Time Regularities in the Nordic Power Market: Potentials for Profitable Investments and Trading Strategies?

Electricity is a nonstorable commodity. Consequently, electricity prices will follow fairly regular fluctuations in demand, stemming from time dependent variations in economic activity and weather conditions. However, it is possible to store electricity as a different energy carrier (e.g., hot water) and both consumers and producers have some leeway for changing behavior in order to take advantage of price regularities. Thus, the price regularities should be within arbitrage limits, and one would expect price regularities to be reduced over time as a result of investments that increase flexibility in consumption as well as production. In this article, hourly, daily, and weekly prices and price changes at the Nordic power exchange (Nord Pool) are analyzed over the period January 1995-December 2006. The tentative conclusion from the statistical analysis is that the price regularities may offer potentials for profitable investments in flexibility as well as profitable trading strategies.