Markets

Market development

The Nordic power market has become highly price competitive and almost carbon-free, positioning the region as the leader to decarbonise other sectors. As a trusted energy partner with a competitive and reliable portfolio of clean energy generation and unparalleled industry knowledge, Fortum is well-positioned to drive this clean transition.

The cold start to 2024 gave the Nordic spot price a strong beginning to the year, particularly in Finland, which saw extreme price spikes during the first quarter. However, after the first quarter, various factors began to weigh on the Nordic spot price. The high level of onshore wind power capacity enhanced the power supply in the Nordics. This, combined with a wet second half of the year which substantially strengthened the Nordic reservoir balance, pressured the spot prices up until the end of the year. This was partly offset by the ongoing recovery in Nordic power demand, especially as non-industrial demand increased in ‍2024. 

In 2024, the TTF gas front-month contract averaged 16% lower compared to the previous year, but its price trajectory diverged sharply from 2023. After a steep decline in the first quarter, prices gradually rose each quarter from the second quarter onwards, climbing from below 25 EUR/MWh in mid-March to nearly 50 EUR/MWh by the end of the year. This upward trend was driven by ongoing concerns over potential supply shortages due to geopolitical risks and intensified competition for LNG between Europe and Asia throughout the year. In 2024, EU carbon prices saw a decline due to reduced demand, stemming from a continued decrease in emissions from the power sector. Moreover, the industrial sector remained in contraction, further contributing to the lower demand for carbon allowances. The high gas prices were mirrored across the European power markets, which also saw rising spot prices. At the same time, corresponding futures prices in several Continental European markets, although reduced relatively during 2023, remained well above pre-‍crisis ‍levels.

In 2024, the Nordic system price realised at 36 EUR/MWh compared to 56 EUR/MWh in 2023. The futures price for 2025 baseload delivery was at 45 EUR/MWh at the beginning of the year but decreased to 33 EUR/MWh by the end of the year. 

Besides becoming extremely price competitive, the Nordic power supply is strong, with almost 10% of total generation being exported to the Baltics, Continental Europe and the UK. Another competitive edge for the Nordics is that Nordic power generation already is decarbonised as almost 99% of its power generation is carbon-free. Altogether, last year’s figures indicate that the Nordic power market is well-positioned to lead the way in the decarbonisation of other industrial sectors. However, to achieve industrial decarbonisation, the competitiveness of the energy industry and the conditions for new investments must be ensured to enable clean energy investments needed in the Nordics and ‍Europe. 

Although annual baseload prices, in both the realised spot and futures markets, have returned to pre-crisis levels , the dynamics of the Nordic power market have shifted. Strong growth in wind power, especially in the northern price areas, and new interconnectors in southern Norway have contributed to a persistent price gap between the lower-priced northern and higher-priced southern parts of the region. Continued strengthening of the transmission capacity remains crucial to enable the Nordic potential for clean energy to be further developed, benefiting both the Nordic economy and European energy security and climate goals. 

The rapidly increasing price volatility in the Nordics continued throughout 2024, with the most extreme variations seen in the Finnish and Baltic price areas. With wind production accounting for more than a third of Finland’s power supply on windy days and limited export possibilities to neighbouring areas, the Finnish spot market once again recorded the most negative price hours of any EU country. On the other hand, a ‍low wind period in September, coinciding with maintenance outages on all Swedish-Finnish interconnectors and both planned and unplanned outages of two Finnish nuclear units, pushed the highest hourly spot prices in Finland above 400 ‍EUR/MWh, while prices in Sweden continued to be pressured and Continental European prices remained close to ‍annual average levels. 

As one of the top three largest power generators in the Nordics with its valuable 47 TWh CO2-free generation fleet based on flexible hydro, baseload nuclear and some wind power, Fortum plays an important role in the Nordic power market. It is a pioneer in creating a clean power system while also supporting industrial decarbonisation. Our role goes far beyond just owning and operating these existing assets. It is about ensuring that each of the more than 150 individual power plants we own are operated in an optimised and sustainable way, finding common solutions and risk sharing models to enable new investments, and understanding the entire value chain from Nordic power generation to end-use ‍demand.

From turbulent times towards a ‍new normal

The energy industry operates at the heart of all functioning and prospering modern societies and economies. However, despite the strong megatrends for decarbonisation and digital development, our operating environment has been, and continues to be, defined by turbulence,  low predictability and uncertainty.

