Exchange electricity – what is it and why should you keep an eye on it?

We can often take electricity for granted and we do not necessarily think about what makes up the electricity price we pay for, and what factors affect it. However, the prevailing conditions have caused most of us to examine electricity prices more closely, because the average price of electricity has risen radically in the last year alone.

We may have become aware about our own electricity consumption only recently, resulting to a more critical approach to it, considering various measures to curb the use of electricity, and reducing our electricity bills. Because of this, the spot priced electricity currently dominating the market worries many. What exactly is it and what does it consist of? Why does the price of electricity vary drastically between different days and singular hours?

Electricity spot price and Nord Pool

Nord Pool is a Nordic electricity exchange, where the hourly changing price of electricity, i.e. the so-called spot price, is determined. The purpose of the exchange is to trade electricity in such a way that electricity producers in different countries sell electricity and electricity sellers in turn buy it. Electricity producers and sellers announce their offer to the exchange that at which price and how much they want to sell and buy electricity the next day. From these offers, Nord Pool creates a chart where the intersection of demand and supply forms the spot price for each hour.

The electricity bill received by the customer includes the hourly price generated by the Nord Pool exchange, the surcharge and a commission fee called the marginal. To summarise, the spot market therefore determines the price of electricity available the next day, which is formed according to the demand and supply of electricity, and it varies every hour. The energy traded on the exchange is produced by, for example, nuclear power, hydropower, coal, oil, and natural gas.

What factors affect the price of electricity?

The formation of the spot price of exchange electricity and its daily demand are affected by many different factors and conditions. The key factors are especially geographical location and weather conditions, such as rains and winds, the amount of water resources and droughts, the price of oil and gas, disruptions in electricity production and transmission, the price of emission allowance and the amount of electricity consumed in general. Particularly the current high price of oil and gas leads to increased demand for electricity, and with it also come the higher electricity prices on the market.

Different times of the day also significantly affect the current price of electricity. Due to low demand, the price of electricity usually decreases towards the evening, and electricity used at night is therefore usually the cheapest. Despite the fact that electricity consumption increases in the mornings and during the day, its price can vary greatly even during daytime. This kind of price fluctuation makes it possible to use appliances that consume a lot of electricity, such as a washing machine or an oven, at a lower cost also at other times than only late in the evening and at night.

Save on electricity bills by following exchange electricity

By using spot-priced exchange electricity, you can regulate how expensive or cheap electricity you use. The benefit of exchange electricity right at its core is its hourly changing price of electricity. When the prices are high, it is important to pay attention to the cheaper hours, because by taking advantage of them you can have a significant impact on your electricity bills. The internet is full of different electricity saving tips, of which we have also compiled our own in this article.

Examining hourly prices is essential not only for users of exchange electricity, but also for owners of fixed price electricity agreements. This is due to the previously mentioned ratio of supply and demand for electricity – if electricity users reduce their electricity consumption, the need for expensive electricity production and import will also decrease at the same time. The availability of electricity affects us all, and in this way, it is possible for everyone to play their part in curbing high electricity prices.

Accordingly, the exchange electricity is market-priced, already tendered, and transparent electricity, thanks to which, in the long term, contracts based on exchange electricity are among the cheapest options. The next day's exchange electricity can be viewed on the current day at around 12:45 CET, which allows you to plan the use of electricity in advance and thus makes it easier to regulate and calculate your own consumption. The overview of your household's consumption found on your own pages will help you understand your own electricity use, and you can check the current prices of hourly exchange electricity here.