Leppikoski power plant in Finland

Market development

Nordic countries

According to preliminary statistics, electricity consumption in the Nordic countries was 114 (117) terawatt-hours (TWh) during January-March 2017. The lower consumption was caused by warmer weather in the first quarter compared to the first quarter of 2016.
 
At the beginning of 2017, the Nordic water reservoirs were at 75 TWh, which is 8 TWh below the long-term average and 23 TWh lower than a year earlier. By the end of March, reservoirs were 3 TWh below the long-term average and 10 TWh lower than a year earlier. The deficit has decreased during the beginning of the year, due to higher than long-term average precipitation and inflow as well as lower consumption and high nuclear availability.
 
In January-March 2017, the average system spot price in Nord Pool was EUR 31.1 (24.0) per MWh. The main drivers for the price increase were the clearly higher marginal cost of coal condense than a year earlier and hydro reservoirs below the long-term average. The average area price in Finland was EUR 32.9 (30.4) per MWh and in Sweden SE3 (Stockholm) EUR 31.8 (24.1) per MWh.
In Germany, the average spot price in January-March 2017 was EUR 41.3 (25.2) per MWh. The spot price increased due to lower nuclear generation, low hydro reservoirs, increased fuel prices and cold conditions in the continent during January.
The market price of CO2 emission allowances (EUA) was EUR 6.5 per tonne at the beginning of the year and EUR 4.7 per tonne at the end of March 2017.
 

Russia

Fortum operates both in the Tyumen and Khanty-Mansiysk area of Western Siberia, where industrial production is dominated by the oil and gas industries, and in the Chelyabinsk area of the Urals, which is dominated by the metal industry.
 
According to preliminary statistics, Russian electricity consumption was 283 (279) TWh in January-March 2017. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 217 (212) TWh.
 
The average electricity spot price, excluding capacity price, increased by 2.9% to RUB 1,180 (1,147) per MWh in the First price zone.
 
More detailed information about the market fundamentals is included in the tables at the end of the report (page 54-55).
 

European business environment and carbon market

Revision of the EU ETS at the final stage
 
The last decisive stages of the revision process of the EU Emissions Trading (ETS) Directive for the period 2021-2030 are ongoing. The European Parliament adopted its position and the Council approved a General Approach in February. The trilogue negotiations between the Commission, Parliament and the Council started 4 April 2017 and are expected to be finalised during the summer. The directive could be formally approved during this year.
 
Strengthening of the Market Stability Reserve (MSR), including a temporary doubling of the MSR intake rate is the key issue from the market balance and pricing perspective. More contentious issues between the Parliament and Council are cancellation of allowances (amount and timing), flexible auction share and the indirect cost compensation.
 
Circular economy legislation impacting energy recovery of waste
 
In January 2017, the Commission released a progress report on its Circular Economy (CE) package from 2015. In addition, the Commission issued guidance to member states on converting waste to energy.
 
The trilogue negotiations on the CE package between the Commission, the Parliament and the Council will officially start after the Council has adopted its final position and the goal is to finalize the legislative package during the summer. The package includes amendments of waste, landfill, packaging waste and three other waste-related directives. The debated key issues are municipal waste and the reuse and recycling targets.
 
The Waste-to-Energy Communication includes non-legislative guidance on energy recovery of waste in the context of a circular economy. Energy recovery of waste is seen as a way to stop landfilling and as a needed treatment method for the rejects from recycling processes.
 
Text from Fortum January-March 2017 Interim Report
 

4/27/2017