The electricity wholesale market determines the amount of electricity produced and the wholesale market price, as well as the imports and exports of electricity. The electricity exchange plays a key role in the electricity wholesale market. The common market area of the electricity exchange includes Denmark, Norway, Sweden, Finland and Estonia. Electricity producers, retailers and large electricity users buy and sell electricity on the exchange. Approx. 70 per cent of the electricity consumed in the Nordic countries is traded on the Nordic Power Exchange.
The Elspot market of Nord Pool Spot determines the next day’s wholesale prices for electricity. The parties operating in the spot market send their daily price bids and offers to Nord Pool Spot. In these, they specify how much electricity and at which price they are prepared to buy or sell in each hour of the following day. Based on these bids and offers, Nord Pool Spot will calculate the supply and demand curves, the intersection point of which determines the spot price for electricity.
The electricity derivatives market, which resembles the stock market in many respects, operates separately under the name of Nord Pool ASA. The prices of electricity derivatives are also determined according to supply and demand. With electricity derivatives, the producer or vendor can agree on the price of electricity, for example, for the next year. In addition to electricity producers, brokers and consumers, also investors, such as international banks, operate on the derivatives market. The volume of the financial market is about five or six times that of the physical market.