Fortum today published its latest Energy Review, which focuses on the Nordic power market. In the Energy Review, Fortum emphasises the need for cross-border coordination and collaboration of policy decisions in developing the Nordic power market.
“The Nordic electricity market can be considered one of the most efficient regional markets in the world. Throughout its existence, it has ensured a good security of supply and economical electricity prices in the wholesale market. To ensure the continued success of the Nordic power market, a few targets of development are in need of shared attention,” notes Esa Hyvärinen, Senior Vice President, Public Affairs, Fortum.
In Fortum’s view, the key development targets include narrowing the gap between the consumer price and wholesale price of electricity, improving the balance between electricity supply and demand, shared energy policy supporting market conformity, and development of certain aspects of market regulations.
In terms of electricity wholesale and consumer prices, the Fortum Energy Review notes that the divergence between them has increased significantly in the Nordic countries in recent years. While the wholesale price for electricity in the Nordic market has decreased by half compared to the 2006-2010 level, the consumer price has increased by 10-30%, depending on the country, due to taxes, higher grid fees and production subsidies. When changes in the wholesale price are not adequately reflected in the consumer price, the attractiveness of demand response is diminished in the eyes of consumers. This is regrettable because demand response is generally considered as one solution to the supply and demand imbalance caused by the intermittency of renewable energy production.
In terms of surplus electricity production in the Nordic countries, the Fortum Energy Review notes that it is a growing challenge. The amount of subsidised, intermittent renewable energy production in the market is constantly growing, while power plant capacity needed for peak consumption situations is being decommissioned for reasons related to profitability. The best way to remedy this situation is to deepen the collaboration and coordination between the Nordic and Baltic countries in energy and climate policy.
“In order for the efficiently functioning electricity market to continue being one of region’s success factors, more joint actions are needed – for instance, in the planning of electricity transmission connections. Likewise, production subsidies for mature production technologies must be gradually phased out in the Nordic market. The benefits of international electricity trade are best achieved when development of the market model moves in the same direction in all countries operating in the Nordic market,” says Esa Hyvärinen.
Sergey Ilyukhin, Head of Industrial Intelligence, Fortum, tel. +358 40 352 4511
Merja Paavola, Vice President, Public Affairs, Fortum, tel. +358 50 396 1161
Fortum Energy Review: Building an efficient Nordic power market
The previous review on the Nordic power market was published in March 2015.
Energy reviews on Fortum’s website
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