The energy landscape has changed entirely during 2021/2022. The increase in demand and broken logistics has led to surge in commodity prices during winter 2021. This was further reinforced by Russian-Ukrainian war conflict leading to increased power prices level across Europe. The conflict also forced Europe to rethink security of supply strategies connected to dependency on Russian oil and gas, which will sharply strengthen the renewable ambitions and provide continued support to higher commodity prices.
While the uncertainty is remaining exceptionally high, there is no doubts that the current situation will lead to remarkable changes of the European power system future structure. Approval of the 2030 targets and further commitment for carbon neutrality by 2050 already had visible impact in 2021 in form of strong increasing EUA prices. This is further enhanced in 2022 due to security of supply considerations. Strongly increased ambitions and necessity regarding hydrogen as balancing source for renewables and replacement for conventional thermal generation changes significantly the future path of the power system development.
While planning process for the future development on the EU and national level is still ongoing there is an urgent need to understand impact of those changes. Incorporating proposed decisions and changes into the power modeling enables a clear insight of the future development. In this year’s edition of the Long-Term Power Outlook, we analyzed and simulated on the market model most recent proposal from EU, national and TSOs initiatives regarding both security of supply and transition to net zero targets.
The simulation is carefully implemented by several control runs on the EMPS market model to arrive at the most optimal solution for the future power system development. The complexities are further analyzed by providing two fundamental sensitivity scenarios to outline future uncertainty in the commodity prices, CO2 prices and power balances.
Projected significant growth in demand will be driven by strong deployment of hydrogen electrolyzes, industry electrification and EV. Current levels of commodities prices and EUA prices lead to sufficient high price level across Europe and are expected to trigger major increase in the new renewable facilities, overperforming our earlier expectations. Required and forced phase-out of thermal and nuclear capacity will further contribute to it, however, might be postponed due to security of supply considerations. Replacement of the conventional thermal generation by the hydrogen as the main source of fuel in the longer run will change completely the way power system has been operated before.
Along with the higher share of intermittent production and phase out of coal and nuclear capacity, volatility in the Nordic and European power system will increase tremendously in the coming decades. Closer integration with the European power system, along with electrolysis facilities and flexibility on the demand side are needed to balance the variation of increasing intermittent production and impact of capture rates.
Ongoing changes has already seen a start of a new revolution in the energy market which will completely change the rules of the game. Our in-depth insight is based on careful analysis of quantitative modelling and provides a solid framework for everyone who need to understand the recent exiting developments in the European and Nordic power markets.
- Three scenarios, reflecting different fundamental inputs: base, high and low.
- 40 years fundamental forecast of the Nordic, Baltic and Central European power markets
- Extensive report with background information, review of assumptions and analysis of the results
- Detailed results in Excel format: scenario specific energy balances by country. Weekly area prices with stochastic distribution of onshore and offshore wind/solar/inflow/demand variations
- Presentation with the summary of the analysis and main conclusions
- Analysis of the most recent political and security of supply changes in the EU’s and global policy development including impact of the Russian-Ukrainian war conflict
- Review of the most recent trends in the market including development of LCOE and capture rates, flexibility and energy storage and hydrogen technology
- Analysis of transfer to the hydrogen society both on demand and production side
- Impact analysis of reduction on Russian dependency and updated commodity and EUA prices
- Forecast the power production, consumption, and grid development in the Nordic and Baltic countries
- Assertion of the consumption development with focus on EV, datacenters, and industry electrification
- Interconnector development in the Nordics and in main connected areas in Central Europe, UK, and Russia
Most likely development of the Nordic and Baltic power markets based on the rapid transfer to carbon free power system, updated commodities prices, and impact of the most recent EU political decisions on renewables, hydrogen, and reduction of the energy dependency on Russia
High Sensitivity Scenario:
Further increase in thermal fuel and carbon prices from the current level due to stricter environment and energy security targets. Higher growth in renewable capacity due to improved competitiveness and profitability of RES and higher hydrolyzer utilization. Impact of the rapid switch from coal and gas phase-out to hydrogen as fuel
Low Sensitivity Scenario:
Lower thermal and commodity prices compared to the current level. Lower demand due to less amount of electrification. Less strict commitment from EU regarding renewable and carbon targets. Low price levels do not trigger sufficient renewable construction to start with, power system remains in the current conditions.
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