Operating environment

Operating environment in Q1 2026

European power markets

In the first quarter of 2026, Nordic spot prices increased significantly and almost doubled year-on-year, driven by elevated power demand due to cold weather, lower hydro reservoir levels and weak wind power availability. Nordic power demand was approximately 8 TWh above both the 5-year average and the first quarter of 2025, while wind availability was significantly below seasonal average. The challenging weather conditions were compensated by higher Nordic hydropower generation, which resulted in the moderate Nordic reservoir surplus at the start of the year deteriorating rapidly, briefly turning into a deficit during February. In March, Nordic weather‑driven fundamentals softened, as temperatures increased and wind conditions improved. This led to a clear decline in spot prices, while futures prices developed largely sideways, supported by surging commodity prices and stronger Continental European power prices. The reservoir balance recovered during March, ending the quarter with a small surplus of around 2 TWh. Meanwhile, Continental European electricity prices strengthened in March, as gas prices surged following the escalation of the conflict in the Middle East.

During the first quarter of 2026, the average Nordic system price in Nord Pool was 90.1 (45.5) EUR/MWh. The average area price in Finland was 92.7 (49.3) EUR/MWh. In Sweden, the average price in SE3 (Stockholm) was 86.0 (56.2) EUR/MWh, while SE2 (Sundsvall) averaged 66.0 (14.7) EUR/MWh. In Germany, the average spot price in the first quarter was 102.2 (111.9) EUR/MWh. Prices in Finland and SE3 were above the German price during January and February, but fell notably below it again in March.

According to preliminary statistics, Nordic power consumption amounted to 123 (115) TWh in the first quarter of 2026. The cold start to the year, together with structurally increasing non‑industrial electricity consumption, supported demand growth. Industrial demand across the Nordic region has remained broadly flat: Norwegian industrial demand is gradually increasing, Finnish industrial demand remains low and stable, while Swedish industrial demand continues to decline. In Central Western Europe (Germany, France, Austria, Switzerland, Belgium and the Netherlands), power consumption in the first quarter of 2026 totalled 358 (361) TWh. Demand remained slightly below the five‑year average, with the post‑energy‑crisis recovery largely stalling. Overall power consumption continues to lag pre‑crisis levels by approximately 50 TWh.

At the start of the first quarter of 2026, Nordic hydro reservoir levels stood at approximately 90 TWh, around 6 TWh above the long‑term average and 9 TWh below the level a year earlier. During the quarter, hydro inflows were close to normal, while hydro generation was slightly above average. By the end of the quarter, reservoir levels had declined to around 42 TWh, corresponding to a surplus of 2 TWh relative to the long‑term average, but 19 TWh below year‑ago levels. Sweden ended the quarter with a small reservoir surplus, while reservoir levels in Norway were close to normal.

In late April, the Nordic system forward price on Euronext for the remainder of 2026 was around 56 EUR/MWh, and for 2027 around 46 EUR/MWh. Nordic hydro reservoirs stood at approximately 38 TWh, around 2 TWh above the long‑term average and 23 TWh below year‑ago levels. The German electricity forward price for the remainder of 2026 was around 97 EUR/MWh, and for 2027 around 92 EUR/MWh.

European commodity markets

Natural gas prices rose sharply in late February following the outbreak of the US–Iran war. The escalation increased perceived supply risks linked to LNG flows through the Strait of Hormuz, tightening the near‑term market balance and pushing the gas forward curve higher. Oil prices also strengthened markedly during the quarter, as elevated geopolitical risk premia amplified supply concerns, driving prices to their highest levels since 2022.

Gas consumption in Central Western Europe totalled 638 TWh during the first quarter. Over the same period, regional gas storage levels declined significantly, falling from 357 TWh at the start of the quarter to 122 TWh by quarter‑end. This represented a deficit of 62 TWh compared with the same period last year and 115 TWh below the five‑year average (2021–2025).

The average TTF front‑month gas price in the first quarter was 40.1 EUR/MWh. The 2026 gas forward price increased from 25.9 EUR/MWh at the start of the quarter to 30.7 EUR/MWh at quarter‑end, remaining 5.0 EUR/MWh below the level observed one year earlier.

EU Allowance (EUA) prices decreased during the quarter, declining from 88.3 EUR/tonne at the start of the quarter to 77.7 EUR/tonne at the end of the period. Despite the quarterly decline, prices remained 2.5 EUR/tonne higher than one year earlier.

Coal prices rose sharply over the quarter. The ICE Rotterdam 2026 forward contract increased from 97.7 USD/tonne at the start of the quarter to 131.5 USD/tonne by quarter‑end, 19.7 USD/tonne higher year‑on‑year.

In late April, the TTF gas forward price for the remainder of 2026 was approximately 44 EUR/MWh. The corresponding EUA forward price for 2026 traded around 75 EUR/tonne, while the ICE Rotterdam coal forward price for the remainder of 2026 stood at approximately 112 USD/tonne.

