Nordic electricity market will integrate with Western Continental Europe this year

Capital expenditure in the Nordic grid will rise to 600-800 million euros per year. The European wholesale market for electricity will take a long step forward in the summer when the Nordic market will integrate with Western Continental Europe. The Nordic electricity exchange Nord Pool Spot and the German electricity exchange EEX will couple their spot markets during the coming summer. The integration of the wholesale market of electricity was discussed during Fingrid’s electricity market day arranged today.In practice, the wholesale market for electricity can encompass the Nordic countries and Germany, Belgium, Holland and France in one year. The total size of this market is almost four times as large as the Nordic market, and it accounts for one half of the entire electricity market in Europe.

In the future, the transmission system operators (TSOs) will make their capacity available to the electricity exchanges, who allocate it to the market in the same process where they settle the energy trades. This procedure, called implicit auctioning and already applied in the Nordic countries, is hence expanded further to Europe.

This ensures that all transmission capacity becomes available and that electricity always flows in the right direction in view of the market, i.e. from areas of lower price to areas of higher price. It is likely that sharp variations in electricity prices between different areas will level out.

The TSOs have a major role in the market integration process. TSOs such as Fingrid Oyj create the facilities for the functioning of the wholesale market. Adequacy of transmission capacity, good management of congestions, transparency of market information, and fluent balance management are among these facilities. Fingrid is highly committed to the creation of proper market conditions. The most recent example of this commitment is increased availability of electricity market information on Fingrid’s website.

The market integration project between the Nordic countries and Germany has progressed favourably. European Market Coupling Company will launch operations in the summer of 2008. The owners of the company include Nord Pool Spot, the German electricity exchange EEX and TSOs in Denmark and Germany. Nordel planning new grid reinforcements Side by side with the European integration of the electricity market, TSOs are working to develop regional markets. Nordel, the organisation of the Nordic transmission system operators, has proposed new grid reinforcements extending to the period after 2015.

Nordel’s newest grid plan contains four new transmission line proposals. These new projects, together with the ones presented earlier, will improve the functioning of the electricity market considerably. The period of time during which the market area will stay uniform will be almost twice as long as now. In practice, the new grid programme will mean that the Nordic capital investments in the transmission grid will double to an annual level of 600-800 million euros.

The proposed grid reinforcements will also facilitate the achievement of environmental goals, because the grid reinforcements will contribute to the wide-spread use of renewable forms of energy.

The grid plan proposed by Nordel will extend to 2025. It is based on the electricity consumption and production outlook in the Nordic countries and on alternative scenarios. The analysis has also taken into account climate matters, market integration, and national decisions concerning transmission system development.

The new lines are a continuation to the five projects proposed earlier by Nordel. Of these five projects, four are already being engineered or constructed, and a letter of intent exists of the fifth.

Appendix: New grid reinforcements proposed by Nordel

Reinforcements proposed by Nordel in 2004
1. Fenno-Skan 2
2. Great Belt
3. Nea-Järpströmmen
4. South Link
5. Skagerrak IV

New internal reinforcements proposed by Nordel
6. SouthWest Link
7. Ørskog-Fardal
8. Ofoten-Balsfjord-Hammerfest
9. Sweden-Finland, northern AC connection
Further information:
Jukka Ruusunen, President & CEO, tel. +358 (0)40 593 8428
Juha Kekkonen, Executive Vice President, tel. +358 (0)40 560 5274
Pertti Kuronen, Senior Vice President, tel. +358 (0)400 462 614