The current decade started with substantial decline in global energy demand due to the Covid-19 pandemic, which significantly disrupted economic activity across various sectors. The backdrop started shifting and gradually turned into a supply shock towards the second half of 2021 dramatically exacerbated by the Russian invasion of Ukraine in early 2022. These events raised significant concerns regarding energy availability and affordability, and introduced broader uncertainties around security, macroeconomy and geopolitical developments. Europe has navigated the flux of disruptions fairly well, having secured a relatively healthy position in terms of energy security despite the abrupt discontinuation of low-cost and large-scale energy imports from Russia. The impacts of these events are still being felt and the unfolding of full implications will most likely continue to shape our operating environment in the years to come. 

The world is increasingly marked by growing polarisation, geopolitical tensions and strategic rivalry, reversing the trends of globalisation and rule-based order from the early 1990s. We seem to be shifting back to a divided world with multiple power blocks competing with each other economically, even militarily, further slowing global and possibly even European integration – at least in the near term. The increasing fragmentation is already evident within and beyond Europe, visible in national industrial policies and support mechanisms aimed at strengthening security, production and employment.

In the short term, continued geopolitical tensions and uncertainty are expected to affect global economic growth. Although inflation and interest rates have declined from earlier highs, interest rates in particular remain elevated, increasing costs for the clean energy transition. Furthermore, the softer investment environment can lead to an aggravated gap between affordable energy prices for consumers and the power price needed to secure profitability for new investments in future energy ‍supply to meet projected demand growth.

In the past year, Europe has placed an increasing focus on economic growth, competitiveness and security. Simultaneously, Europe is committed to its high climate ambitions and emission reduction targets, providing strong tailwinds for electrification and demand for clean energy. However, considering the uncertainties on a global level, it remains to be seen how Europe manages to recover and strengthen its economic competitiveness and execute the planned decarbonisation investments across energy demand and supply.

Before the energy crisis, policies concerning the energy sector mainly aimed at reducing emissions and mitigating climate change. One of the key implications of the Russian war in Ukraine is the sharpened focus on all corners of the so-called energy trilemma: sustainability, affordability and security of supply. Today, ensuring affordable and secure energy is crucial, while decarbonisation is viewed as essential for a secure, resilient and cost-effective energy system that minimises reliance on fossil fuel imports in the long term. 

The Nordics is well positioned as a hub for competitive clean energy 

The Nordics exhibit several fundamental strengths to facilitate European and even global decarbonisation efforts affordably at scale.

The Nordic region is very well positioned to play a key role in the clean energy transition with the combination of flexible hydro assets providing necessary and valuable flexibility to the energy system, societally accepted baseload nuclear with a ready permanent solution for nuclear waste disposal together with extensive renewables potential, especially for wind and solar power. This is a formula delivering the most affordable electricity prices in Europe today, combined with unparalleled growth potential to attract energy-intensive industries that need clean, affordable and predictable energy to support their clean growth.

While electrification is the primary route to decarbonisation for many sectors, such as residential heat and light transport, there are harder-to-abate applications, in particular in selected industries and heavy transport, where direct electrification alone is not suitable. For these applications, clean hydrogen and its derivatives offer a solution for which the Nordic region also possesses unique advantages. In addition to the high potential for competitive clean electricity generation, there is an abundant supply of fresh water, good availability of biogenic carbon and potential for further efficiencies, as the excess heat from electrolysis could be connected e.g. to existing district heating networks. Further, the Nordic region has a well-developing energy infrastructure and an energy policy landscape aimed at enabling carbon neutrality already in the 2030s and 2040s. 

These fundamentals are already encouraging a growing number of global technology firms, leading industrial companies and new clean energy-intensive ventures to develop projects in the Nordic region, such as data centres, green steel and clean fuels.

Nordic transmission system operators for electricity and gas cooperate both nationally and across the Gulf of Bothnia to develop a long-term plan to build a robust energy transmission network that facilitates electricity and hydrogen trade both within the Nordics and to the Continent. This development makes the Nordic countries increasingly interconnected to the rest of Europe, enabling the region to serve even greater clean energy demand, via exports in the form of both electricity and hydrogen.

The Nordics are ideally positioned to connect the abundant clean energy resources within the region with the structurally  clean energy deficient markets on the Continent, and thus stepping up to the role of a major clean energy hub driving European decarbonisation – affordably and reliably. Over the coming decades, domestic growth opportunities combined with the export potential is expected to lead to power demand growth of hundreds of terawatt hours, up to more than doubling of the current Nordic power market.

As a trusted energy partner with a competitive and reliable portfolio of clean energy generation and unparalleled industry knowledge, Fortum is well-positioned to drive this transition.