off the following day. the Eu’s goal is to create an integrated European electricity wholesale market by 2014. what are the implications of integration? Integration will lead to more efficient use of energy, which is positive from an economic, social and environmental perspective. Integrated markets will help equalise the electricity price in europe. the ”Vision for European Electricity markets in 2030” report states that sufficient transmission capacity and price elastic demand are of crucial importance for functioning electricity markets. do you agree? absolutely! Both are necessary for the development of functioning and highly competitive markets. It is important to ensure sufficient transmission capacity, and it requires sizable investments in several european countries. Functioning transmission connections equalise prices between different areas and increase competition in the market. Nord Pool SPot Nord Pool Spot is a physical energy exchange where power is traded for delivery during the next day. Electricity price is determined in a closed auction based on supply and demand.
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