Nordic Energy Day: Declining Coal Power, the Golden Age of Gas, the Surge in RES
Date: August 28th 2020
Author: Alenka Lena Klopčič
How much will electricity cost in the future and what are the most important influencing factors to follow? Arne Bergvik, chief analyst at Jämtkraft, tried to provide answers to these questions during Thursday’s Nordic Energy Day, organised by Montel. The panel discussion has also highlighted today’s uniqueness in the energy markets.According to Bergvik, the three most important drivers ahead in terms of future electricity prices are the cost of carbon, liquefied natural gas (LNG) and, finally, politics.
In Q2 2020, we did not see a ‘real winter’, but still there was a lot of snow, which resulted in major spring flooding, stressed hydro power generation, and topped up reservoirs. Bergvik also stressed the impact of the carbon prices movement, which is not only a result of the COVID-19 crisis, but also due to higher LNG imports - the growing ‘appetites’ in China boosted the prices at first - as well as declining coal power production, and finally there is the new European Green Deal.
If there will be a further expansion of renewables, we must also be prepared for further development of system flexibility, reiterated Bergvik, adding that the energy transition is really a system transition, whereas ‘planned’ generation and distribution are not enough, thus there is a requirement for access to new partnerships and technologies, and there is also a need for product development for key clients and re-allocation of capital flows.
While 2019 was mostly a ‘normal’ year, this year – 2020 – is more challenging, said Bergvik, adding that major trends are still present, and are even stronger: declining coal power generation, the golden age of gas 2.0, and a surge in renewables. He also explained that the dependency on LNG as a swing supply links Europe closer to the global natural gas market, and natural gas power is already determining the power price in Europe today.
Today’s uniqueness in the energy markets
Nordic power prices are usually relatively low, however, power prices must be comparably lower than those of competitors, and it is expected that this will also be the case going forward. The Nordic power market is usually also transparent and predictable. However, today there is some ‘uniqueness’ witnessed in the markets, illustrated Ole Løfsnæs, Nordic Energy Director at Alcoa, adding that he isn’t confident that the (Nordic) power prices will remain so relatively low.
Nevertheless, it is necessary to have the bigger picture in mind when talking about the competitiveness of entire economies, not only power markets, because power and transportation costs in industry are what affect the competitiveness of industries. Various subsidy systems are what makes industries competitive or not.
Løfsnæs concluded with the statement that the Nordic power market is a very good place to be, not only because the market is functioning well – it is transparent as well as diversified – but also because renewable energy does not have to be a scarcity.
The best way to promote industrial competitiveness is to allow the market to work as intended, to protect it against carbon leakage and, finally, to incentivise efficient grid operations and development and to clarify grid tariff regulation for the industry, added Løfsnæs.
In a panel session in which Løfsnæs and Bergvik were joined by Eylert Ellefsen, a senior analyst at the Energy Quantified, and Sigbjørn Seland, chief analyst at Storm Geo Nena Analysis, the panel confirmed that the whole of 2020 has been, and still is, a unique year for the energy business, and this is also the reason that the predictability is substantially different than it was not that long ago.
This article is available also in Slovene.
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