Leppikoski power plant in Finland

Market development

Nordic countries

According to preliminary statistics, electricity consumption in the Nordic countries was 88 (86) terawatt-hours (TWh) during the second quarter of 2017. The higher consumption was mainly caused by colder weather compared to the second quarter of 2016. In January-June 2017, electricity consumption was 202 (203) TWh.

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 June, reservoirs were 3 TWh below the long-term average and 2 TWh lower than a year earlier. The reservoir balance turned from a clear deficit to close to the long-term average during the first half of the year, due to the higher than long-term average precipitation in Norway.

In the second quarter of 2017, the average system spot price in Nord Pool was EUR 27.4 (23.9) per MWh. The main driver for the price increase was the clearly higher marginal cost of coal condense than a year earlier, which contributed to strong continental prices, increasing the export from the Nordics. Colder weather and the delayed spring flooding also contributed to the increase. The average area price in Finland was EUR 30.9 (30.2) per MWh and in Sweden SE3 (Stockholm) EUR 28.5 (26.5) per MWh.

In January-June 2017, the average system spot price in Nord Pool was EUR 29.3 (24.0) per MWh, the average area price in Finland was EUR 32.0 (30.3) per MWh and in Sweden SE3 (Stockholm) EUR 30.2 (25.3) per MWh.

In Germany, the average spot price in the second quarter of 2017 was EUR 29.8 (24.8) per MWh. In January-June 2017, the average spot price was EUR 35.5 (25.0) per MWh.

The market price of CO2 emission allowances (EUA) was EUR 6.5 per tonne at the beginning of the year and EUR 5.0 per tonne at the end of June 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 238 (230) TWh during the second quarter of 2017. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 184 (176) TWh. In January-June 2017, Russian electricity consumption was 522 (510) TWh and the corresponding figure on Fortum's operating area in the First price zone was 402 (388) TWh. 

In the second quarter of 2017, the average electricity spot price, excluding capacity price, decreased by 1.6% to RUB 1,148 (1,166) per MWh in the First price zone. In January-June 2017, the average electricity spot price, excluding capacity price, increased by 0.6% to RUB 1,164 (1,157) per MWh in the First price zone.

European business environment and carbon market

Swedish nuclear and hydro taxes adopted
In May 2017, the Swedish parliament adopted the proposed changes of nuclear and hydropower taxation in accordance with the energy agreement from June 2016. The tax on installed effect in nuclear reactors will be reduced by 90%, starting from 1 July 2017, from SEK 14,770/MW/month to SEK 1,500/MW/month, and abolished on 1 January 2018. The hydro real-estate tax will be reduced from 2.8% to 0.5% in four steps until 2020.

Finnish waste plan published
In May 2017, the National Waste Plan was published for consultation. The main objective is to increase waste recycling. The target rate for municipal solid waste recycling is set to 55% by 2023. According to the plan, the current waste-to-energy capacity is sufficient for municipal solid waste, but for other waste requiring thermal treatment additional capacity of at least one waste-to-energy plant is needed. More capacity is also needed e.g. for pretreatment of waste and biogasification. The plan also covers taxation of waste incineration and inclusion of waste incineration into the EU emissions trading system.

Finnish Parliament’s statement on the national climate and energy strategy
In May 2017, the Parliament gave its statement on the government’s proposal (November 2016) for the national climate and energy strategy for 2030. The Parliament requires, among others, that the government renews the support schemes for electricity and heat from renewable energy sources with the objective of having cost-efficient and truly technology-neutral schemes. The Parliament also highlights the preparatory measures for the electrification of transport. The government is requested to strengthen regional cooperation and coordination in the Nordic energy market and to study the preconditions for establishing a joint Nordic energy and climate strategy.

Development of Nordic energy cooperation: report by Jorma Ollila
The Nordic Council appointed Mr Jorma Ollila as an independent investigator to make proposals on how to improve Nordic energy cooperation. In June, Mr Ollila delivered his report, which contains several positive suggestions related to stronger coordination of national energy and climate policies, energy research as well as EU positions in order to strengthen the Nordic voice in Brussels. One important proposal is the establishment of a Nordic power market forum to bring together different energy stakeholders. The report supports further development of the energy-only market, stronger real-time price signals and harmonised retail markets. The Nordic energy ministers will discuss the report in their annual meeting in November 2017.

 (Text from Fortum's January-June 2017 Half-Year Financial Report)

7/20/2017