“Big and small market participants – generators, distributors, and traders – can submit their bids and offers for electricity on our platform with clarity and confidence. Based on supply and demand, and transmission capacity – the amount of power that can be moved from one area to another – we determine the market clearing price, which is the price at which electricity is traded.” 

All Nord Pool members can engage in the bidding process as market participants. To qualify, companies must maintain a balancing agreement with the relevant Transmission System Operator (TSO) in the bidding zone. 

Trading activities are monitored and overseen to ensure fair play and compliance through a dedicated market surveillance function. This surveillance aligns with the Regulation for Wholesale Energy Market Integrity and Transparency (REMIT), which mandates power exchanges to detect and report suspicious activities. 

Nord Pool’s two roles 

To efficiently manage and facilitate electricity trading and the allocation of cross-border electricity capacity within the European market, Nord Pool has two roles.  

“One is as a power exchange (PX), operating the market as a trading platform, engaging with customers to process their orders, settle trades, manage collaterals and act as their clearinghouse. The other is as a Nominated Electricity Market Operator (NEMO), playing a significant role within the European framework, tasked with setting prices”, Kristiane explains. 

Nord Pool as a Power Exchange 

“We facilitate fair and equal access to the electricity market. We provide robust trading platforms and API solutions where market participants can place bids and receive real-time information about accepted trades,” she states.  

As a Power Exchange, Nord Pool provides a centralized marketplace for electricity trading, promoting competition and price transparency.  

“We manage two key markets: the day-ahead (DA) and intraday (ID) markets. The day-ahead market involves trading electricity one day before the actual delivery, allowing participants across Europe to plan and balance their supply and demand efficiently,” says Kristiane.  

The intraday market, on the other hand, allows for trading closer to the delivery time, providing flexibility to adjust for any last-minute changes in supply or demand. 

Market participants who have placed their bids and offers in the Day-Ahead market can utilize both continuous and Intraday Auctions to further trade themselves into balance. As the delivery period approaches, the responsibility for final balancing lies with the Transmission System Operators (TSOs). 

Under the SIDC (Singe Intraday Coupling) framework, both intraday continuous (IDC) and 3 Intraday Auctions (IDAs) now exist.  

“After the day-ahead price is fixed and settled, we open the Intraday Auction at 3 pm for the same 24-hour period, now with a 15-minute resolution for areas that supports it. We repeat this process at 10 pm for the next day’s 24-hour delivery period and again at 10 am, but only for the remaining 12 hours of the same day, from noon until midnight,” Kristiane elaborates. 

Link to 15 minutes article 

Nord Pool also acts as the central clearing counterpart for all trades, handling approximately €XX million in transactions daily, ensuring a seamless process from trade initiation to invoice settlement. All clearing is done in-house, allowing members to have access to the full lifecycle of a transaction, from trade to invoice. 

Transparency is a core value 

“We publish the daily electricity price at 12:45 CET, allowing market participants to make informed decisions,” Kristiane highlights.  

“This allows them to optimise their portfolios, manage risks and respond to changes in supply and demand.”  

This commitment to transparency fosters reliability, a well-informed market, and collaboration and allows even householders to know by 1 pm when it is most economical to use their electricity.  

“It’s fascinating to see consumers using this flexibility to their advantage, like charging their electric vehicles when prices are lowest,” she notes. 

At 2 pm, Nord Pool issues invoices for the day’s trades, and by the next morning, all buyers are required to make their payments to the exchange.  

“We receive the funds early the next day and complete the payouts within two banking days, ensuring that all trades are settled promptly. We do require collateral for the two-day settlement period, which extends slightly over weekends, but it is still a brief timeframe,” she elaborates. 

The intraday market operates non-stop, 365 days a year, yet follows the same settlement period. Nord Pool processes intraday settlements at 2 pm, combining them with the day-ahead settlements for a streamlined process. 

Nord Pool as a Nominated Electricity Market Operator (NEMO) 

In its role as a NEMO, Nord Pool collaborates with other NEMOs to develop and operate the physical power market. This responsibility involves managing the algorithm that calculates prices, a task they share as part of the regulatory requirements. 

“There are eight of us, and we take turns running this algorithm and overseeing the daily operations. We have now extended this collaborative approach to Intraday auctions, and we handle similar responsibilities for the continuous market,” the expert explains.  

“We collaborate by going into price coupling of regions where we all bring the liquidity we receive from our members as a power exchange. Despite the rotation, we maintain a consistent setup and achieve the same outcomes.” 

The algorithm Euphemia is designed to find the best solution for optimising social welfare – to optimise the use of all available resources, including supply, demand, and transmission capacity. 

The auction process 

The auction process is a daily ritual that sets the stage for the next day’s energy distribution. Kristiane sheds light on the intricate procedure that ensures the smooth operation of the power market. 

“The price setting process starts in the morning of every day,” she begins, “when all the Transmission System Operators (TSOs) submit their available transmission capacities before 10:00 to the relevant Nominated Electricity Market Operator (NEMO).” 

Europe’s electricity market is divided into bidding zones, such as Norway’s five and Sweden’s four, determined by the TSOs. These zones are interconnected by cables that allow for the import and export of electricity. 

“Transmission capacity,” she clarifies, “refers to the capacity to transport electricity between these bidding zones.” 

This information is crucial for market participants, both suppliers and consumers, as it indicates the capacity available for the following day. Based on this, more extreme weather and other price drivers, they submit their bids for production or consumption for each hour of the next day (24 hrs). 

Once all capacities and orders are received, they are aggregated and sent to the Price Matching Broker (PMB). The PMB is the system that facilitates the price coupling of regions, preparing the data for the next crucial step in the process. 

Price publication 

“All the NEMOs aggregate their orders,” Kristiane explains.  

“Then we gather the liquidity in the PMB cloud. Euphemia, the algorithm owned collectively by the NEMOs, then takes over.” 

Euphemia arranges all the orders from the lowest marginal cost upwards, creating supply and demand curves. The intersection of these curves defines the price and volume for a specific hour of the day. (link to article 1/Kristiane) 

After Euphemia calculates the results, two checks are performed. The power exchanges conduct a preliminary check, ensuring that the results can be allocated back to all the participants who placed their bids and the TSOs ensure that the results are within the physical grid’s limitations. 

“The preliminary results are published at 12:45, but they are not confirmed until the TSOs send in their final approval a few minutes later. And then, when this process is done,” Kristiane concludes, “the participants can receive their trades and the TSOs receive the flow and the schedule for the physical power market the next day.  

This meticulous process, governed by transparency and efficiency, is what enables Nord Pool to maintain its position as a pioneer in the power exchange market, providing a reliable platform for the trade and distribution of electricity across Europe.