Dry weather pushing Norway-South towards net-import situation

This winter, snow levels in Norway-South have been significantly below normal levels. We have seen a continued dry period since the end of March, meaning that snow levels were at the lowest levels we have seen the last 25 years by mid-May.

However, the hydro reservoir filling levels currently remain close to normal for the season, but they too are expected to come out lower than normal during the melting period.

Currently the snow/groundwater level is about 10 TWh lower than normal in Norway-South, which means a reduction of around 17% compared to the normal reservoir filling curve after the melting period (provided normalised levels of precipitation and production occur).

Adjusting production levels in accordance with the precipitation and inflow situation (to secure sufficient reservoir levels in order to avoid or reduce the risk of supply squeeze towards next spring) will no doubt become a crucial factor in the coming months. Reduced production will most likely mean that spot prices in the NO2-area come closer to the German spot prices, as we have seen first part of May.

To explore the future possibilities, this article makes reservoir and production calculations for Norway-South, as well as an assessment on the NO2 spot price outlooks for the summer and the Q3-period, based on inflow scenarios for weeks 23-44 2025. These have been produced using 43 years of climatic weather statistics. Powerbalances and net exchanges are included as parts of these calculations.

Hydro production for Norway-South in Q2 and Q3 2025

In order to reduce the risk of a supply squeeze, Norway-South will most likely need to reduce the production level to about 90% of normal levels during the summer and Q3. This will mean a reservoir filling level of about 80% during November, which is 6% lower than normals. A production level of 90% of normal will mean a total net export of about 3.0 TWh (800 MW) from Norway-South in the period, which is significantly lower than last year (11.1 TWh/3000 MW net Export). This will mean NO2 begin to hot levels close to the German spot price. Currently we are expecting NO2-prices somewhere between 65-85 EUR/MWh during the summer/Q3-period.

In a dry scenario (5th percentile) the production has to be reduced to about 80% of normal. Net imports will also likely be required in Norway-South during this period. In a dry scenario such as this NO2-prices will most likely exceed the German spot prices.

Snow/groundwater and hydrological balance end week 22

As mentioned in the introduction, the snow/ground level in Norway-South is currently at its lowest level in the past 25 years. The deficit is about 10 TWh lower than the long-term average.

The hydrological balance is close to the snow/groundwater deficit by around 10 TWh, which means that the water reservoir filling observed in mid-May is close to the long-term average. The chart shows that the 25 year minimum hydrobalance is around -15 TWh.

Inflow scenarios Norway-South until end week 44

Our climatic scenario study of the expected inflow levels until the end of week 44 is shown below in a weekly resolution. The chart shows the weekly average scenario (black dotted line) and 23 other scenarios for the weather years 1979-2021. In addition, you see the statistical high (95th percentile) and the low scenario (5th percentile) as well as the long-term average (2000-2024).

The average scenario is significantly lower than the long-term normals during weeks 23-34 due to the current dry situation.

To get a view on reservoir filling and production levels throughout the autumn and early winter, we need to study the accumulated inflows for weeks 23-44.

We see that expected average is about 10 TWh lower than the long-term normal, which corresponds to the snow/groundwater deficit. The variation band between high and low inflows is about 18 TWh. A simplification of the variation band of +/- 9 TWh means about +/- 15% reservoir filling. 

Reservoir outlooks until week 44 – avoiding supply squeeze situation, imports needed?

Based on the accumulated inflow scenarios and adjusted production profiles (relevant percentages of the long-term normal curve), we have estimated the reservoir curves until the end of week 44.

The production curves are scaled from the long-term normal in order to avoid lower reservoir levels than the 20-year historical minimum in the dry 5th percentile scenario. A 5th percentile level by the end of November presents an obvious risk of a supply squeeze during spring 2026. Look out for an another article covering this in Q3 25.

In the 5th percentile scenario, which ends at the historical minimum filling rate at 60% by week 44, a production level during the summer/autumn at 90% of long-term average is required. Maybe even lower production could be required, meaning that Norway-South might be forced into a net import situation this summer.

Powerbalance outlooks

In the table below, you find the powerbalance numbers from both the inflow and reservoir scenarios. In order to avoid lower reservoir levels than the 25 year minimum, production must be reduced to about 80% of normal in the dry scenario. This means that Norway-South would need to import about 0.5 TWh via interconnectors. Comparatively, Norway-South normally exports about 6.5 TWh in the same period (weeks 23-44) during a normal year.

In the average inflow scenario, and with 90% production, we estimate that a net export level of around 3.0 TWh will be maintained, and that reservoir fill levels would reach 81% by the end of November. Notice that the net export will then be reduced from 3005 MW as an average in 2024 to 806 MW in 2025. By current market conditions we also “fear” that the production will be closer to 100 % in the normal weather scenario, bringing the reservoir filling levels down to 75%.

As a summary of so many scenarios, the reservoir charts by 90% of normal production and the powerbalance table indicates the risk of very low reservoir filling this autumn.

Spot price outlooks for NO2 this summer

The year-on-year spot prices during May 2025 indicate a much stronger price-connection between NO2 and DE. This is caused by the reduction of net exports in NO2 thanks to reduced production and the low hydrological balance. Please note, by net export balance from NO2, we mean for the entire area, not just on border exchange towards Germany separately.

Based on historical prices and exchanges for 2024, and outlooks/market prices for 2025, we have made the following table to show the large differences between this year and last year.

We see that May 2025 is estimated to be delivered with a price-difference of only -1,10 EUR/MWh, while May 2024 was delivered at a price-difference of -25,69 EUR/MWh. We see the much higher net export in 2024 of about 2950 MW throughout the Q3 period, while this year we expect only 800-900 MW as an average.

We believe that the NO2-price will be delivered much closer to the German spot this summer and Q3 than the current market difference indicate. We think that we could easily see NO2-prices reach 70 EUR/MWh on average this summer and Q3, according to the current German market outlook. We only expect this to have a limited impact on the NordPool system price.

Note:

This scenario study of the inflows and reservoir outlooks across Norway-South assesses the potential variation band of reservoir filling towards the winter and the effects on the price-difference between NO2 and DE. The inflow modelling is based on the SMHI HYPE GWh-concept, and the power balance data is based on the database from Energy Quantified.