The report Evalution of Nordic Electricity Retail Markets analyses the functioning of the retail electricity markets in the five Nordic countries and Åland by looking at regulatory frameworks, competition, and customer satisfaction. The aim has been to find commonalities and to allow countries to learn from each other. It also analyses the reactions of market participants to the price shock caused by the Ukraine war to see what can be learned from the crisis to improve retail markets.

On 12 April, Nordic Energy Research launched the report at a webinar, where participants had the opportunity to gain further insights into the findings.

Christopher Markhus Poots, Senior Economist, Oslo Economics, presented the results and recommendations, which were then commented on by Per Nässén, Analyst, the Swedish Energy Markets Inspectorate (Ei), Thomas Iversen, Senior Legal Adviser, the Norwegian Consumer Council, and Henrik Boesgaard Sørensen, Senior Adviser, Green Power Denmark.

Did you miss the report launch, or would like to see it again? Watch a recording of the event here.

Similar structure but different approaches

The Nordic electricity retail markets, apart from Iceland, have similar structures following liberalisation in the 1990s, separating the grid from competitive activities like production and trading. End-users can choose their electricity suppliers, with the local distribution system operator (DSO) adding grid fees and taxes to the bills for the distribution of electricity. Retailers use Nord Pool Spot for wholesale trading and Nasdaq or bilateral contacts for financial contracts.

In recent years, the electricity markets have been under pressure from a combination of factors, with the predominant one being the energy price crisis after the Russian attack on Ukraine. But low reservoir levels and a recovery of demand after Covid played a role as well. To make the market more resilient to price shocks and to facilitate the green transition in the long run, an agreement on the Electricity Markets Design Review was reached in the European Union in December 2023. The agreement is now set to be implemented in the Nordic countries and could have a strong impact on market design in the years to come by facilitating, for example, state support for investment in new production and giving customers increased rights.

Well-functioning markets but lower customer satisfaction and trust

The study finds that the Nordic electricity retail markets are functioning well over all and that there is a sufficiently high level of competition, except for certain regions like Åland or more isolated areas within a country. However, customer satisfaction and trust in the retail electricity market are relatively low, pointing to a need for improvement.

More specifically, retail companies are challenged by liquidity issues post-2022 energy crisis, impacting retailers’ ability to offer fixed-price agreements. Retailers now rely on bilateral agreements due to market instability, which leads to reduced price transparency and information asymmetry. Regulations on notification periods, for example, to protect consumers, affect contract types that can be offered, impacting market dynamics.

Challenges for end consumers arise from complex contracts, limited information, and a tendency not to engage with the markets, leading to a general lack of understanding. Small and medium-sized enterprises (SME) may have better awareness but still face difficulties finding the best offers for them. Overall, there’s a growing consumer awareness post-crisis since the high prices increased consumers motivation to understand their electricity bill.

Report recommendations

The report identifies a need to support the ability of retailers to compete in a fair way and to support customers in making informed decisions. To do this, the following reforms are recommended:

  • Enforcement of Regulations and Sanctioning: Strengthening enforcement of existing regulations and imposing adequate sanctions on retailers to encourage them to operate within legal boundaries and to discourage unfair practices. National regulatory authorities or industry associations could assist their retailers by providing them with clear interpretations of the regulations and model contracts so that there are fewer grey areas.
  • Enhancing Information Given to Customers: Stricter requirements for suppliers to inform customers about contract features and clearer electricity bills to aid consumer understanding. The information could also be in the form of a public list of retailers receiving a lot of justified customer complaints.
  • Further Development of Price Comparison Tools: Continual improvement and maintenance of price comparison tools to ensure reliability and prevent deceptive offers. For example, to appear at the top of the list, the minimum period of validity of a good contract could be one year before different conditions apply.
  • Improved Customer Protection for SMEs: Exploring options to enhance customer rights for SMEs to address information asymmetry issues they face, possibly through rights to withdraw from a contract like those for consumers.
  • Introduction of Customer Awareness Campaigns: Promoting energy conservation through effective campaigns targeting both households and SMEs, which have shown success in Denmark, Finland, and Sweden.

An evaluation that can inspire change

Andrea Stengel, Senior Adviser at Nordic Energy Research.

“It is evident from the analysis that while the Nordic nations overall have relatively similar retail market challenges, they have found different ways to handle them. This evaluation is a direct call to cooperate and take inspiration from successful measures in neighbouring countries,” says Andrea Stengel, Senior Adviser at Nordic Energy Research and responsible for the Nordic Electricity Markets Group, which commissioned the report.