Nordic Market report

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Nordic Market report 2011 Report 3/2011 Nordic Market Report 2011 Development in the Nordic Electricity Market Report 3/2011 NordREG c/o Energitilsynet Nyropsgade København V Danmark Telephone:
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Nordic Market report 2011 Report 3/2011 Nordic Market Report 2011 Development in the Nordic Electricity Market Report 3/2011 NordREG c/o Energitilsynet Nyropsgade København V Danmark Telephone: Telefax: Internet: July 1 PREFACE SUMMARY INTRODUCTION: NORDREG SUPPLY GENERATION...8 SUMMARY GENERATION CAPACITY GENERATION MAIN PLAYERS CONDITIONS FOR GENERATION DEMAND CONSUMPTION...15 SUMMARY CONSUMPTION CONDITIONS FOR CONSUMPTION SECURITY OF SUPPLY PEAK LOAD ELECTRICITY TRANSMISSION...22 SUMMARY TRANSMISSION NETWORK CONGESTIONS IN TRANSMISSION WHOLESALE POWER MARKET...29 SUMMARY FRAMEWORK PRICE DEVELOPMENT IN THE SPOT MARKET VOLUMES IN THE SPOT MARKET BALANCING MARKETS FINANCIAL MARKET...40 SUMMARY VOLUME TURNOVER VALUE TURNOVER NUMBER OF TRANSACTIONS RETAIL MARKETS...43 SUMMARY DEVELOPMENT OF RETAIL PRICES SUPPLIER SWITCHING SUPPLIERS MARKET INDICATORS FOR THE NORDIC ELECTRICITY MARKETS...47 SUMMARY COMPETITION IN THE NORDIC RETAIL MARKETS ONGOING NORDREG WORK A TRULY COMMON NORDIC RETAIL MARKET WITH FREE CHOICE OF SUPPLIER A WELL-FUNCTIONING NORDIC WHOLESALE MARKET WITH COMPETITIVE PRICES RELIABLE SUPPLY EFFICIENT REGULATION OF TSO APPENDIX A DESCRIPTION AND DEFINITIONS OF MARKET INDICATORS FOR THE NORDIC ELECTRICITY MARKETS 1 Preface The Nordic Market report describes on a yearly basis status and developments in the Nordic electricity market with focus on generation, consumption, transmission, wholesale power market and retail markets. The Nordic market report 2011 also brings an updated version of the statistical indicators introduced in the Nordic Market report 2010 to describe and assess market functioning and competition in the retail markets. In 2010 NordREG published a report on the Nordic financial electricity market. An update of the set of statistics regarding the liquidity of the financial electricity market has been incorporated in the Nordic Market report The report is based on data and information for the year 2010 available in late spring A working group with participants from the regulators in Denmark, Finland, Norway and Sweden has prepared the report. The members of the group were Henrik Gommesen (Energitilsynet, chairperson), Elin Söderlund (Energimarknadsinspektionen), Mats Øivind Willumsen (Norges vassdrags- og energidirektorat) and Timo Partanen (Energiamarkkinavirasto). Copenhagen, July 2011 Finn Dehlbæk Chair of NordREG 5 2 Summary The Nordic power system is a mixture of generation sources: Hydro, wind, nuclear and thermal power based on coal, oil and gas. Total generation in the Nordic countries was TWh in 2010, a small increase of 1 %cent compared with The high share of hydropower makes inflow and reservoir levels vital. In general 2010 was a dry year creating a deficit in reservoir levels. At most the deficit was around 30 TWh. The total Nordic electricity consumption was 396 TWH in 2010, which is an increase of 3.8 % compared to The largest rise in consumption was in Finland, due to the recovering in the energy intensive industries after the financial crisis. Total consumption was also generally affected by low temperatures in the region. The transmission grids in the Nordic region are closely linked to perform a solid foundation for a common Nordic electricity market. The Nordic region operates almost entirely as one synchronous system through the transmission grid enabling increased security of supply and more efficient use of the generation capacity. However, increased cross border flows also strain the transmission system leading to congestions. Between the Nord Pool bidding areas these are handled through market splitting. Internal congestions in general are handled through counter trade or by reducing interconnector capacity at the bidding area borders. The Nordic whole sale power market is a common Nordic market, where electricity is traded on the Nordic electricity exchange, Nord Pool. During 2010 average spot prices at Nord Pool were higher than prices in The beginning of 2010 saw several price peaks in most of the Nordic price areas. Low temperatures, low Swedish nuclear power generation and low available transmission capacities contributed to these prices. The Nordic retail markets are to a large extent still four separate markets, but the work of integrating the four markets has begun with a goal to have an integrated wellfunctioning Nordic end-user market for electricity no later than Price developments differed slightly between the countries during Norway and Sweden experienced relatively volatile prices while Finland and Denmark experienced more steady developments throughout the year. The competition statistical indicators show competitive markets throughout the Nordic region in general but also highlights areas of each national market which