Regulatory environment

EU leaders address energy and carbon regulation

At its meeting in mid-March, the European Council discussed energy prices and the EU emissions trading system (ETS). Ahead of the meeting, several member states and industry groups advocated for measures to reduce energy costs and called for intervention in electricity and carbon markets. The Council did not mandate the Commission to reform the electricity market. Instead, it emphasised that the most effective way to structurally reduce prices and exposure to geopolitical volatility is to accelerate the deployment of domestic renewable and low-carbon energy sources.

Regarding the ETS, the Council's conclusions reflected divergent interests. While responding to pressure from energy-intensive sectors and indicating openness to short-term adjustments, the Council reaffirmed its intention to maintain the core design and integrity of the system. The Commission is expected to present a review of the ETS by July 2026 at the latest. As a transitional measure, on 1 April, the Commission proposed the removal of the invalidation rule in the Market Stability Reserve. However, its impact on the supply-demand of emissions allowances remains limited in the near term.

Fortum, together with the European power sector and selected Nordic customers, has strongly advised against reopening the electricity market design or weakening the ETS. Fortum highlights the importance of maintaining stable and predictable policy frameworks to enable long-term investment decisions.

EU publishes Industrial Accelerator Act

On 4 March, the European Commission published the Industrial Accelerator Act (IAA), its flagship industrial initiative under the Clean Industrial Deal. It aims to strengthen the EU's strategic autonomy and to increase the share of manufacturing in the EU's GDP to at least 20% by 2035 by accelerating industrial deployment and investment.

The proposal introduces measures such as faster permitting processes, establishment of Industrial Acceleration Areas, and new requirements for large foreign investments in strategic sectors. A central and politically sensitive element is the introduction of low-carbon and “Made in EU” criteria in public procurement and public support schemes. The IAA scope initially covers steel, cement, aluminium, electric vehicles and net-zero technologies, with differentiated thresholds and phased application starting from 2029. Third countries with relevant trade agreements remain eligible, reflecting the Commission’s effort to balance EU preference with openness to global trade.

Although the majority of Fortum's current operations are outside the scope of the IAA, the policy initiative can help create viable business cases for clean transition projects and strengthen demand-side signals for low-carbon solutions.

Reform of the Nuclear Energy Act progresses in Finland

On 12 March, the Finnish Government submitted a proposal for a new Nuclear Energy Act to the Parliament. The comprehensive reform of the Nuclear Energy Act is one of the most significant legislative initiatives of the government, aiming to strengthen Finland’s position as an attractive location for nuclear energy production. The main changes include revisions to the licensing process and updated requirements for plant technology.

Fortum welcomes the proposed reform and considers it to create favourable conditions for nuclear power and possible construction of new facilities.

Finland publishes study on derisking of new nuclear power

In March, the Ministry of Economic Affairs and Employment published a study on the options for advancing nuclear energy in Finland. The study evaluates the realistic and economically viable nuclear investment alternatives, and considers the conditions required for their implementation. It also evaluates the government's role in supporting nuclear development and facilitating risk-sharing arrangements.

The findings are largely consistent with Fortum’s feasibility study published in March 2025, underlining key prerequisites for new nuclear projects. Increasing electricity demand is the decisive driver for new nuclear, with new demand considered essential to support additional generation. The report recognises that effective risk‑sharing with the state is essential to reduce capital and production costs, outlining several tailored mechanisms, such as Contracts for Difference (CfDs), government‑backed financing, loan guarantees, and partial state ownership.

Fortum views the discussion on new nuclear in Finland as timely and constructive. New nuclear is part of a long‑term solution to growing customer demand in the Nordics and a step in preparing for the eventual replacement of existing and lifetime extended nuclear capacity.

Increased electricity tax for data centres creates uncertainty for investments

In October 2025, the Finnish government decided to increase the electricity tax on data centres from 0.05 cents/kWh to 2.24 cents/kWh, effective from July 2026. A compensating support mechanism is under preparation.

Data centres are part of critical infrastructure and essential to both the ongoing digitalisation of society and the clean transition. Predictable energy taxation and policies play a crucial role in encouraging investments that support the energy transition.

Finnish support mechanism for stable electricity production to be prepared on a new basis

The Ministry of Economic Affairs and Employment has been preparing a non-fossil flexibility support scheme in Finland to address electricity adequacy and ensure security of supply in the future. In March, the original preparations were discontinued due to different views between Finland and the EU. As a next step, the Ministry is now preparing a new mechanism that is intended to support bioenergy-based dispatchable electricity generation. The system is planned to be similar to the Swedish Kraftlyftet support scheme, but excluding support for electricity storage.

As the energy transition accelerates and geopolitical shifts intensify, electricity demand grows and the Nordic supply-demand balance tightens. In addition, electricity price volatility is expected to remain high also in the future. Fortum considers it essential for Finland to introduce a mechanism to support electricity adequacy and ensure security of supply. From Fortum’s perspective, it is important that the mechanism supports investments in system-critical infrastructure features.