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


5

Jukka Ruusunen

6

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%


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


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


9

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?


10

On the journey towards a new energy system...


11

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


12

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

16

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

17

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.

Integration of Electricity markets of Baltic/Nordic and Europe

Engineering

Transcript of Integration of Electricity markets of Baltic/Nordic and Europe