could question the effectiveness of competition in that market thus suggesting the need for further analysis to determine whether further initiatives could be called for. 6 3 Introduction: NordREG NordREG is a cooperative organisation for Nordic energy regulatory authorities. The mission and common goal of the organisation is to actively promote a legal and institutional framework and conditions necessary for developing the Nordic and European electricity markets. The cooperation in NordREG is based on consensus and common understanding of the Nordic market. NordREG works by exchanging information and views, mapping and analysing energy market issues and by delivering statements and reports for harmonisation and improvement with the aim of identifying areas where NordREG can take joint action to influence Nordic or European electricity market development. NordREG mission In cooperation, we actively promote legal and institutional framework and conditions necessary for developing the Nordic and European electricity markets. The specific strategic priorities of NordREG are to provide for a well-functioning Nordic wholesale market with competitive prices, be conducive to establish a common Nordic retail market with free choice of supplier, to ensure a reliable supply within the region, and finally, to regulate and monitor the transmission system operators (TSO s) with focus on efficiency and Nordic harmonisation. NordREG has formulated its vision for the development of the electricity market NordREG vision for the development of markets All Nordic electricity consumers will enjoy free choice of supplier, efficient and competitive prices and reliable supply through the internal Nordic and European electricity market. 7 4 Supply Generation The Nordic power system is a mixture of generation sources such as wind, hydro, nuclear and other thermal power 1. Hydropower is the major source of electricity generation in the Nordic region. It normally constitutes with a little more than half of the total production capacity in the Nordic countries. Summary The total power generation in the Nordic region in 2010 was TWh which with a rise of app. 1% was at the same level as Vattenfall is the largest electricity generator in the Nordic region with 18.4 % of the total generation followed by Statkraft (13 %), Fortum (12.7 %) and E.ON (7.3 %). The high share of hydropower makes inflow and reservoir levels vital when calculating and analysing potential generation levels. In general 2010 was a dry year. At most there was a deficit in the reservoir levels at around 30 TWh. 4.1 Generation capacity The Nordic region has a total of MW installed capacity for power generation (see table 1 below). More than half of the installed capacity comes from renewable power sources. Hydropower alone accounts for more than 50% of the total generation capacity. It is representing virtually all of the Norwegian and nearly half of the Swedish generation capacity. The large share of hydropower is due to large rivers and significant quantities of precipitation in the mountains, filling the reservoirs during the spring flood. CHP (Combined Heat and Power) is the second largest generation source accounting for 31 % of the total Nordic power generation capacity. The third largest power source is nuclear power, only located in Sweden and Finland and with a share of 12 % of the total Nordic generation capacity. Wind power accounts for about 7 % and has increased considerably during the last few years. 1 Based on for example coal, gas and biofuels. 8 Table 1 Nordic Generation capacity (MW) by power source, Source: Swedenergy, NVE, DERA, EMI Denmark Finland Norway Sweden Nordic region Installed capacity (total) Nuclear power Other thermal power Condensing power CHP, district heating CHP, industry Gas turbines etc Hydro power Wind power Generation Total power generation in the Nordic region increased with 2.7 TWh, 1 %, in 2010 compared to In total the generation amounted to TWh. The development of the total power generation in the Nordic region during is Illustrated below (see figure 1). The development in yearly Nordic generation shows the same trend. In the summer, when the demand (consumption) is low, the supply (generation) decreases, while it is higher in the winter time when there is a bigger need for power heating. Figure 1 Total power generation in the Nordic region, Source: Nord Pool 9 The development shows that even though the generation increased it was still lower than in 2008.This has to do with the constraints in the Nordic reservoirs levels and the continued problems in nuclear power production in Sweden. In general, thermal power generation (Finland and Denmark) in the Nordic region acts as a swing-production determined by the level of hydropower generation in Norway and Sweden. In the end of 2010 there was lack of hydropower in the Nordic generation system, it decreased with 6.2 % compared with the year before. This caused an increase in the use of other thermal power, shown in figure 2. In total thermal power increased with 14.7 %. There was also an increase in wind power with 18.8 % which depends on the last year s expansion of windmills. In 2009 the Swedish nuclear power production was suffering from many boot problems. The generation from nuclear power increased with 4.7 % from last year. Figure 2 Power generation by power source in the Nordic region 2010 Source: Nord Pool 4.3 Main players Vattenfall has a generation capacity of MW which is 15.7 % and the largest share of the Nordic capacity (shown in table 2). Statkraft is the second largest generator with a capacity of MW amounting for about 13.3 % of the total Nordic generation capacity. Fortum has a total capacity of MW and 11 % of the Nordic capacity. 