Expected 17 Terawatt-Hour Water Deficit Threatens Northern Power Price Spikes
Key Facts
Mind Energy warned that the Nordic electricity market is entering winter in a weaker-than-usual position, with the hydrological balance deficit expected to reach about 17 terawatt-hours after conditions deteriorated in September. In its October briefing, the company said the combination of lower hydropower reserves, uncertainty in the gas market and the possibility of prolonged periods of weak wind and solar output could lead to sharp price spikes in Europe and the Nordic countries. That means the region’s usual abundance of hydropower may offer less protection if water shortages coincide with lower output from other renewable sources. The company said the risk concerns possible price volatility during winter, not a predetermined price trajectory. In September, hourly prices had already exceeded 700 euros per megawatt-hour in several Nordic areas during periods of limited renewable generation.
Reservoir levels point to a sharp divide within Norway: fill levels in the north reached 90%, above the normal level of 78%, while the four southern price areas combined were at just 56%, compared with a normal level of 81%. Norway’s NO2 price area was the most exposed, with reservoirs only 48% full, 30 percentage points below normal. Mind Energy said this was the area’s lowest level in 30 years. The company did not provide figures for reservoir levels in Sweden and Finland, but said they were also below normal. The water-supply gap is therefore concentrated in southern Norway, while the north has a relative reservoir surplus.
Mind Energy data show the Nordic water deficit stood at about 10 terawatt-hours at the end of August, after being at minus 15 terawatt-hours two months earlier, before conditions deteriorated again in September. At the start of the third quarter, the region’s hydropower stocks stood at about 79 terawatt-hours, around 5 terawatt-hours below their long-term average and 10 terawatt-hours below their level a year earlier. By the end of the quarter, stocks had risen to about 88 terawatt-hours, but remained 13 terawatt-hours below the long-term average and 12 terawatt-hours below the year-earlier level. Fortum attributed the widening storage deficit to lower water flows because of a significant lack of snow in the previous winter. These figures help explain the electricity market’s sensitivity to any further decline in water resources as the winter demand season begins.
Pressure on hydropower coincided with higher gas costs, a fuel that influences European electricity pricing when renewable output falls. Mind Energy said the European day-ahead gas contract and futures on the TTF platform reached their highest levels since the start of 2023 at the end of August. European gas inventories were also at about 70%, compared with 82% during the same period a year earlier, according to the October briefing. The company said the German 2027 electricity contract rose nearly 10% month on month. These indicators add to pressure on Nordic forward prices as the market’s balance depends on the availability of water and gas and on wind and solar output.
Prices showed the impact of these factors combining in August, when Denmark and southern Norway saw prices in the second half of the month reach their highest levels since 2024. Mind Energy attributed this to lower wind output, limited water resources and higher gas and electricity prices on the continent. For the third quarter, the average Nordic system electricity price rose to 74.4 euros per megawatt-hour, from 36.0 euros in the third quarter of 2025, according to Fortum. The average price in Sweden’s SE3 area was 62.0 euros per megawatt-hour, compared with 41.3 euros a year earlier, while SE2 recorded an average of 33.7 euros, up from 16.6 euros. Nordic electricity consumption reached 85 terawatt-hours in the third quarter, up from 84 terawatt-hours in the same period a year earlier.
Winter risks are also reflected in the futures market: Mind Energy said several Nordic price areas recorded record levels for 2027 and 2028 contracts. The company warned that another cold winter could trigger sharp price spikes, with uncertainty remaining high ahead of the season. In late October, the forward price for the Nordic electricity system for the remainder of 2026 was about 116 euros per megawatt-hour, while the 2027 contract stood at about 74 euros, according to Fortum. The price trajectory remains tied to weather developments, water and gas availability, and renewable output, based on the factors cited by the two companies. Mind Energy’s warning therefore focuses on the breadth of winter risks, amid below-normal water reserves and other potential sources of supply volatility.