Correct price signals: NordREG finds that in the long run price signals should be the driver for all investments in infrastructure, generation capacity and demand flexibility. Correct prices reflect scarcity from the underlying physics and fundamentals in the energy system. Thus, they are important both in terms of ensuring efficient market balance and managing grid congestion as well as ensuring security of supply. Correct and reliable price signals are the efficient way to allocate resources in the energy market including incentives for investments in energy infrastructure. Correct price signals to the end consumer are also essential for demand side flexibility which is key to obtain system security and handle the increasing share of renewable energy production. In volatile markets, efficient and liquid forward markets are important for both generators and end users for hedging their positions. In addition, sufficient and adequate hedging opportunities are also needed by suppliers in order to be able to offer a variety of contracts for consumers.

Active consumers: The purpose of linking the wholesale and retail market is to give correct prices and provide consumers with market-based incentives to provide flexibility (demand response) and contribute to support a cost-efficient integration of renewable energy sources. Correct price signals are essential for consumers to engage in the markets for efficient demand side response. NordREG will facilitate a market design where consumers are encouraged to be active and where new market players can enter and be active on behalf of consumers. Efficient competition in the retail market is crucial for active consumers. For the consumers to be active in choosing suppliers and providing demand response, transparent, relevant, and accessible information is essential. With correct information, consumers can decide or automate the decision to use less electricity at times of high prices, which in turn facilitates the use of renewable energy sources in the system to a larger extent. Smart metering in combination with billing systems to provide consumers with easy access to information allows them to respond to fluctuations in electricity prices, and they are also essential in integrating increasing amounts of small-scale renewable production into the system. The bills should be easily understandable for consumers. The design of information communication technology systems that are ensuring neutrality is important. Another important principle is that the data is the property of the consumer and third-party access can only be given with the authorization of the consumer.

Dynamic framework enabling advanced energy markets and green transition: The changing energy systems and markets in the EU are also visible in the Nordic countries. Decarbonisation goals, electrification, hydrogen, sector coupling etc. will also influence the Nordic region in the coming years and will have to be integrated in the regulatory framework and in the energy system. The costs of the green transition will be considerable and calls for competitive, efficient markets, and systems to achieve the goals. NordREG will actively promote a dynamic regulatory framework that enables the development of advanced and cost-effective energy markets as an essential element in an efficient and cost-effective green transition. The NRAs have an important role in the regulation and to ensure a framework that gives incentives for innovation, new production facilities, and the use of new technology in a cost-efficient way. Electrification in areas such as transportation, heating, and cooling will, in addition to new technology, provide new opportunities and challenges. In this context, NordREG will strive to facilitate an efficient framework for prosumers, batteries, peer-to-peer trade, local energy communities, data collection, and use. Due to the changing energy markets and systems as well as the costs related to the green transition, flexibility needs will increase. Flexibility needs to be handled, to a larger extent, with decentralized tools such as storage, demand response, electric vehicle batteries, and decentralized production. As a general principle, the Distribution system operators (DSOs) should not perform tasks that can be performed by competitive markets.

Unbundling of monopoly activities from activities subject to competition is a prerequisite. Hence, regulation of the role of TSOs and DSOs in the operation and optimization of flexibility tools will be important. Tariff design that reflects the underlying network costs is an important way to facilitate efficient demand response. Grid tariffs should be costreflective by giving signals on efficient utilization and development of the network.