Fortum's Energy Review: Nordic electricity market in transition
PRESS RELEASE 2 March 2015
Fortum’s second Energy Review, published today, focuses on the Nordic electricity market, its success so far and the challenges ahead. The Nord Pool area in the Nordic and Baltic countries is a real example of a functioning, regional electricity market offering its customers energy at competitive prices, good security of supply, and one of the world’s lowest energy production emissions per kilowatt-hour.
“For the success to continue, we need a strong, shared mindset in the Nordic countries. Transmission connections must be further developed within and between each Nordic country as well as between the Nordic countries and the rest of Europe. In addition to the wholesale market, the functionality of the retail market must also be a focal point, so that better products for controlling energy consumption and costs can be offered to household customers”, notes Fortum’s CFO Timo Karttinen, who currently acts also as President and CEO.
In Fortum’s view, the key issues in the electricity markets are related to assessing generation adequacy, securing sufficient investments in generation and transmission, increasing renewable energy, better utilisation of hydropower, and developing the retail markets.
• Generation adequacy must be assessed at a broader, regional level rather than a national level. Electricity today is abundantly available in the Nordic and Baltic countries, and thus security of supply must be primarily improved by strengthening the transmission network. National reserves of electricity generation should be considered only for exceptional situations of prolonged disruption to market functionality.
• Investments in carbon-free energy generation are promoted most economically by developing the emissions trading system. There must be a clear commitment to reducing carbon dioxide emissions in energy generation. The EU’s emissions trading system must be made the primary driver of investments in carbon-free, including renewable, energy.
• Hydropower must be utilised better to balance fluctuations in the growing wind and solar power generation. The advantage of the Nordic and Baltic electricity market is the diverse generation mix in which flexible, economical and carbon dioxide-free hydropower plays a significant role. Prerequisites for hydropower must be secured also in the future. All countries in the region benefit from this, even though hydropower is concentrated more to some countries than others.
• Better products and services must be available to consumers. Sizable investments have been made in the Nordic countries in smart meters and in the smart grid, but customers are not yet fully benefitting from them. Consumers will become interested in hourly-metered electricity products when demand flexibility gives them an immediate economic benefit. This will also require clearer services, like one electricity bill and one supplier that can serve the entire spectrum of customer needs.
“Many European countries are facing problems with regard to adequacy of electricity generation capacity. One solution offered is national capacity subsidies for traditional electricity generation, so that there would be a supply of electricity also when wind and solar production are not available. If the Nordic and Baltic countries are not able to further develop their electricity markets, we too will encounter the same issue. This would be an expensive solution for consumers”, says Simon-Erik Ollus, Chief Economist, Fortum, who presented the review at its publication event.
Simon-Erik Ollus, Chief Economist, Fortum, tel. +358 40 179 0166
Esa Hyvärinen, Senior Vice President, Corporate Relations, Fortum, tel. +358 40 826 2646
Fortum’s purpose is to create energy that improves life for present and future generations. Catering to the versatile needs of our customers, we generate, distribute and sell electricity and heat, and offer related expert services. Our operations focus on the Nordic and Baltic countries, Russia and Poland. In 2014, Fortum’s sales totalled EUR 4.75 billion and comparable operating profit was EUR 1.35 billion. We employ approximately 8,800 people. Fortum’s shares are traded on the Nasdaq Helsinki. www.fortum.com