The shockwave in the energy markets caused by the Russian-Ukrainian war is calming down; however, the aftermath of it has changed the long-term energy landscape forever. The conflict forced Europe to implement new strategies to ensure the reduction of dependency on Russia and to archive a new level of supply security. This will sharply strengthen the demand for renewables and flexibility solutions and provide continued support for commodity prices. Strongly increased renewable ambitions and necessity for new flexibility sources like hydrogen and battery storage and electrification across all sectors completely changes the future power system landscape.

The tremendous volatility observed in 2022 has been reduced; however, the power prices have been established on the new levels and uncertainty in the longer-term prospective remains high due to significant changes in the years to come. On the EU level, experienced volatility and high prices trigged a process for reformation of existing market structure. The main aim of this process is, however, to focus on the diversification of future market’s instruments and their suitability for renewable and new energy solutions.

While planning process for future development on the EU and national level is still ongoing, understanding and quantifying the impact of those changes is extremely important. During the spring 2023, all Nordic TSOs/Energy regulators updated their long-term strategies, reconfirming the path to electrification across all sectors, extreme growth in renewables and need for balancing sources. Incorporating those changes into power modelling enables a clear insight into the future development of energy systems. This year’s edition of the Long-Term Power Outlook analyzes and simulates on the power market model most of the recent proposal from EU, national governments and TSOs regarding increased requirements for security of supply, electrification process and transition to net zero targets.

The simulation is carefully implemented by several control runs on the EMPS power market model to arrive at the most optimal solution for future power system development. The complexities are further analyzed by providing two sensitivity scenarios to outline future uncertainty in the assumptions in commodities and power balance development.

Projected significant growth in demand will be driven by strong deployment of hydrogen electrolyzes, industry electrification and EV. Risen power price level is expected to trigger further increase in the new renewable facilities; however, it will set a new level of requirements for balancing sources in the power system. Required and forced phase-out of thermal and nuclear capacity will further contribute to it; however, it might be postponed slightly due to security of supply considerations. Replacement of the conventional thermal generation by green 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 continue to increase 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

Ongoing changes have already seen the start of a new revolution in the energy market that 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 needs to understand the recent and future developments in the European and Nordic power markets.

Base Scenario:

Most likely development of the Nordic and Baltic power markets based on the accelerated transfer to carbon free power system, impact of the most recent EU and national decisions with strong growth in renewables, hydrogen and requirements for flexibility.

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 a reduced amount of electrification. Less strict commitment from the EU regarding renewable and carbon targets. Low price levels result in lower renewable growth, leading to obstacles to archive the required level of decarbonization. For order or questions please contact:

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