Flexibility in marketplaces

The procurement and sale of electricity will, in future, take place closer to the consumption hour.

The price of electricity is determined in the market, where the market price reflects its value, which varies at each moment. In the short term, the market price will guide electricity production and consumption. In the long term, it will enable and guide investments both to production and consumption, as well as to transmission lines and storage.

It has traditionally been relatively easy to predict electricity production and consumption in the short term. Weekdays are generally very similar, on weekends saunas are heated up at around the same time, and as the mercury drops, more electricity is used for heating. At any given time, an exact amount of electricity is produced to meet demand.

The electricity marketplaces have largely evolved to meet the needs of the traditional time frame for planning electricity consumption and production. On a winter weekday, for instance, electricity consumption and the required production can be predicted relatively accurately a day in advance on the basis of the temperature forecast.

On the day-ahead market, electricity is sold and purchased for the next day. Sellers and buyers leave their offer on the electricity exchange by 1 p.m. and the results are published roughly an hour later. The basis for trade is the operators’ plans concerning the required amount of electricity, either for resale in the retail market or for consumption by industrial facilities. Each hourly price settles at the level where demand meets supply. Nowadays, most trade takes place on the day-ahead market, which, in the Nordic countries, is maintained by the Nord Pool electricity exchange.

The intraday market supplements the day-ahead market. If, for example, the wind and temperature forecast changes over the course of the day, trade can take place on the intraday market, taking the revised situation into account. Electricity market operators in the Nordic countries can make use of Nord Pool’s Elbas market, which is based on continuous trade. The intraday market gives electricity market operators the opportunity to balance their electricity purchases and sales closer to the consumption hour.

With a green electricity system, trade will be concentrated closer to the hour of consumption, as varying electricity generation and the difficulty in forecasting it will increase the need for trade to take place closer to the hour of supply. At the same time, this will require the development of all marketplaces and their regulations in order to meet the requirements of the transformation. The most obvious need for change exists in the short-term intraday markets and the real-time markets.