Integration of European and Baltic Sea electricity markets

1. Integration of
European and Baltic
Sea electricity
markets
Jukka Ruusunen
Fingrid Oyj, President and CEO
Tallinn University of Technology 18.10.2017

2. About Fingrid

3. Jukka Ruusunen
• Fingrid is the transmission
system operator and owner of
the main electricity
transmission network in the
Finnish mainland
• Fingrid owns for the Finnish
part the interconnections to
Sweden, Norway, Estonia and
Russia
Finnish Power Transmission Network
18.10.2017

4. Fingrid in numbers
18.10.2017Jukka Ruusunen

5. Our mission
Fingrid is Finland’s transmission system
operator. We secure reliable electricity for
our customers and society and we shape
clean, market-oriented power system of
the future.
18.10.2017Jukka Ruusunen

6. Electricity markets

7. Versatile generation structure in the Baltic Sea region:
potential for synergies
18.10.2017Jukka Ruusunen

8. Electricity cannot be stored: how to create a
market?
18.10.2017Jukka Ruusunen
Supply and demand must be in balance – every second!
What is the
commodity that
is traded?
How is it traded?
What is the
"market model"?

9. How does the market balance the current
hour October 18th 16:00-17:00?

10. October 17th at 13:00:
Day-ahead market
18.10.2017Jukka Ruusunen
Buyers and sellers enter orders into the day-
ahead market
Spot price for Oct 18th hour 16:00-17:00 as a
result of auction. Supply-demand balanced
based on forecasts.

11. 18.10.2017Jukka Ruusunen
Due to errors in forecasts,
imbalances between day-ahead
contracts and volumes actually
produced/used need to be
offset.

12. Between October 17th after day-ahead auction settlement and
October 18th 15:30:
Intraday market
18.10.2017Jukka Ruusunen
Continuous trading in the intraday market to
offset the imbalances
Intraday price finetuned for hour 16:00-17:00
as a result of continuous trading. Supply-
demand balance based on improving
forecasts.

13. 18.10.2017Jukka Ruusunen
When commercial markets close,
imbalances between contracted
volumes and volumes actually
produced/used are based on
forecasts at gate-closure time of the
intraday market.

14. Delivery hour October 18th 16:00-17:00:
Balancing and reserve market
18.10.2017Jukka Ruusunen
Transmission system operators
keep the balance in real time –
“laws of physics”

15. Market mechanism keeps the electricity system
running
18.10.2017Jukka Ruusunen
• Price signals steer demand, operation of power plants and use of
cross-border connections
• Electricity flows from low-price regions to high-price regions
Day-ahead and intraday
markets
• Transmission system operators keep the balance in real
time
Balancing and reserve
markets
• Price drives market-based investments
Long term prices – price
expectations
Markets and competition produce efficiency and high security of supply

16. European Market Integration: from day-ahead to real-time markets
18.10.2017Etunimi Sukunimi16
Day-ahead market integration
status July 2017
Full harmonization
Partly harmonized
Pan-European intraday XBID
expected go-live Q1/2018
Countries currently involved
Accession countries
European balancing markets
MARI, platform for manual Frequency Restoration Reserve
go-live 2020-20
Member countries
Observer countries

17. Markets 1.1.-31.7.2017
Transmission
(TWh) * 1
1
• Well integrated Nordic and Baltic
markets:
• Strong interconnections
• Integrated day-ahead and intraday
markets
• Next step: Nordic-Baltic balancing
market integration
• Price peaks ~ 100 €/MWh in
Finland and Baltic countries:
• Wind power
• Planned outages of nuclear power
and cross-border connections
* 1 Source: Nordpoolspot
Elspot commercial
transmission
32,2 €
32,2 €
30,2 €
30,2 €
30,3 €
31,0 €
35,2 €
5,8
3,9
3,2
0,9
SYS
26,5 €
34,3 €
34,7 €
0,6
28,7 €
28,5 €
28,5 €
29,0 €
24,4 €
35,7 €
18.10.2017Jukka Ruusunen

18. Future

19. Over 22 GW of windpower planned by 2025 in the
Nordic countries!
0
2000
4000
6000
8000
10000
12000
Installed 2015 Estimated 2025
Finland Norway Denmark Sweden
18.10.2017Jukka Ruusunen

20. Trends that challenge the power system
18.10.2017Jukka Ruusunen
There is surplus of energy
BUT
there will be scarcity of
 peak power
 flexibility
 rotating mass to support
system stability

21. Possible implications
18.10.2017Jukka Ruusunen
 Power shortages for citizens during
peak hours
 Centralized control actions to
balance supply and demand
 Restrictions for the operation of big
nuclear units and interconnectors

22. Scarcity of peak power
is a regional problem!
18.10.2017Jukka Ruusunen
Demand for
Norwegian
balancing power
increases in
Europe
Denmark:
Condensing power
not competitive -
peak load reserves
proposed
Baltic countries:
Lower price level
via integration -
condensing power
not competitive
Finland: Closure of
condensing power
due to low profitability
– new nuclear!
Price peaks
become more frequent
and stronger!
Probability for
power
shortages and
load shedding
is rising!
Sweden: Early
decommissioning of
nuclear power due to
low profitability –
replaced by wind

23. Two scenarios
18.10.2017Jukka Ruusunen
European or regional solution
– no room for a national solution!

24. 18.10.2017
Jukka Ruusunen
"Finland must have an excellent security of
supply. When we generate electricity by
ourselves, security of supply is in Finnish
hands. We must reach self-sufficiency in
electricity generation, because that has an
impact on security of supply and electricity
pricing. Then we rule electricity price."
Different political stories...
Finnish MEP candidate
... leading into very different solutions!

25. No country can solve market challenges alone –
coordination is needed
18.10.2017Jukka Ruusunen
• National energy policies have regional consequences,
which impact international electricity markets
• Regional electricity markets call for coordinated energy
policies
• Investment climate impacted from rapid increase in
promoted renewable energy resources
• CO2 price should be a driver to a clean energy system
• Promotion of renewable energy should be done without
hampering markets
• National energy policies should be coordinated to
address common challenges

26. Our Shared Journey
– a Roadmap towards Achieving a Clean Power System
Large
market area
Real-time
market
Consumer at
the centre
New
solutions

27. Fingrid Oyj
Läkkisepäntie 21
00620 Helsinki
PL 530, 00101 Helsinki
Puh. 030 395 5000
Fax. 030 395 5196