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Interview

Jorma Ollila: Nordics stand to gain hugely on closer energy cooperation

Jorma Ollila, photo: Marjo Koivumäki
Jorma Ollila is a prominent name in the international business community. He was a CEO of Nokia at a time when the company was a world leader in the 1990s and 2000s. He was also the chairman of Shell from 2006 to 2015. Mr Ollila is currently the chairman of the steel group Outokumpu. Photo: Marjo Koivumäki

The Nordics are living proof that a green transition can happen without compromising economic growth. However, in order to tap the huge potential in energy, the countries need to step up cooperation and build peer dialogue in political decision-making, says Jorma Ollila, the former Nokia CEO and the author of a recently published report, in an interview with the NIB Newsletter.

In June 2017, Mr Ollila presented his report “Nordic Energy Cooperation Strong Today—Stronger Tomorrow” to the Nordic Council of Ministers. As part of the Nordic Council of Ministers’ reform project and one in a series of strategic reviews previously conducted on Nordic cooperation in different areas, Jorma Ollila’s report includes concrete proposals that build on success the region has achieved in interconnectedness, production of renewable energy and decarbonisation of the economy. For the purpose of this research, Mr Ollila conducted a hundred interviews with politicians, authorities, researchers, businesses, as well as international and non-governmental organisations in all the Nordic countries and beyond.

NIB Newsletter has met with Mr Ollila to discuss the critical aspects and full potential of Nordic energy cooperation.

What was the starting point of the review?

“Energy cooperation is today very specifically framed by the Paris Agreement of December 2015, the EU’s aspirations towards the Energy Union, and the advancement of renewable technologies in the recent years which has changed the paradigm globally. It was felt that this is a particularly good time to see how we are doing, and whether we can do more. This was the mandate for my work.

Since June when this was handed over to the Nordic Council of Ministers, there has been tremendous curiosity and interest in the issue and the review.

National energy policy and how this can be strengthened through Nordic cooperation as well as through the European Union’s aspirations and with respect to global warming and climate policy—is under discussion. You could feel that the review was timely. I saw it at the Almedalen Week in Sweden this past July and at other events.”

You write in the review that “nationalist tendencies (..) [present] many challenges to Nordic energy cooperation, which has achieved ground-breaking results based on cross-border cooperation.” The US under the new administration has stepped out of the 2015 Paris Agreement. Is this the kind of challenge you are talking about?

“There is a good awareness and everyone realises the necessity of the climate agreement even if the US is not part of it. This is the time for us to step up our actions and make sure that the commitments and national goals as set in the Paris Agreement are met. The US stepping out of the agreement only highlights the importance of the issue even more and gives it more publicity.

The Nordics need to play a key role in the European Energy Union. This also encourages interest in closer cooperation in the energy sector. Our region is ahead of other European countries and globally in the electricity market, in target-setting for the role of renewables, and in the design of subsidy schemes. Over the past two decades, the Nordics achieved sustained GDP growth while constantly reducing their CO2 emissions. The review highlights the importance of research. Europe needs to step up in supporting research in order to be a leader in the global arena, both in terms of technology and market design.”

The review gives an account of the success of Nordic cooperation but it also highlights what needs to be developed or changed. What was the most striking aspect during the work on the review?

“It was really striking that during the sixteen months I was working on this review, most of the Nordic countries published their governmental strategies for energy. There was no dialogue during the preparation of the national programmes. The national political elites have that in their DNA—to make sure that each country can design its energy policy in the national domain. When they have made their decisions, they get together and see what can be done based on those separate national policies.

Through cooperating in the electricity market, the Nordics have already realised that one country’s investments in a certain type of energy production can significantly affect electricity prices in the other Nordic countries.

I didn’t see any hostility towards working together on broader energy issues. There is simply no working mechanism in place for planning together. I think that discussing plans for the next five to ten years would create significant benefits for all countries. I am not proposing a supranational Nordic body or an arbitration panel. What I am proposing is a peer review process: when a country forges a national energy policy plan for years ahead and the planning process comes to key conclusions, this country could invite key decision-makers from the other Nordic countries to review the thoughts and proposals before they go to print. It is not about seeking approval from peer countries. It is about a dialogue to create more awareness and better policies through better knowledge.”

How do you see further development of cooperation with the Baltic countries in the energy area?

“The Nordic countries have gained more stability in the electricity market by including the Baltic countries in this cooperation. The region should continuously be looking for new ways of doing more together with the Baltics in BEMIP (Baltic Energy Market Interconnection Plan) but also in discussions within the EU, not least on the issue of the energy union. Stronger ties and interconnection in the Nordic–Baltic region will improve energy security and strengthen the Nordic voice in the EU.”

What are the most likely future challenges for energy cooperation?

“Technological changes, particularly, in the transport sector, are bigger and coming at a faster pace than we could ever expect. It will mean that the policy response in transport, which is the best example, has to be proactive. In Europe and Asia, we see growing enthusiasm about investing in electrifying transport. This trend is driven by Germany and China. National policy decisions concern what kind of fuel and what technology you support, and how you design your subsidy system, in order to ultimately cut your CO2 emissions. This creates a big energy impact. One third of the global energy use is down to transport.

In the review, we are discussing the need for harmonising the Nordic national transport strategies. For the moment, Norway and Denmark are focusing on electric vehicles, while Sweden and to a certain extent Finland have prioritised biofuels. Countries would benefit from harmonising their strategies to stand stronger in international competition. While each of the Nordic countries is small, taken together they make up 27 million people and the 11th largest economy in the world.

This is why in the report I put a lot of effort on a strong joint effort in research. My fear is if not doing so, the Nordic leading role in the green transition could be lost and jobs and welfare created elsewhere. So the key question is: Can we afford not to cooperate?

There is an analogy with the Nordic Mobile Technology standard the countries agreed to use back in the 1990s. This analogy, however, is not direct, because the transport sector has gone very far in its development in many parts of the world and it is very difficult to build a strength that can compete with the automotive industries in the US, Germany, China and Japan.”

Where do you see the most potential in Nordic energy cooperation?

“In addition to research mentioned above - it is naturally in the electricity market and working together on renewables and raising the Nordic voice internationally and in the EU. We have tried to answer the most important questions that the Nordic energy cooperation is facing today. When we presented the review to Nordic civil servants, I saw a clear understanding that the proposals made in this paper call for certain changes in the national decision-making mandate.

Fortum has estimated that the common Nordic electricity market has brought a EUR 20 billion welfare benefit to Finland and similar figures to the other participating countries over the past twenty years. There is mutual recognition of the advantages. Now when talking about the energy union, Nordic cooperation is being recognised at the EU level as a prime example, a better example than any other cross-border cooperation in the world.

The question is: can we afford not to look critically at these areas and not to develop the electricity market going forward? I am sure there’s solid understanding of this need and this affects the thinking behind the decision-making.”

You started your career as a banker at Citibank back in the 1980s and had NIB as a customer at the time. What is the role of financing institutions in these changes?

“Innovative financing is always a key to success in any infrastructure project, including projects in the energy sector. There is a role to play for NIB and the financial services industry, which is well developed in the Nordic countries. NIB only has to continue doing a good job.”

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Sep 2017

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