Fortum's Energy Review: Nordic electricity market in transition

PRESS RELEASE 2 March 2015

Fortum’s second Energy Review, published today, focuses on the Nordic
electricity market, its success so far and the challenges ahead. The Nord Pool
area in the Nordic and Baltic countries is a real example of a functioning,
regional electricity market offering its customers energy at competitive
prices, good security of supply, and one of the world’s lowest energy
production emissions per kilowatt-hour.

“For the success to continue, we need a strong, shared mindset in the Nordic
countries. Transmission connections must be further developed within and
between each Nordic country as well as between the Nordic countries and the
rest of Europe. In addition to the wholesale market, the functionality of the
retail market must also be a focal point, so that better products for
controlling energy consumption and costs can be offered to household
customers”, notes Fortum’s CFO Timo Karttinen, who currently acts also as
President and CEO.

In Fortum’s view, the key issues in the electricity markets are related to
assessing generation adequacy, securing sufficient investments in generation
and transmission, increasing renewable energy, better utilisation of
hydropower, and developing the retail markets.

Generation adequacy must be assessed at a broader, regional level rather than
a national level. Electricity today is abundantly available in the Nordic and
Baltic countries, and thus security of supply must be primarily improved by
strengthening the transmission network. National reserves of electricity
generation should be considered only for exceptional situations of prolonged
disruption to market functionality.

• Investments in carbon-free energy generation are promoted most economically
by developing the emissions trading system. There must be a clear commitment to
reducing carbon dioxide emissions in energy generation. The EU’s emissions
trading system must be made the primary driver of investments in carbon-free,
including renewable, energy.

Hydropower must be utilised better to balance fluctuations in the growing
wind and solar power generation. The advantage of the Nordic and Baltic
electricity market is the diverse generation mix in which flexible, economical
and carbon dioxide-free hydropower plays a significant role. Prerequisites for
hydropower must be secured also in the future. All countries in the region
benefit from this, even though hydropower is concentrated more to some
countries than others.

• Better products and services must be available to consumers. Sizable
investments have been made in the Nordic countries in smart meters and in the
smart grid, but customers are not yet fully benefitting from them. Consumers
will become interested in hourly-metered electricity products when demand
flexibility gives them an immediate economic benefit. This will also require
clearer services, like one electricity bill and one supplier that can serve the
entire spectrum of customer needs.

“Many European countries are facing problems with regard to adequacy of
electricity generation capacity. One solution offered is national capacity
subsidies for traditional electricity generation, so that there would be a
supply of electricity also when wind and solar production are not available. If
the Nordic and Baltic countries are not able to further develop their
electricity markets, we too will encounter the same issue. This would be an
expensive solution for consumers”, says Simon-Erik Ollus, Chief Economist,
Fortum, who presented the review at its publication event.

Fortum Corporation
Corporate Communications

Further information:
Simon-Erik Ollus, Chief Economist, Fortum, tel. +358 40 179 0166
Esa Hyvärinen, Senior Vice President, Corporate Relations, Fortum, tel. +358 40
826 2646

Fortum
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Fortum Energy Review, March 2015 (pdf)