Eightfold household electricity price on the short-term market: A sign of a bigger problem?
Here's the translation:
Eightfold household electricity price on the short-term market: A sign of a bigger problem?
Today, 8. July 2026, the price on Elma's short-term market for the next day (9. July) rose to more than eight times the general household price, and was also many times higher than prices on comparable markets in Europe, even in the middle of summer, at a time when there should generally be plenty of energy in the system.
People are probably asking themselves what happened and what this means.
Why a small market behaves differently
In a small electricity system like Iceland's, it's unrealistic to expect the market to solve everything on its own. A market works best when it has sufficient depth, sufficient competition, and sufficient flexibility. By depth, I simply mean this: How many independent parties are actually selling electricity at any given time. A market with one or two sellers behaves very differently from a market with many, in the same way that a small marketplace with a single kiosk works differently from a large market with many stalls. If that one kiosk runs out or drops out, there's no one else to turn to, and the price can rise quickly.
A concentrated system with little slack
We need to face the fact that the Icelandic electricity market is small and concentrated. Landsvirkjun is by far the largest producer, and the reservoirs are effectively the battery of the Icelandic electricity system. This matters because almost all of the system's flexibility to handle disruption, such as a plant failure or a sudden increase in demand, lies with this one company. There's no second or third major producer that can step in and fill the gap, so when conditions change, even slightly, the whole system feels it immediately.
From long-term contracts to market transactions
In the past, electricity trading was more often organized through bilateral contracts, made in advance, with prices fixed ahead of time regardless of what happened on any given day. Today, an increasingly large share of trading instead takes place on the market, where the price is set on the spot, based on who is actually buying and selling at that moment. This has both advantages and drawbacks.
What happened: A transformer failed
If only a few producers sell into the market, while many more parties buy from it, the market can become shallow, in the way described above, and vulnerable when something goes wrong. What happened today is that transformer 3 at Landsvirkjuns Burfell failed. The price increase was not a sign that Iceland lacks energy. It was a sign that too little of that energy is actually offered for sale on the market that determines the price, so that a small disruption had a major impact.
Why the market needs to be more open and transparent
That's why it matters that as much electricity trading as possible takes place transparently, through the market. For the market to function properly, it needs depth, activity, and real competition on the production side — more sellers who are actually present, not just more buyers relying on the market.
In particular, a case can be made that all energy from publicly owned companies that goes into the general distribution grid should go through the market, rather than being handled in other ways. If this energy flowed through the same open market as everything else, there would simply be more sellers present on days like today, which would strengthen price formation, increase competition, and help build a deeper and more active electricity market — a market less likely to swing eightfold on an ordinary summer day.
In closing
This isn't about criticizing the market or any particular party. It's about making better use of Iceland's energy system and energy resources, and building solutions that suit Iceland.