SKM Market Predictor has released the February 2021 update of the 2020 Long-Term Power Outlook.
The main changes since the release of the main report in May:
- Hydro balance is 20.9 TWh lower compared to LTPO main and 18.2 TWh lower compared to November update 2020
- Carbon prices is adjusted in line with carbon prices for week 6 in the market. After 2030 carbon prices are unchanged compared to November update. Also gas and coal prices are adjusted in line with the market, which means a little increase in coal and gas prices. After 2026 coal and has prices are unchanged.
- In LTPO main we adjusted consumption down 2 % for Nordic areas for 2020 and back to normal consumption in 2022 due to Covid-19. In November update we adjusted consumption down 1 % for Nordic areas, we have maintained these assumptions for February update.
- For European areas we assumed consumption down with 4 % decrease for 2020 and back to normal in 2022 in LTPO main report from May. For November Update we assumed consumption down 3 %, based upon updated statistics from for week 11 to week 48 in 2020, we have maintained this assumption for February update (statistics from ENTSOE).
- Start up for Olkiluoto 3 is delayed according to information given 28. of August. First connection to grid in November 2021 and regular production from beginning of February 2022. Since 28. August, there have been no new information concerning Olkiluoto 3.
- In November update we adjusted wind capacity in the Nordic region based upon updated statistics and new information on country level. In February update we have not many any changes from November update.
The energy landscape has drastically changed recently with the Covid-19 pandemic across the entire world. While long-term consequences on the global economy are still uncertain, the impact is already visible in terms of drop down in electricity demand and lower commodities prices.
Depending on the track of the Covid-19 development those events will have either short (1-3 years) or medium-term impact (3-7 years) on the future prices. This has been one of the main focuses in this edition of the report where we focused on Covid-19 impact both for the Base and Low scenario. Still in the longer-term it is natural to assume that underlining elements of the market will function as planned.
Transition towards a low carbon European power system is ongoing with accelerating rate. The change is visible on EU level since the European Commission acts in favour of highest ambition towards decarbonization. Implementation of European Green deal that leads to carbon neutral Europe by 2050 is given high priority even in current challenging times and is integrated deeply into the EU energy strategy development. It is visible also on country level as the governments are tightening their long-term emission targets and they are organizing competitive tenders to increase renewable power production.
Due to steep cost reductions of renewable energy a significant amount of onshore wind power is entering the Nordic energy market during the next years. The target of the common Swedish - Norwegian certificate scheme for the year 2021 is reached and the additional 18 TWh target for 2030 is expected to be fulfilled during 2020, before the extended scheme period has even started. Also, offshore wind is expected to have an important role in Europe’s power mix during the next decades due to rapid reduction of the costs. However, decreasing capture rate for wind and solar power will increase the break-even level for intermittent wind and solar power production above their levelized costs and thus decelerate deployment of intermittent power production in the coming decades. Along with the higher share of intermittent production and phase out of coal and nuclear capacity, volatility in the European power system will increase in the coming decades. Closer integration of the European power system, but also energy storage and demand side management is needed to balance the variation of increasing intermittent production in different countries.
In this year Long Term Power Outlook report, we will discuss these topics in more detail. Besides assertion of Covid-19 impact we have implemented more detailed modelling of the Polish and other European power systems as well as updated Baltic modelling to incorporate most recent changes.
- Base scenario, describing our current view of the market development.
- Two fundamental sensitivity scenarios (high and low) describing a possible variability of the power prices and other fundamental factors.
- Assessment of Covid-19 impacts both for the Base and Low scenario.
- Reviewed and detailed modelling of the Polish and other European power system.
- Update of the Baltic market modelling to incorporate most recent changes.
- Updated assessment of the increase in the renewable capacity under the Swedish-Norwegian electricity certificate scheme.
- Decommissioning of the nuclear capacity and replacement by renewables from 2030s
- Impact of RES cannibalization on break-even level for intermittent production.
- Implementation and impact of net zero targets from 2050s
Most likely development of the Nordic and Baltic power markets from our point of view, based on the current market and economical perspectives.
High Sensitivity Scenario:
Increase in thermal fuel and carbon prices from the current levels. The High Sensitivity scenario has a higher growth in renewable capacity towards the end of the period due to improved competitiveness and profitability of RES.
Low Sensitivity Scenario:
Long-term lasting impact of Covid-19 on the global economic conditions resulting in lower demand development combined with lower thermal fuel and carbon prices. Low price levels do not trigger any major renewable construction combined with decrease of thermal capacity due to low demand.
- Overview of the recent changes and uncertainty in commodity prices and hydrology
- Estimation of renewable capacity development for each price area
- Assessment of decommissioning of nuclear power plant and additions in line with recent statements
- Estimation of the development of volatility in the Nordic power market
- Assessment of the historical capture rates for Nordic wind power
- Updated plans for new interconnector capacity based on most updated information
- Assessment of scenarios for future electricity demand development
- Assessment of scenarios for future EUA development
- Complete modelling of the Nordic, European, Baltic and Russian power markets
- Coverage period 2020-2060
- 40 years fundamental forecast of the Nordic, Baltic and Central European power markets for each price area
- Three different scenarios for the market development, analyzing the impact of fuel and EUA prices, changes in demand, development of renewable and thermal production
- Report with background information, summary of assumptions and analysis of the results
- Detailed results with weekly prices for each price area, distribution of different hydrological years and scenario specific energy balances delivered electronically in Excel-sheets
- Presentation with the summary of the analysis and main conclusions
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