24 Feb 2020
EUR 75 million
Industries and services
Nordic-Baltic region by night. Image: NASA Earth Observatory
The Nordic electricity market is one of the most efficient regional markets in the world. Nord Pool runs a wholesale power market in the Nordic-Baltic region, Germany and the UK. Still, retail customers purchase their electricity nationally. National authorities are now introducing data hubs for their electricity retail markets, which is a prerequisite for future cross-border markets. Expectations are for peak demands to drop and innovations to flourish, such as consumers storing or selling self-generated renewable energy.
The Nordic Energy Regulators (NordREG) has promoted the idea of connecting national electricity retail markets across borders in Denmark, Finland, Norway and Sweden for several years. NordREG consists of the transmission system operators (TSOs) Statnett, Svenska Kraftnät, Fingrid and Energinet. The regulator says that it would increase the region’s competitiveness by lowering barriers for suppliers to enter a larger market. This could lead to improved efficiency and reduction of unit costs.
The International Energy Agency (IEA) highlights that the regional wholesale electricity market is an important reason why the Nordic countries have experienced steady economic growth without corresponding growth in greenhouse gas emissions during the last decade.
The Nordic governments have tasked TSOs to set up a national service platform that facilitate the transparent exchange of market information between all market participants. These national data hubs are scheduled to become operational before end of 2020.
“Integration and interoperability between national data hubs is a natural next step,” states a recent report on data hubs in the Nordic region written by the four Nordic TSOs.
NIB lends to smart grids
A key component to this plan is to harmonise the method of measuring real time electricity consumption by installing smart meters in every household. These are currently being rolled out and facilitate a possibility for two-way communication measuring consumption and opening up for innovations.
NIB has been providing long-term lending for investments in real time metering since 2007. In Norway, where the roll-out of meters is scheduled for completion by 1 January 2019, NIB has recently signed loan agreements with eight utilities. These loans typically have maturities of 15 years.
“Real-time pricing of electricity is likely to change consumption patterns, at least in the long run with higher electricity prices”, says Magnus Andersson, Senior Environmental Analyst at NIB.
Smart grids are expected to have a positive impact on energy efficiency in the long run. According to the EU’s cost- benefit analyses, predicted savings are in the order of 3%.
In Norway—which has the highest per capita and typical household electricity consumption in Europe—feedback from smart meters could reduce households’ electricity consumption by 6%. This is according to research company VaasaETT in a report on smart metres ordered by the Norwegian Water Resources and Energy Directorate. The firm estimates that Norwegian households could save around 7 TWh within two years if effective feedback were applied following the roll out of smart meters.
“Norway's increased conservation of energy would reduce the need for imports of energy and enable more exports of low or zero CO2 emissions to other Nordic markets and other parts of Europe”, VaasaETT says.
A power network is primary designed to manage peak demands.
“One major expected benefit with smart grids is to cut peak demand and thereby reduce the need for investments in the grid capacity. In the long run, the real time metering system may be able to switch off the floor heating and the sauna when the stove is on and reduce peak demand. That would save a lot in network investments”, Andersson says.
Innovation and competitiveness
Installation of smart meters will allow a considerable expansion of collecting client-specific data that will increase the amount of available information on consumption and network status. Consumers will receive one invoice, even though they may purchase electricity is purchased from several providers other than the network provider.
Smart meters will also facilitate the adoption of decentralised power production to the network. This will open up for households to sell surplus renewable power from their private wind and solar installations.
The data will be used to improve monitoring of network stability and to facilitate faster response to network failures. This will further increase energy security. The electricity data will be available to all service providers via national data hubs. The competition between electricity trading companies means that the value added from increasingly sophisticated pricing schemes can be passed on to the end customers. This would put price pressure on the least productive units in Nord Pool area and thus contribute to a more efficient system. The Nordic electricity market is also part of the European Union's single market. Installing smart meters, with an eye to harmonising the Nordic electricity market adds to European market integration and Europe’s transition to low-carbon economies.
“The utilisation of abundant Nordic wind resources, together with more active use of existing dispatchable hydropower, creates an opportunity for the Nordic region to play a stronger European role. The Nordic region can both export electricity and balance European variable renewables, generating large economic revenues and facilitating the transformation of the European energy system.” IEA says in its Nordic Energy Technology Perspectives report 2016.