The Energy Regulation and Markets Review - Stikeman Elliott

iii
Contracts for sale of energy
Norway
Physical or financial electricity trading that take place on Nord Pool Spot, Nasdaq
OMX Commodities or other regulated marketplaces follow standardised contracts and
rulebooks applied by the relevant exchange or regulated marketplace in respect of the
product in question.
Bilateral over-the-counter contracts for sale of electricity in the wholesale
market are also to a large extent standardised. Different organisations have contributed
with standardised contracts, including Nordic Association of Electricity Traders
(NAET), European Federation of Energy Traders (EFET) and International Swaps and
Derivatives Association (ISDA). These types of trade usually take place within a master
agreement framework that provides for swift exchange of documentation in respect
of individual trades, as well as risk-mitigating mechanisms such as early termination
and netting in the event of bankruptcy. Such mechanisms are generally recognised by
Norwegian law insofar as commodity derivatives are concerned. The demarcation of
commodity derivatives under Norwegian law follows basically the demarcation applied
under the MiFID. This means that, as a rule, financially settled electricity contracts
may generally be netted in a bankruptcy situation, while the same only holds for
certain physical contracts.
Contracts for sale of electricity to households and similar end-users are generally
standardised by the retail electricity suppliers, while larger contracts concerning electricity
deliveries to industrial end users vary significantly depending on the commercial strength
of and negotiation process between the parties.
iv Market developments
The Norwegian electricity market has since its deregulation, represented by the Energy
Act in 1990, developed to become one of the most liberal electricity markets in the
world, easily accessible to producers, end-users and traders alike.
On the power production side, due to the Norwegian–Swedish electricity certificate
scheme introduced from 1 January 2012, there is a marked expectation for the installation
of significantly more production capacity in the years to come (see Section V.i, infra).
Coupled with expected lower electricity consumption in the industrial sector, as well as
limited transmission capacity between the Nordic market and continental Europe, there is
a growing concern in the market that electricity prices will drop in the long term.
On the regulatory side Norwegian law is closely connected to EU law through the
EEA Agreement. Thus the developments in this sector are on an overall basis expected to
track developments in the EU.
V
RENEWABLE ENERGY AND CONSERVATION
i Development of renewable energy
Since 1 January 2012, Norway has been part of a Norwegian–Swedish electricity
certificate market, which was introduced to increase production of renewable energy.
Until 2020, Norway and Sweden intend to expand their electricity production
based on renewable energy sources by 26.4TWh. This corresponds to the power
consumption of more than half of all Norwegian households.
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