The Danish electricity market is a part of the Nordic market model. In the wholesale market most of the electricity trading takes place on the common Nordic power exchange, Nord Pool, which is owned by the transmission system operators in the Nordic countries.
The power exchange has two market places for electricity, namely Elspot and Elbas. Trading at Elspot is based on the auction principle, which means that once a day Nord Pool will find a market price for the various price areas by matching purchase and sales bids. In the Elbas market, players can trade themselves into balance when Elspot is closed.
Nord Pool has divided the Nordic market area into bidding areas, with Denmark being divided into two areas separated by the Great Belt. One of the consequences of this is that all physical trading between areas must take place via Nord Pool. This is due to the fact that the power change is tasked with optimising the flow between several bidding areas in the Nordic market, taking capacity restrictions in the transmission grid into consideration. In the spot market, Nord Pool uses implicit auction, which means that transfer capacity is allocated while electricity is traded. When there is a lack of transfer capacity (congestion), the Nordic area is divided into various price areas (market splitting), which may consist of one or several bidding areas.
Trading in the Nord Pool spot market follows a fixed time schedule that is repeated every day. The main features are as follows:
- Before 10:00, the Nordic TSOs announces how much capacity is available for the spot market for the next day.
- Before 12:00, the electricity suppliers and producers send purchase and sales bids for the next day to Nord Pool.
- Before 13:00, Nord Pool matches all purchase and sales bids, giving due consideration to the restrictions in the power system, and sends BRP notifications to the individual electricity suppliers and producers together with information about traded amounts and prices for the next 24 hours.
Nord Pool's revenue has increased steadily over the years, and in 2008, around 300 TWh of electricity were sold in the spot market. This corresponds to 70% of total consumption in the Nordic countries.