Markets

Fortum is the third-largest power generator and the largest electricity retailer in the Nordic countries. Fortum has district heating generation in Finland and Poland.

Read more in Fortum CEO's Business Review 2023

Market development

After the energy crisis in 2022, the Nordic power market was characterised both by a return to a more normal state and by the realisation that the new normal has changed.

A mild start of the year, strong LNG flows, well-filled gas storages and significant energy saving measures in Europe provided for gradually easing gas prices during 2023. This, in turn, was reflected throughout the European power markets which also saw decreasing prices. In the Nordics, the commissioning of the 1.6 GW Olkiluoto 3 nuclear unit in spring 2023 in Finland and continued strong growth in the onshore wind power capacity strengthened the region’s power supply significantly putting further downward pressure on prices. This supply increase not only compensated for the previous year’s discontinuation of the power imports from Russia, but it was a key factor pushing down futures prices to levels similar to those seen prior to the energy crisis. At the same time, corresponding futures prices in several Continental European markets, although strongly reduced from 2022, remained clearly above the pre-crisis levels.

Even though the annual baseload prices, both in terms of realised spot and futures markets, have returned to levels similar to before the crisis, the dynamics of the Nordic power market have changed. Strong growth in wind power, especially in the northern price areas, and the new interconnectors in southern Norway have contributed to a growing price gap between lower-priced northern and higher-priced southern parts of the region. Continued strengthening of transmission capacity remains crucial in order to enable the Nordic potential for renewable energy to be further developed for the benefit of the Nordic economy as well as for the European energy security and climate goals.

Another equally significant change has been the increase in price volatility with the most extreme variations seen in the Finnish and Baltic price areas. With the share of wind production being more than a third of the Finnish power supply on a windy day and export possibilities to neighbouring areas remaining limited, the Finnish spot market saw the most negative price hours of all the EU countries last year. On the other hand, a low wind period in August, coinciding with maintenance outages on the Swedish-Finnish interconnector and two nuclear units, sent the highest hourly spot prices in Finland to above 500 EUR/MWh while prices in Sweden and Continental Europe remained close to annual average levels. The realised consumption and regulating prices suggest that the market is still learning how to forecast and utilise the already increased demand flexibility.

From deep turmoil towards new normal


The energy industry operates at the foundation of all functioning and prospering modern societies. However, during this decade, our operating environment has been under constant turmoil.

First, we were hit by a negative demand shock from the global Covid-19 pandemic significantly affecting economic activity across various sectors. Next, the backdrop started changing and gradually turned into a supply shock towards the latter half of 2021, dramatically exacerbated by the Russian invasion of Ukraine in early 2022, leading to concerns around both energy availability and affordability.

While Europe survived the flux of disruptions fairly well, having a relatively healthy position in terms of its broad energy security, the implications of these events are still being felt. As with all major transformations, low visibility to the full implications will most likely continue to deeply shape our operating environment during the years to come.

In the short term, geopolitical tensions and uncertainty clearly weigh down on global economic potential. This coincides with the global economy just starting to recover from the recent period of extreme inflation, consequent monetary tightening and high interest rates which has manifested itself also in terms of clearly pushing up the costs for the energy transition. Furthermore, it has potentially aggravated the gap between affordable energy prices for consumption and needed profitability levels for new entry.

One of the key implications of the Russian war in Ukraine is a re-appreciation of all corners of the energy triangle: sustainability, security of supply and affordability. It is fair to say that in the past, much of policy focus has been put on pushing forward the sustainability and decarbonisation agenda including policies and actions to mitigate climate change. In hindsight, it is equally fair to state that the two other corners of the energy triangle have been somewhat neglected.

In the past, pursuing targets for the entire triangle was considered somewhat incompatible, while today, and going forward, the energy trilemma is in broad terms seen to be reinforcing each other. If, in the past, decarbonisation of energy usage across various sectors was driven by climate change mitigation concerns, today it is seen as a way to ensure long-term secure, resilient and affordable energy supply which is not reliant on fossil energy imports. Adequate policy emphasis and solutions need to be decisively put forward to ensure electricity system resilience and security of supply, and for shielding the electricity market from excessive volatility and unpredictability given its growing importance in the total energy usage of our societies.

The Nordics as a global clean energy hub

The Nordic market exhibits numerous strengths instrumental to facilitating global and European decarbonisation efforts at scale and we firmly believe the Nordic region is able to play a key role in the upcoming energy transition.  We have the largest hydro power resources in Europe, a well-functioning stable nuclear power fleet with societal support for new investments with a ready solution for disposing of nuclear waste and massive renewables potential, especially for wind energy, far exceeding plausible future domestic needs for conventional electricity demand. This is a formula delivering the most competitive electricity prices in Europe today, having the potential to attract industries needing clean, affordable and predictable energy for decarbonisation. In addition, the Nordic region has a developing energy infrastructure and energy policy landscape aimed at enabling carbon neutrality. The Nordic region is ideally positioned to connect abundant clean energy resources with the structurally clean energy deficient markets on the Continent, thereby obtaining the role of a major energy hub – a decarbonised, affordable and European contribution to solving the energy trilemma. 

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