Nordic Power Prices Risk Spikes as Hydropower Reserves Plunge

Nordic electricity prices face severe upward pressure this winter as low hydropower reservoir levels and soaring European natural gas prices combine to strain regional energy supplies, according to energy trader Mind Energy.

In its November market insight, Denmark-based Mind Energy warned that reduced hydropower generation in southern Norway and Sweden could trigger sharp price spikes, particularly during extended periods of low wind speeds.

Hydropower Depletion at 30-Year Lows

The Nordic region is entering the winter heating season with significantly less water in its hydropower system than normal. According to Mind Energy, the southernmost Norwegian price zone, NO2, currently holds its lowest reservoir water levels in 30 years.

Mind Energy Senior Market Analyst Karsten Sander Nielsen noted that alongside strained European gas markets, the hydrological situation in the Nordics has driven large price increases since October.

Gas Plant Pricing Mechanism

Natural gas prices across Europe have risen to their highest levels since the end of 2022. When wind generation declines, power prices in Denmark, southern Sweden, and southern Norway are directly set by German gas-fired power plants, according to Peter Nikolaj Krebs, vice president of customer trading at Mind Energy.

The interplay between depleted hydro storage, elevated natural gas costs, and variable wind output is expected to result in a highly volatile winter for regional power pricing.

Key facts

• Hydropower reservoir levels in southern Norway's NO2 zone hit 30-year lows.
• European natural gas prices reached their highest levels since late 2022.
• Low wind output forces regional electricity pricing to be set by German gas plants.
• Mind Energy warns of potential winter power price spikes across Nordic markets.