Nordic energy management seminar. 10 June 2015, by Jukka Ruusunen.

Securing Supply in the Nordic Power Market

Jukka Ruusunen

President and CEO, Fingrid Oyj

Nordic Energy Management Seminar, Finlandia Hall, Helsinki, June 10th, 2015

Until mid 1990's:

Vertically integrated monopolies

Today: International electricity markets

?

June 2015 Jukka Ruusunen

Renewables

Subsidies

"Nordic Energiewende?"

Today:

Electricity markets

Basic idea:

• Competition

• Efficiency

Price signals:

1. Efficient dispatching and cross-border trade

2. Drive investments (energy mix)

TO

secure supplyJune 2015 Jukka Ruusunen

Game changer: renewables and subsidies

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10000

12000

Installed 2014 Estimated 2025Finland Norway Denmark Sweden

Nordic market: Over 22 GW of windpower planned by 2025!

Wind and

solar!

Europe

June 2015 Jukka Ruusunen

Wind and solar challenge the current market model...

June 2015 Jukka Ruusunen

Dispatch

• Renewables not sensitive to price signals

• More difficult for the "the invisible hand" to balancesupply and demand

Investments

• Renewables push down wholesale market prices

• Profitability of market based investments disappears

• No investments for back-up capacity

...and reshape the Nordic power system

June 2015 Jukka Ruusunen

There is surplus of energy BUTthere will be scarcity of

peak power

flexibility

inertia

Possible implications

June 2015 Jukka Ruusunen

Power shortages for citizens

during peak hours

Centralized control actions to

balance supply and demand

Restrictions for the operation of

big nuclear units

Scarcity 1: Peak power

June 2015 Jukka Ruusunen

Demand for

Norwegian

balancing power

increases in

Europe

Denmark:

Condensing power

not competitive -

peak load reserves

introduced

Baltic countries:

Lower price level

via integration -

condensing power

not competitive

Finland: Closure of

condensing power

due to low

profitability – new

nuclear!

Price peaks become more frequent

and stronger!

Probability for

power

shortages and

load shedding is rising!

Sweden: Early

decommissioning of

nuclear power due

to low profitability –

replaced by wind

Case Finland: conclusions from Pöyry's generation adequacy study

• Situation before Olkiluoto 3 is challenging –

Finland is dependent on electricity imports

• Commissioning of Olkiluoto 3 won't fix the

situation completely

• Competitiveness of condensing power is low

now and also in the future

• Surplus of energy, the prices of energy

futures are low

* Source: Pöyry Management Consulting Oy, Report available: http://www.tem.fi/files/42026/Kapasiteetin_riittavyys_raportti_final.pdf

June 2015 Jukka Ruusunen

Scarcity 2: Flexibility

[MW]

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20 000

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0:00 6:00 12:00 18:00

Simulation: 20 GW wind power in the Nordics year

2020

Demand +4 000 MW/h

Wind production

-1200 MW/h at the

same time

June 2015 Jukka Ruusunen

Less flexible

generation• More subsidized wind power –

intermittent

• Commercial investments rely

on nuclear (Finland) – not

flexible

• Condensing capacity

decommissioned – flexible

back-up disappears

• Even hydro power facing

difficulties – flexible and

renewable

Some remedies

available• Increase of demand response

will help, but cannot change the

big picture

• Cross border capacity

increases, but similar

challenges in the whole region

• Technological innovations can

help - in the long run

Scarcity 3: Inertia

June 2015 Jukka Ruusunen

Drivers• More wind – does not contribute to the rotating

mass of the system.

• Less thermal generation – less rotating mass

Consequences• Power system more sensitive to

disturbances – risk for operational

security

• Problems for big nuclear units and cross-

border connections – more centralized

control actions

How to go forward?

June 2015 Jukka Ruusunen

June 2015 Jukka Ruusunen

"Finland must have an excellent security of

supply. When we generate electricity by

ourselves, security of supply is in Finnish

hands. We must reach self-sufficiency in

electricity generation, because that has an

impact on security of supply and electricity

pricing. Then we rule electricity price."

Different political stories...

Finnish MEP candidate

... leading into very different solutions!

Step 1. Upgrade the market model to version 2.0

• Increase of cross border capacity within the market area

• Better capacity calculation methodologies

• More advanced and integrated reserve and regulating power markets

• Improved imbalance pricing principles

• Increase of market transparency

• Advanced end-user market (e.g. datahub)

• Active demand side response

• Regional view on capacity mechanisms

June 2015 Jukka Ruusunen

Improved regional

cooperation!

Step 2. Longer term - two scenarios

June 2015 Jukka Ruusunen

European or regional solution

– no room for a national solution!

Towards a new power system

June 2015 Jukka Ruusunen

Regional or European solution – no room for a national solution!

Renewables are here

to stay

Decentralized + market based

or

centralized + subsidies

peak power + flexibility + inertia

Fingrid Delivers. Responsibly.