1. Market mechanisms in Norway / Nordel Reserves Adequacy and Demand Response. Security of supply. Grid Operation Division, 20.04.2005 Bjørn Walther

2.  Political willingness and consensus on liberalization  Legal framework put in place and adjusted to ensure competition  Regulator established in all countries  Independent Transmission System Operator (TSO) created in all countries to facilitate market development Driving Forces behind Liberalization

3. Forming a Nordic Electricity Market Requirements: Co-operation between all five Nordic TSOs on issues required to form one common market Co-operation regulated in: “The Inter-Nordic Transmission System Operation Agreement” Inter-Nordic Transmission System Operation Agreement StatnettFingridSvenska KraftnätEltraElkraft System

4. Governing Bodies Example: Statnett

5. The mix of electricity generation The Nordic electricity market in 2003 (%)

6. Peak load versus available capacity Norway

7. Great variation in generation Norway

8. Various markets and their timescale RKOM A catalyst to secure sufficient regulating power to be available in the Balance Market Time

9. Option Market as a catalyst for the Balancing Market places including options when needed RKM Elspot 12 hours in advance The hour of operation The market place Generation Consumption RKOM Duration one week Option market Catalyst for RKM G C

10. The Nordic intra-day Market (Elspot) Purchase Sale 0 Volume in MWh 1 000 2 000 3 000 4 000 5 000 6 000 020406080100120140160180200 Price in NOK System price 124

11. Common Nordic Balance Management Upward regulation Downward regulation Price MW Highest up regulation Price = Sales price Lowest down regulation Price = Purchase price Spot price = base price

12. Norwegian balancing Need 2001. Duration curve (frequency control only) The highest value for upregulating i BM  10%

13. Common Balancing Market Established 1 th September 2002 Results so far: –Efficient balance control –Lower total control costs for the TSOs –Improved overview and reliability due to simplified routines –Equalisation of the Balancing Power Price –Increased interest in offering on the Balancing Market –Harmonisation of balance settlement –TSOs work as one company in this respect

14. Activation of demand response (DR) Day-ahead Market according to price –More eksplisit response –More flexible products Balancing Market according to situation –According to deviation in forecasted consumption –According to disturbances Present in both markets –Excluded in RK-Market if activated in Elspot

15. Demand response in day-ahead Market

16. Acquisition of Reserves Options Overwiew from the beginning, nov 2000

17. Nordic perspective The Nordic potential for DR is large Increasing need of operating reserves and DR, as a consequence of more windpower installed Nordic coordination is important and will reduce the total cost of keeping the necessary amount of capacity reserves

18. Market prices The Nordic Electricity Market 1992 -2001 1 Euro = 8.30 NOK (01.09.2003) 0 5050 100 150 200 250 300 35 0 400 JanFebMarAprMayJunJulAug SepSep OctNov D e sc NOK/MWh 2000 1996 1994 1997 1993 1998 1995 1992 1999 Norways last politica l decided price 1991 2001 Source: Nord Pool

19. How to ensure Security of supply Supply / demand balance in normal years Power exchange capacity against continental Europe Price elasticity in demand A set of ”tools” for extreme years

20. Conclusion –The Nordic Experience Reduced prices to the customers Better service to the customers Cost efficient operation Flexible power flow Reduced overcapasity Focus on the economy

21. Web-sites www.energinet.dk LANDSNET www.landsnet.is