Since Norway introduced deregulated electricity production in 1990, the Norwegian market has evolved into a model for national authorities around the world hoping to capitalize on market forces.
In a well-designed deregulated market like Norway's, customers can change power suppliers without being penalized and can expect to find increased trading, an expanded array of services, reasonable prices and stable distribution, no matter where in the country they are located. Deregulation has also fostered the establishment of power trading and power brokerage firms, electricity exchanges and specialized consultancy companies.
The hub of the Nordic electricity market is Nord Pool, the world's first international commodity exchange for electricity. The volume of electricity traded through the exchange has grown dramatically since it opened outside Oslo in 1993. Over 500 TWh is bought and sold by 180 participants, and over half of Norway's production is traded. The power markets of Sweden, Finland and Denmark, with a total annual consumption of some 350 TWh, are also integrated into the exchange. Nord Pool competes with regular bilateral contracts by organizing the sale of standardized power contracts through a next-day spot market. Major consumers - producers, distributors and industry - are the main buyers, and the spot price is formed on an hourly basis. Exchange participants may also enter into futures contracts of up to three years against the spot price. Futures contracts rarely lead to physical delivery. Producers and large-scale consumers often use them to hedge against the unexpected, as can household customers, while independent brokers and traders make it their business to anticipate and exploit price swings. Nord Pool also provides the clearing of power contracts, participating as a contractual party. Growing trading volume pushed Nord Pool's operating profit in 2000 to some USD 4.7 million, the best ever in the exchange's history.
Nord Pool is working to provide capital, expertise and a model for the formation of new electricity exchanges elsewhere in Europe. As well as being involved in projects in Leipzig, Germany, and in Switzerland, Nord Pool is working closely with the Amsterdam Power Exchange (APX) in the Netherlands. It has also forged an alliance with the International Petroleum Exchange, the London-based oil and gas exchange, to explore and develop commercial possibilities between the two sectors. Planned subsea power cables linking Norway to Germany and the Netherlands and Sweden to Poland will help to expand Nord Pool's potential.