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The Nordic Power Market The Nordic electricity market covers Norway, Sweden, Finland, and Denmark

The Nordic countries produce and consume close to 400TWh in a normal year of which

50% hydro power, 20% nuclear, 15% CHP and 10% wind. Prices are thus influenced by

hydrological conditions and can for example be low for long periods of time in a wet year.

The Nordic countries all pursue ambitious renewable targets which have been driving

recent renewable development. The large majority of renewable capacity additions has

been onshore wind power, with projects taking place on a nearly merchant basis in the

past couple of years. The combination of continuing falling turbine costs and favourable

wind conditions make the Nordic region attractive for future wind investments. There are

in addition policy restrictions on building new conventional capacity related to climate

emission targets that act in the disfavour of thermal fossil investments.

At the same time, new demand sectors are emerging: electric vehicles, battery factories,

data centres and electrification of industries, such as oil or steel. These sectors represent

a small share of demand today but there is a prospect for significant growth in the future.

With ambitious renewable targets and comparatively lower demand growth, electricity

generation is expected to increasingly exceed demand. The Nordic countries are

therefore planning new interconnectors to Continental Europe and Great Britain, which

effectively provide a larger demand base for the Nordic renewable electricity. High wind

build-out in the north (while demand and interconnectors are in the south) as well as

nuclear reaching end of lifetime post-2040 may however challenge the Nordic system.

Therefore, in our latest Nordic report we explore:

• How will the aims and policies of the four Nordic countries shape the Nordic electricity

market in the coming years?

• How will bottlenecks in the Nordic internal grid affect price convergence, the

development of new demand and new renewable generation, as well as the need for

internal grid investments?

• What are the main risks and uncertainties in the Nordic electricity price projections?

kathrine.bakke@poyry.com

+47 957 59 204

The Nordic Power Market

Pöyry Independent Market Report

• Presents our annual projections for wholesale electricity prices out to 2040 for our three

internally consistent scenarios (High, Central and Low). Pöyry’s modelling of the Nordic

countries includes 20 weather variations run for every modelled future year. Our model

has a detailed treatment of reservoir hydro dispatch under uncertainty of inflows using

Stochastic Dynamic Programming (SDP), similar to the method used by most

producers that operate in the Nordic market.

• Considers the main drivers of electricity prices in each scenario, including:

– the evolution of generation capacity mix;

– carbon and commodity prices; and

– developments in technology costs and electrification.

• Delivers in-depth market intelligence, including insights into:

– government policy and regulation;

– renewable subsidy support schemes; and

– the EU Emissions Trading Scheme.

• Based on highly detailed modelling from our suite of worldwide commodity models,

including coverage of the heat and transport sectors.

Quarterly updates

• Projections updated on a quarterly basis, ensuring all the latest regulatory and market

developments are reflected.

• Quarterly projections are accompanied by a Quarterly Update Note, which summarises

the major changes and drivers in prices.

Key data for Pöyry projections is provided in a usable Excel format annually, with quarterly

updates available.

Half-day workshop

• Provides the opportunity to discuss the market, our modelling and price developments.

Invitation to our Power Market Conference

• Hear the latest developments in our modelling, insights into new topics and areas of

research every year.

Subscriber support

• Prompt access to our experts who have a wealth of experience and constantly follow

market developments.

Our reports and projections are:

• Independent. Our reputation is built on providing an impartial view.

• Trusted. The ‘Pöyry curves’ are the definitive benchmark for the power sector.

• Bankable. Relied on by the financing community for over 25 years.

Our Offering

Our Nordic experts

Kathrine Stene Bakke

kathrine.bakke@poyry.com

+47 957 59 203

Clémence Carnerero

clemence.carmerero@poyry.com

+47 451 74 632

The Nordic Power Market kathrine.bakke@poyry.com +47 957 59 203

1. Executive Summary 6

1.1 The Nordic electricity market in facts and figures

1.2 Main developments in the Nordic electricity market

1.3 Issues to watch

1.4 Wholesale electricity price projections for the Nordic region

1.5 Elcertificate price projections

2. Report content and convention 21

3. The Nordic power market 24

3.1 Overview

3.2 Physical characteristics

3.3 Market structure and key players

3.4 Wholesale market operation and trading

3.5 Policy drivers

4. The Danish power market 64

4.1 Overview

4.2 Supply

4.3 Demand

4.4 Reserve power

4.5 Grid status and interconnection

4.6 Market structure and participants

4.7 National energy policies and market developments

4.8 Wholesale electricity prices

5. The Finnish power market 79

5.1 Overview

5.2 Supply

5.3 Demand

5.4 Reserve power

5.5 Grid and interconnection

5.6 Market structure and participants

5.7 National energy policies and market developments

5.8 Wholesale electricity prices

6. The Norwegian power market 96

6.1 Overview

6.2 Supply

6.3 Demand

6.4 Reserve power

6.5 Grid status and interconnection

6.6 Market structure and participants

6.7 National energy policies and market developments

6.8 Wholesale electricity prices

7. The Swedish power market 113

7.1 Overview

7.2 Supply

7.3 Demand

7.4 Reserve power

7.5 Grid status and interconnection

7.6 Market structure and participants

7.7 National energy policies and market developments

7.8 Wholesale electricity prices

8. Modelling scenarios and inputs 134

8.1 Pöyry Independent Market Report scenarios

8.2 High level principles driving the scenarios

8.3 Economic assumptions

8.4 Fuel & carbon prices

8.5 Electricity demand

8.6 Generation capacity mix

8.7 Transmission capacity

8.8 Developments on watch

9. Wholesale electricity price projections 188

9.1 Evolution of the Nordic electricity system

9.2 Wholesale electricity price projections

9.3 Price shape in the Nordic electricity market

9.4 Impact of hydrology

9.5 Qualifications

10. Capturing the value of renewable generation 211

Annex A – Sensitivities and risk to Nordic price projections 222

Annex B – Developments in EU legislation and market rules 227

Annex C – Generation costs assumptions 242

Annex D – Economic assumptions and commodity prices 252

Annex E – Pöyry market models 272

Annex F – Additional Pöyry services available 295

Annex G – Pöyry Independent

Market Reports 297

Table of Contents

The Nordic Power Market kathrine.bakke@poyry.com +47 957 59 203

Bespoke scenarios Define specific sensitivities or scenarios

• Customisation for bespoke assumptions, such as fuel prices or decarbonisation goals.

• Sensitivities to examine impact on power price of changing gas or carbon prices.

Transaction support services M&A advisory (including commercial, market and technical due diligence)

• Buy-side and sell-side support for the investment in, or disposal of, generation assets.

• Lenders’ Market Advisor services to support debt financings.

BID3, Pegasus and BID3live Models and datasets available for purchase

• For clients needing full flexibility to do own model runs.

• Live short-term forecasts available with BID3live.

Capture prices Available for all markets and technologies

• Pre- and post- economic curtailment.

• Market-wide, price area specific, asset-specific or for portfolio of assets.

Imbalance projections Projections of the costs of imbalance for wind and solar farms

• Accounts for future growth of renewables, different trading strategies and

improvements in forecasting.

Ancillary service projections Projections of the value of reserve products for flexible generation and storage

• Fundamental projections using BID3 to account for changing capacity mix.

• Covers both holding and activation fees for FCR, aFRR, mFRR, RR, and equivalent.

Other Pöyry Independent Market Reports available Our expansion is client-led: if you’re interested in any other market, please contact us for options

Additional Services

■ Pöyry Independent Market Reports available

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