About the market > Connection between spot and forward market

At the Nord Pool spot market buyers and sellers of physical power meet for a daily auction . A spot price is then determined for every single hour, and the spot price also serve as reference price for the financial market. The prices in the forward market reflects the markets expectations for future spot price in each of the contract periods. When a contract is delivered, the price of the contract is settled against the actual spot price in the contract period.

Pricing of forward products is based on the current spot, expectations of future energy balance and a number of other conditions. Correlation between the spot and the closest contracts are relatively high, but decreases with distance in time. Further, volatility is usually higher for contracts with short time to delivery than for contracts further out.