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Understanding Spot Pricing

The criterion for determining spot price is the time of the day when consumption happens. Supply and demand in the market influence the spot price.The spot price is the rate that retailers use to purchase electricity from the wholesale market. The prices can be higher during winter and at dinner or breakfast time during weekdays.

In many markets, the most common forms of electricity supply are the fixed and variable rate. With the fixed price consumers, pay a flat rate all through the billing while in the variable price the prices fluctuate depending on the cost of electricity.

The spot price (spotpris strøm) changes on a half-hour basis which makes it difficult to estimate what your average electricity bill is at the end of the month. This fluctuation in spot prices has both advantages and disadvantages. When electricity spot prices are low, you experience considerable energy savings but when they are high – like during winter – the spot prices rise unlike in a fixed price.

With the fixed price, the customer is charged the same rate in spite of the current electricity status. The customer benefits when prices are high but losses out on savings when prices come down.

If you are thinking of signing a spot price contract then you need to look at:

  • How the variation in spot prices will affect your household or office electricity budget. If it will budgeting will be harder with a spot price then it would be advisable you go with a fixed price.
  • Your ability to switch to cheaper energy resources when spot prices are high. This can include the use of solar panels, wood fuel, or gas.
  • Using power intensive tools when spot prices are low. One advantage of the spot price is that you can use energy-intensive equipment when prices are at their lowest and switch off some equipment when they are high.

 

Before you get into a spot price plan, use an app to monitor your electricity usage per month. This can be done when you are still using a fixed price or variable price option. Once you know your monthly usage, you can calculate how much you would have spent had it been a spot price contract. If there are considerable savings, then you can move to the plan.

However, you will need to know whether the service provider imposes a fine for any changes in the contract. Some providers have fixed-term contracts that are costly to change.

Spot prices are relatively new when compared to the fixed price (fastpris strøm) and variable price. Consumers are still in the dark concerning the pricing model, and service providers need to take active steps in consumer education.

 

Final thoughts

While spot price gives you the right electricity bill that is based on market rates, it carries a significant risk when electricity prices are at their highest. It can be hard to renegotiate your current rate due to service provider restrictions. You may also incur higher bills when a power plant falls down or when water levels are not sufficient when using hydro electricity.