The Spot price for electricity essentially is how much it costs on the market at that moment. Learn the monthly wholesale electricity prices for Norway at  https://www.statista.com/statistics/1271469/norway-monthly-wholesale-electricity-prices/#:~:.

Supply and demand are a fundamental component of the wholesale market. When looking at generating energy and considering the demand, this is the amount of energy that’s asked for or that the public needs.

When considering supply in the context of generating energy, this is the amount that providers have to offer those in need. When supplied it’s dispatched via power plants or renewable resources. Supply and demand will invariably affect the wholesale price, or the cost generators pay for the daily electricity supply.

The spot or wholesale market prices have recently started to spike for a few reasons some of which include:

1. Increases in fuel costs are affecting the supply.
2. Less supply due to power station closures, tight balance between supply/demand

Understanding The Fundamentals of the Spot Price

All generated electricity at the “utility scale” is supplied from the spot market and sold at the “spot price.” Over time this price is recognized as the wholesale cost.

The idea behind the spot market was to assess the cheapest price for generating electricity per MWh- Mega Watt hour by prioritizing the lowest bids for energy supplies first. Here’s a breakdown of how spot pricing works.

1. A “market operator” is appointed to predict the amount of electricity needed for “every five-minute interval” because the demand changes with such regularity.
2. This same market operator searches to find generators that can find the greatest amount of electricity for the cheapest price to meet the demand at these intervals.
3. Because the industry is fiercely competitive, generators bid to try to win the 5-minute intervals, offering their lowest price point and the greatest amount of electricity for that timeframe.
4. The market operator categorizes the bids from the cheapest to the costliest based on those that meet the demand. These are referenced as the “bid stack.” The generators that offer the cheapest bids will be chosen until the supply meets demand.
5. Over a 30-minute timeframe the generators in the bid stack are compensated at the spot price. The rest of the generators or didn’t meet the price point don’t receive payment – the “too-high” bids.

With less supply and increasing fuel costs, the generators’ bids continue to grow since producing energy is becoming more expensive. That means the bid stack consists of higher-than-usual bids.

High spot prices aren’t desirable but at the same time, these encourage the building of a new generation to generate more supply for the demand. Once that happens, the costs will decrease.

What Is the Process for Electricity Pricing

Energy prices are a source of news for most countries as the costs are typically on the high side. Why is it expensive and why do they continue to go up?

Primarily, as discussed, supply and demand play a significant role in the cost of energy, but another contributor is the fuel costs which lead not only to high energy pricing but ultimately the residential electricity rates.

Natural gas is among the most common fuel resources. When these prices rise so do electric bills for the consumer. As a commodity’s demand goes up, the price follows but if the demand wanes, the cost would go down.

The same is true with the supply. A surplus would allow for lower prices while a shortage would mean rate increases. These are the fundamentals and the primary factors as to why utility costs for the consumer are as they are.

Here are factors aside from demand and supply that can spike the cost of energy to explain why consumers are paying high utility costs.

1. Generated power available: The increasing demand can result in more plants generating sufficient power in response to consumption.
2. Weather: Extreme weather conditions can increase electricity usage creating a greater demand, not to mention the potential for power outages.
3. Supply chain: Obtaining the equipment parts can be delayed from the manufacturer to the power plant.
4. Damage to the grid infrastructure: If a component of the grid were to experience damage, the power available to the client would be limited.
5. Weather events: Power outages and demand for increases in use occur when there’s a peril like a catastrophic weather event or climatic change.
6. Slow growth: The distribution from infrastructure growth can take time as high-voltage transmission lines or switches are incorporated in the grip, making the supply slower than the ever-growing demand.
7. World events: Energy production/distribution can be disrupted when there are conflicts at borders or wars and with international health crises.

The nationwide grid is strong but when a few variables coincide, the rates will rise. That has been the case over the last few years, with subsequent rises in electricity costs continuing to hold fast.

When working with a fixed-rate plan, you can handle the market volatility more readily with locked-in rates. You can also change your behavior with energy use by sticking with heavy energy users like appliances when the rates are at their lowest.

Tips On Making an Energy Choice

With many homeowners, there is the allowance for “energy choice” in de-regulated markets in many of the states allowing the consumer the advantage of selecting their provider among several they choose.

The idea is to look for the most competitive rate with a customer-friendly plan based on a fixed rate that involves examining usage. Conserving energy is only part of the process; it’s essential to take full control of how energy prices affect you by comparing suppliers.

Since you’ve been allowed to take advantage of varied energy plans through different suppliers to save money despite energy levels rising and rates soaring it’s wise to use that benefit.

You can lock in for a fixed rate plan or choose a variable contract with rates fluctuating with the spot price. Go here for details on daily market rates in Norway.

What’s The Connection Between Your Electricity Bill and Spot Prices

Depending on the supplier and the contract plan you select, the spot price can have a significant effect on your utility costs. That’s particularly true if you opt for a variable contract referred to as a “spot agreement” with which the spot price is the factor in determining the utility bill.

With a variable contract, the cost of electricity fluctuates according to how the spot price changes. With a fixed or locked contract, the rate will stay the same regardless of where the spot price is. Many people choose the variable contract with the potential advantage of spot prices dropping allowing for a low utility bill.

The downside, however, is trying to keep the energy you use compatible with the spot prices. As a rule, one of the lowest peak times is nighttime. Using energy-heavy items like appliances overnight could lower utility expenses.

The peak times for use include the morning and early evening when everyone gets home from work with weekends being less expensive than weekdays.

With a spot agreement, you need to be able to monitor the fluctuations but also manage consumption to achieve reduced prices.

Final Thought

The spot or market price of electricity is the amount your energy supplier pays for the resources it sells to you. Please visit bestestrøm.no/spotpris/ to learn more about the spot price.

Suply and demand are primary factors for determining the market price. If there’s a surplus, the costs remain low. A shortage will result in higher costs. When there’s a high demand, the prices will increase and when the need is decreased the price is reduced.

Deregulation means customers have their choice of energy suppliers to choose the most budget-friendly. Any savings the electricity providers see in their costs will be passed on to the customers.

As the customer, you can also select between either a variable or spot agreement plan and a locked or fixed contract plan. The variable contract is a favored choice due to the potential for low rates.

With the spot agreement, the rates change as the market prices fluctuate; not only can they drastically fall, but they can also spike. The contract is set up so that you can change electricity providers or the plan as you wish without incurring a penalty.

The thing to remember when prices spike with one provider is that it will be the same for all suppliers across the board because these are based on the market conditions.

Sometimes it makes more sense to stick with your provider and look more closely at the plan you have and your consumption to figure out how to cut costs.