10 Table 2 Generation capacity by producers, 2010 Source: Swedenergy, NVE, DERA, EMI Denmark Capacity (MW) Share - Dong Energy ,4% - Vattenfall ,8% Finland - Fortum ,0% - PVO ,8% - Helsingin Energia ,4% Norway - Statkraft ,3% Sweden - Vattenfall ,9% - E.ON Sweden ,7% - Fortum ,0% Other generators ,7% Total Nordic region % The largest electricity generator in the Nordic region is Vattenfall AB. In 2010 Vattenfall generated 70.3 TWh. This represents 18.4 % of the total Nordic generation. Vattenfall has approximately 38 % of the total Swedish generation capacity. The company is owned by the Swedish state. Fortum increased its generation from the year before with 2.3 TWh ending up generating 48.5 TWh of electricity in the Nordic region in Fortum has 28.9 % of the total Finnish generation capacity. When adding the Swedish division Fortum generated 12.7 % of the total Nordic generation. Fortum Oy is majority owned by the Finnish state. Statkraft generated 49.8 TWh in the Nordic region in 2010 that gives a share of 13 % of the total Nordic generation. Statkraft is the largest of the Norwegian generators with more than 30 % of the total Norwegian generation capacity in a normal hydrological year. The yearly amount of electricity generated by Statkraft varies heavily because of the large share of hydropower in Statkraft s generation portfolio. Statkraft is owned by the Norwegian government. E.ON generated 28.1 TWh, in 2010, in the Nordic region which represents 7.3 % of the total Nordic generation. E.ON Sverige AB is owned by the Germany Company E.ON and has 18.4 % of the total Swedish generation. 11 Figure 3 Share of total Nordic electricity generation by the four largest generators, Source: Swedenergy, NVE 4.4 Conditions for generation The two main sources of electricity generation in the Nordic region are hydropower and thermal power making inflow, reservoir levels and the price of CO 2 emissions important factors in the price formation of electricity. Inflow and reservoir levels are of crucial importance for hydropower generation. Even though electricity in itself cannot be stored, the water creating the electricity can be stored in reservoirs along the rivers. The main bulk of the inflow to the reservoirs occurs during the spring when the snow in the mountains melt and during rainy autumns. In 2010 there was a large inflow in a couple of weeks during the spring flood otherwise the inflow was generally much lower than in 2009 and 2008 (see figure 4). In general 2010 was a dry year. The inflow level was 175 TWh to the Nordic water reservoirs (week 1 53) which is a decrease with 14 % from the year before. 12 Figure 4 Effective inflow to the Nordic water reservoirs, Source: Nord Pool Spot The reservoir levels was below the median level during the whole year 2010, see figure 5. At most the actual reservoir level diverged from median level with 25 %. It correspond to a deficit around 30 TWh. At the beginning of 2010, the total reservoir levels in the Nordic region were 58 % of the total capacity in the end of the year the levels where 45 %. There are many reasons behind the low reservoir levels. Cold weather led to increased demand and the inflow, shown in figure 4 above, was low. Another reason is that the year 2010 started off with a constraint in Swedish nuclear production which made generation from other sources, such as hydro power, more significant. The nuclear production improved during the year while the reservoir levels stayed beneath normal. On top of this there was a period during fall when the inflow temporarily increased when non-reservoir producers had to produce or the extra inflow would go to waste. The situation was most constrained in Norway where the hydropower generation is very important. Norway has the largest reservoir capacity of 84.3 TWh followed by Sweden with a capacity of 33.8 TWh. The capacity in Finnish reservoirs is 5.5 TWh. The total Nordic reservoir capacity is TWh. 13 Figure 5 Reservoir levels in the Nordic region, Source: Nord Pool Spot In the Nordic region thermal power is the second largest generation technology; hence the price on CO 2 emissions is an important factor influencing the price on electricity. Most thermal generation units within the Nordic region are located in Denmark and Finland. Figure 6 shows the price of CO 2 allowances during The price of CO 2 allowances started at about 13 /ton and increased during the year. At most it was around 17 /ton. In the end of 2010 allowances was traded at a price around 14.5 /ton. Figure 6. Price on CO 2 allowances on Nord Pool, 2010 and 2011 Source: Nord Pool Spot 14 5 Demand Consumption Electricity consumption in the Nordic region is relatively high in comparison with other European countries. This is due to the influence of cold winters in combination with electricity heated houses and the relative high proportion of energy intensive industries. Summary The total Nordic electricity consumption in 2010 was 396 TWh. Sweden has the largest share of the total consumption followed by Norway and Finland. Nordic consumption rose by 3.8 % compared to Finland had the largest increase in consumption during This was mainly due to the recovering in the energy intensive industries after the turbulence in the financial market. The total consumption was also influenced by generally low levels of temperatures. The Nordic peak load was MW and took place in January 8 in the evening, where the aggregated consumption exceeded the aggregated production resulting in a net import of 4096 MW. 5.1 Consumption The electricity consumption in the Nordic region varies widely due to specific conditions in each country (see figure 7). Sweden has the largest share of the total electricity consumption of the Nordic countries with around 37 %. The Swedish electricity consumption is highly influenced by a large share of energy intensive industries as well as a large share of electricity heated houses. In 2010, the total electricity consumption in Sweden was TWh, which is an increase of 3.4 % compared to It could be explained by the recovery in industrial consumption after the recession and also by two very cold winters. Norway also has a large share of the total Nordic electricity consumption. The consumption in Norway was TWh in 2010, an increase of 3.7 % compared to As well as Sweden and Norway, Finland has a large share of energy intensive industries leading. The total electricity consumption in Finland increased most in the Nordic countries during 2010 with 6 %, the same as 87.1 TWh, compared to The large increase could be explained by the fact that industries in Finland had a longer way to recover after the recession than industries in the other Nordic countries. Finland, Sweden and Norway has significant seasonal temperature variations and a large amount of electricity heated houses, and hence a much more fluctuating electricity consumption than Denmark. The Danish electricity consumption has been very stable in the past five years. In 2010 the total electricity consumption in Denmark was 35.4 TWh which is an increase of 0.5 % compared to Denmark has a relatively small share 15 of the total consumption in the Nordic countries. One reason why Denmark has considerably lower electricity consumption than the other Nordic countries is a small share of energy intensive industries. Figure 7 Electricity consumption in the Nordic countries (last 52 weeks), Source: Nord Pool Spot Total electricity consumption in the Nordic region is back on previous levels following a decline in 2009, see figure 8. In 2010 the total electricity consumption was 396 TWh, an increase of 14.4 TWh or 3.8 % compared to The development could be partly explained by the recovery after the turbulence in the financial market that started of 2008 which lead to falling demand. The growth in 2010 could also be explained by cold weather which increased demand. 16 Figure 8 Development of the total electricity consumption (last 52 weeks) in the Nordic region, Source: Nord Pool Spot Figure 9 compares the development of the total electricity consumption in the Nordic region for the year The figure shows the effects weather conditions have on the demand, with lower consumption in the summer and increased consumption in the winter. Figure 9 Electricity consumption in the Nordic region (GWh/week), Source: Nord Pool Spot 17 5.2 Conditions for consumption Temperatures in the Nordic region The temperatures were generally lower in 2010 than compared to normal, see figure 10. The year was characterised by very cold winter periods. The temperature was down to 7 degrees beneath normal. The cold weather increased the demand for electricity for heating. Figure 10 Mean temperature in the Nordic region 2 in 2010 compared to a normal year Source: Nord Pool Spot 5.3 Security of supply Finland The Finnish Energy Market Authority has estimated that Finland had MW of generation capacity available in winter season Capacity has increased 260 MW compared to previous winter season. This is mainly because of new CHP plants. Installed wind power capacity is expected to increase greatly in the next few years because of new feed-in tariff that was introduced spring Capacity of wind power is currently about 200 MW. The power reserves related to system disturbances in Finland is MW. Last winter was very cold and the peak load in total electricity consumption in 2010 was 14,588 MW compa
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