Liquidity of the Northern European Power Markets in Light of the Current Price Volatility

Abstract

The Northern European power markets have seen decreasing liquidity in recent years. This has made it challenging for power consumers to source electricity at competitive and stable prices in times where power markets are facing extreme volatility and high prices.

This situation calls for flexibility to expand the available electricity sources. This can be done by utilizing certain financial instruments, such as Financial Transmission Rights (FTRs) which can reduce power price risks between two different price zones. This would facilitate more collaborative and resource sharing Nordic and European power markets with increasing competition, as sourcing and buying of electricity is extended beyond local power market.