People have needs but these needs are based on a hierarchical order. What this means is that some needs are way more important than others. Traditionally, food, clothing, and shelter are the highest in this order.
Besides this being a practical hierarchy of needs, this is what Maslow – who came up with Maslow’s Hierarchy of Needs thinks. You can click here for more information on this.
However, electricity is also high on this list in today’s society. This is considering how many basic amenities run on electricity. For example, most water and indoor heating systems are electricity-powered. It is for reasons such as this that the constant changes in electricity prices bother people.
If this is something that has crossed your mind, you should know that you are not the only one who has thought along that line. Furthermore, it is good to know that there are explanations for why electricity prices are rarely the same throughout the day and seasons. You should read on to discover the factors responsible for the always-changing prices, especially in Norway.
Factors that Determine How Much Electricity Costs in Norway
There is not just one thing responsible for changes in electricity tariffs. Some of them are more frequent than others, which explains why these prices do not only change on a seasonal but daily basis. On the whole, some of the several factors responsible for the changes are disclosed below:
Demand & Supply
Electricity is a commodity just as groceries and several other items are. As a result, several rules that apply to general commodities also apply to it. One such is demand and supply and below is a practical example of how it applies.
Imagine that there is one seller with 50,000 goods to sell. There are also buyers but the total amount of products needed by the buyers is no more than 20,000 goods. In other words, supply exceeds the demand. But what does this mean?
It means that the seller is at a disadvantage. This is because there are more goods to be sold than people available to buy them. On the other hand, the buyers are at an advantage in such a situation. This is especially true if the market is a competitive one, which further reduces the chances of the seller making the required sale.
As a result, the seller is more likely to do the bidding of the buyer. That includes lowering the price of goods to entice buyers.
On the flip side, you should also imagine a seller with 50,000 goods available. However, prospective customers need way more than the available goods. They need 70,000 goods. This suggests that demand for these goods exceeds supply.
This situation usually puts sellers in a vantage position. This is especially true if there are no competitive threats or if demand exceeds supply regardless. In such cases, prices of the available goods can go up, allowing sellers to make more money off available goods.
Both narratives play out in the power sector. You should even know that both narratives play out every day. This is considering how demand exceeds supply and supply exceeds demand at certain periods daily.
This largely explains why the tariff is high at certain periods, low at certain periods, and fair at certain periods. So, this begs the question of when electricity tariff is usually high and low:
Peak Period
Peak periods simply imply those periods when power demand is usually high. It could be so high that it exceeds supply. There are usually two peak periods having observed the power consumption patterns of Norwegians.
The first is the period between when people wake up in the morning, and right before they set out to work, school, or outdoors, as the case may be. Usually, that is the period between 7:00 am and 10:00 am. You have so many people using water-heating appliances and so many other power-consuming systems at this time of the day.
The second peak period is when people get back from work and right until they head to bed. Usually, that is the period between 5:00 pm and 8:00 pm. Many people end up using appliances at these periods of the day.
Cheap Periods
There are two cheap periods, as you may have guessed. The first is while most people are sleeping at night. This is around 9:00 pm and 6:00 am. The second is when people head for work, school, or outdoors, as the case may be. This is around 11:00 am and 4:00 pm.
Understandably, some people are bent on reducing their electricity utility bills. Well, there are two ways to go about this based on the demand and supply rule. The first is to take advantage of cheap periods.
This is especially when it comes to using systems that suck up a lot of power. For example, it is better to charge EVs (Electric Vehicles) overnight. Of course, this applies to those who have EVs and an EV charging port at home.
The second way to go about this is by reducing power consumption during peak periods. You can visit bestestrøm.no/dagens-strømpris for more information on this. By and large, the whole point is to only use whatever is necessary during these periods.
Seasonal Demands
For what it is worth, this point further explains the role of demand and supply in determining electricity prices. However, it is worth being a standalone point for reasons you will discover as you read on.
Power consumption is largely determined by the period of the day as seen early on. However, this is not the only thing that determines it. Seasonal demand is also a determining factor. The best way to explain this is by comparing electricity needs during winter versus summer.
First, you need to come to terms with what takes up the larger part of the consumed power, which is heating. This is both indoor and water heating needs.
Well, there is more need for indoor and water heating during winter. On the other hand, the need for water and indoor heating is a lot less during the summer. Seasonal demands are responsible for this.
In other words, people consume less power by heating their indoor space and water during the summer. As a result of this demand dynamic, electricity prices are usually lower during the summer. On the other hand, the prices are usually higher during the winter season because of surging demand for indoor and water heating during this season.
In the spirit of reducing power consumption during winter, there are proven tips. One such is investing in energy-efficient appliances. Investing in energy-efficient water and indoor heating systems is more of a priority during this period. This is apparently because of the amount of power that is usually channeled into heating water and indoor spaces during winter.
Furthermore, home insulation is very important for this reason. This is because poorly insulated homes require more heating. The reason is that a lot of generated warm air escapes due to poor insulation. So, ensuring that your building is properly insulated would be addressing this costly loophole.
Power Generation
How much power is generated versus how much power is needed by consumers determines electricity prices to a large extent. This has been especially discussed in the first point. However, it cannot be overemphasized.
Speaking of how power is generated in this country, this is mostly down to the activities of hydropower plants. Close to 90 percent of what is generated in the country comes from hydropower plants. Furthermore, there are well over 1700 of such plants in the country and they all play their parts in meeting electricity needs in the country.
Well, natural water supply is integral to the operations of these plants. In other words, a shortage of natural water supply implies that less power will be generated. On the other hand, an excess supply of natural water suggests that more power will be generated. Melting snow, rainfall, and water supplies from connected rivers and valleys are crucial for this reason.
For the record, this is one of the explanations for why prices can be high in summer despite a decline in electricity consumption. This is considering how there is less water available in hydropower plant reservoirs.
By the way, hydropower plants are not the only power generation source in Norway. A little bit does come from the wind. As a result, the amount of wind available to power wind power plants slightly determines how much electricity costs in Norway.
International Market
The Norway power sector does not operate in isolation. It is connected to a large electricity exchange program, which is known as the Nord Pool Electricity Exchange. Electricity is traded by 19 countries in Europe through this exchange. The state of things in this mini-continental market also determines electricity prices.
Wrap Up
Four factors that determine how much power costs in Norway have been emphatically discussed above. The flexibility of some of these factors explains why price changes happen within a day and not just seasonally. Understanding these factors can help in planning when to use electricity for cost-saving reasons. So, bear this in mind going forward.