Aleksi Nordlund, Head of Origination, Fortum

Fortum
Origination
Electricity market: The value
of flexibility in the future
DIGITICE
Vaasa 17th March 2015
16th December 2014
Aleksi Nordlund
Ann Boije af Gennäs, Portfolio Manager Origination
Fortum Origination services
TRADING IN SEVERAL MARKETS
Secure
Optimize
electricity
consumption
financial
result
PPA
80
70
60
Structured
products
50
40
30
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
20
2005
Decrease
volatility in
sales result
2004
Increase
cash flow
with GO
trading
Role of Wind production
Wind and solar plays a major role in
Germany today
Wind will play a major role in
Nordics tomorrow
MW
Source: Eurelectric Power Statistics & Trends 2013, Entso-E 10 year plan & Bundesministerium für Wirtschaft und
Energie, Statistisches Bundesamt, Arbeitsgruppe Erneuerbare Energien-Statistik (AGEE-Stat)
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News on Bloomberg 25th July 2014
July 25 2014 (Bloomberg) -- Germany’s push toward renewable energy is causing so many
drops and surges from wind and solar power that more utilities than ever are receiving
money from the grids to help stabilize the country’s electricity network.
…
Twenty power companies including Germany’s biggest utilities, EON SE and RWE AG, now
get fees for pledging to add or cut electricity within seconds to keep the power system
stable… …Utilities that sign up to the 800 million-euro ($1.1 billion) balancing market.
...
“At the beginning, this market counted for only a small portion of our earnings,” said
Hartmuth Fenn, the head of intraday, market access and dispatch at Vattenfall AB,
Sweden’s biggest utility. “Today, we earn 10 percent of our plant profits in the balancing
market” in Germany, he said by phone from Hamburg July 22…
Source: Bloomberg: http://www.bloomberg.com/news/articles/2014-07-24/german-utilities-bail-out-electric-grid-at-wind-s-mercy
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Balancing market turnover increasing
?
Source: EPEX SPOT http://www.epexspot.com/dib/ & Fingrid Oyj annual reports
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Transmission enhancements supports balancing
Transmission network companies’
cross-border grid plans by 2020:
New internal Nordic grid investments provide
for increased available capacity for
transmission to the Continent and Baltics
Two 1,400 MW NO-UK links as EU Projects of
Common Interest: NSN link to England agreed
to be built by 2020, NorthConnect to Scotland
still requiring Norwegian permission
320 MW of transmission capacity available on the
1,300 MW RU-FI link since December 2014
First direct 1,400 MW NO-DE link agreed to be
built by 2018
EU’s Connecting Europe Facility co-financing 3rd
EE-LV transmission line, due to be ready by 2020
EU financial support for a 700 MW DK-NL link,
due to be built by 2019
EU’s European Energy Programme for
Recovery co-financing 700 MW NordBalt
(ready 12/2015)
Jutland – DE capacity planned to grow by 860
MW by 2019, with further 500 MW increase by
2022
LitPol link (500+500 MW) to connect the Baltic
market to Poland by end -2015/20. It will open
a new transmission route from the Nrodic
market to the Continent
Svenska Kraftnät agreed 3/2014 with 50Hertz to
study a new Hansa PowerBridge DC link
between Sweden and Germany
Existing connections
Future connections
Future cross-border connections
Nordic internal grid enhancement plans are modest – interconnections must be improved
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Source: ENTSO-E 10-year plan, Fortum
Capacity remuneration mechanism is one option to secure
production flexibility
SE&FI: Capacity reserves for spot
market deficits only. SE reserves to
be gradually phased out by 2020. FI
reserves reduced for 2014-15
RU: Capacity market
with price restrictions.
Long-term capacity
supply agreements for
obligatory investments
GB: Full-scale capacity
auctions, approved by EU.
First auction in Dec 2014 for
delivery year 2018/19
IE&NI: Capacity
payments since 2005
BE: Strategic
reserve from
2014/15
PT: Capacity
payments for new
units. Wider
payments on hold
ES: Capacity payments for new
units and to existing coal, gas, oil
and hydro capacity. Payments
reduced in 2013
Source: Fortum
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Partial capacity
mechanisms
LT: Condensing units as
reserve. Lower needs from
2016 due to NordBalt
PL: Strategic reserves
contracted for 20162017/19. Capacity
market under discussion
FR: Capacity purchase
obligations due to be
implemented by winter
2016/2017. Capacity certification
and trade to start in 2015
Energy-only
market *)
DE: Grid reserves in
southern DE since 2011.
Discussion and studies on
further wider mechanisms
GR: Capacity
obligation mechanism
since 2005
IT: Minor payments. New zonal
reliability option mechanism to be
implemented by 2018, with only
part of the capacity included
Proposals for
new capacity
elements
Major capacity
mechanism
Regulated
market
restrictions
*) No capacity payments
to power plants in the
day-ahead and intraday
markets, but balancing
market reserve capacity
is contracted in advance.
The value of flexibility in the future
Summary
• Increasing demand for flexibility
– Increasing renewable production
– Condensing capacity closures
• Increasing regulation is a threat on hydro flexibility
• Transmission enhancements supports power
market balancing
• Capacity remuneration mechanism is one option
to secure production capacity / flexibility
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Your Fortum Contacts
Aleksi Nordlund
Manager Origination
+ 358 50 453 62 90
Aleksi.nordlund@fortum.com
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Confidential
Saara Rantanen
Originator
+358 40 552 2244
Saara.rantanen@fortum.com
Juha Ruokonen
Manager Environmental Values
+ 358 40 091 83 22
juha.ruokonen@fortum.com
Thank You!
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