Integration of Electricity markets of Baltic/Nordic and Europe
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Transcript of Integration of Electricity markets of Baltic/Nordic and Europe
Integration of Electricity markets of Baltic/Nordic and EuropeJukka Ruusunen
President and CEO, Fingrid OyjTallinn University of Technology: "Strategic Development of Energy System"
November 4, 2015
Jukka Ruusunen
2
Finland runs on electricity.Fingrid's most important task is to ensure that Finland
obtains electricity without disturbances at all times.
November 2015
Jukka Ruusunen
3
What is Fingrid?
November 2015
Owners
Our Mission
by reliably transmitting electricity
actively promoting the
electricity market
developing the transmission
system in the long time span
We work for the benefit of our customers and society
November 2015 Jukka Ruusunen
EU energy union:Towards a fully developed internal electricity market
• Integrated markets in all time frames and participation of both large and small resources
• Stronger link between the wholesale and retail prices
• Integration of flexible resources• Energy transition
• Market rules suited to intermittent production
• Transition made at minimum cost• Correct price signals are crucial• Market-based solutions
• subsidies• capacity mechanisms
• Empowering customersENTSO-E member countries 2014:• 34 countries and about 740 million citizens served• Generation 1024 GW• Transmission lines 307 000 km• Demand 3210 TWh/year• Exchanges about 424 TWh/year
November 2015 Jukka Ruusunen
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Jukka Ruusunen
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Regional focus:From Nordic electricity market to integrated Baltic Sea market
• Baltic countries part of the "Nord Pool market" from 2013
• Common EU market rules• New cross-border connections 2015-2016
• Next steps: BEMIP 2 from 2015– Balancing market integration– Retail market development – Synchronization of Baltic power
system– Increased stakeholder involvement 700 MW
500 M
W
1000 MW2 x 600 M
W600 M
W
1500 MW
1200 MW
November 2015
Main transmissiondirection andnet energy flow (TWh/a)
The power price in the Baltic Sea region is at its lowest since 20002011 2014
SYS29,6 €SYS
47,1 €
Area prices (€/MWh): < 20 20-25 25-30 30-3535-40 40-45 45-50 > 50
2
2015*(*until 9.10.)
SYS*20,5 €
Note! Sweden split into 4 bidding zonesin November 2011
Congestionin transmission lines (% of hours)
4 2 3*
22%
22 %
43% 22%
50%
15%45%
59%
48%
48% 9%60%
28% 21%
65%
50%
50%
13%35%
39%
25%18%
113 3*
61%
70%
November 2015 Jukka Ruusunen
New interconnectors in Baltic Sea area integrate the market and improve security of supply
• Long-term main drivers – Significant increase of subsidized intermittent wind
power in Nordics– Increase of electricity demand has seized– Weakened competitiveness of conventional
production – decommissioning has already started
• Future expectations– New interconnectors increase security of supply– Baltic price level closer to Nordic -
competitiveness of condensing capacity in Baltics?
– Decommissioning of Swedish nuclear power plants while Finnish nuclear power increases
– Integration continues: balancing and retail markets
2006 2007 2008 2009 2010 2011 2012 2013 2014 201515
20
25
30
35
40
45
50
55
60
Yearly average electricity prices per country [€/MWh]
Sweden Norway DenmarkFinland Estonia
November 2015 Jukka Ruusunen
Power trade between Finland and Russia
• Historically the trade volumes have risen with increasing transmission capacity
– Russian generation used to be competitive
• Competitiveness has collapsed after 2010
– Introduction of capacity mechanism
– Increase of fuel prices in Russia– Decrease of power price in
Nordics
1960's 1970's 1980's 1990's 2000's 2010's0
50
100
150
200
250
300
Rough estimate of the yearly value of Russian-Finland cross-
border trade
Mill
ion
euro
s
2012 2013 20140
10
20
30
40
50
60
70
Energiahinta, VenäjäKapasiteettimaksu, VenäjäEnergiahinta, Suomi
€/M
Wh
Capacity payment, RussiaPower price, Russia
Power price, Finland
November 2015 Jukka Ruusunen
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Pragmatic solutions for Finland-Russia cross-border trade• Economical benefits to both parties• Fingrid develops more market based cross-border trade
– More flexibility, reciprocal principles & transparency• Trade is conducted via Nord Pool Spot power exchange• Bidirectional trade possible since summer 2015• Dynamic tariff enables trade even with low price
differences • Volatility of Russian rouble affects on trade
• Next steps – targeting flexibility– Shifting capacity from bilateral trade to spot trade– Cooperation in technical reserves– Technical modernization of cross border connections?– Harmonization of Baltic and Finnish trade set-up towards
Russia?
November 2015 Jukka Ruusunen
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On the journey towards a new energy system...
November 2015 Jukka Ruusunen
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How does electricity travel?
Electricity cannot be stored
Supply and demand in balance – in real time!
• "The invisible hand" guides generation and demand
• Transmission system operators responsible for keeping the balance in real time
• New energy system: markets and operation get closer to each other
November 2015 Jukka Ruusunen
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Jukka Ruusunen
Wind and solar challenge the current market model...
November 2015
Dispatch• Renewables not sensitive to price signals• More difficult for the "the invisible hand" to balance
supply and demand
Investments• Renewables push down wholesale market prices• Profitability of market based investments
disappears• No investments for back-up capacity
Subsidies
disturb
competition!
13
Jukka Ruusunen
...and reshape the Nordic power system
November 2015
There is surplus of energy BUT there will be scarcity of peak power flexibility inertia
14
Jukka Ruusunen
Possible implications
November 2015
Power shortages for citizens during peak hours
Centralized control actions to balance supply and demand
Restrictions for the operation of big nuclear units
Peak
power
Flexibility
Inertia
15
Jukka Ruusunen
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EU
EU-level goals to maximize European welfare:
• CO2-emissions within the EU → emissions trading system
• Total goal for renewable energy + allocation to Member States
• Energy efficiency in EU• EU-level electricity markets and
increased cross-border competition
Member states
Goals of individual Member States to maximize national welfare:
• Generation technologies, self-sufficiency
• National support mechanisms e.g. for renewables
• National energy taxes• National measures to enhance
energy efficiency• Electricity price in the Member States
– price regulation in some countries
Problem of the EU energy policy:
How to combine top-down and bottom-up?
November 2015
Jukka Ruusunen
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On the journey towards a new energy system
• Short term: market integration is proceeding – towards the biggest electricity market in the world!
• From Nordic market to the Baltic Sea market• Change of the energy system towards CO2-free generation
challenges the grid and the market model• Low market prices – no market based investments on
generation• Empowering customers: role of consumers increasing –
new business models needed
November 2015
Powering Finland.