The Nordic Power Market: 4 Major Changes That Will Impact You

The Nordic power market is going through unprecedented changes. Volue Insight’s Olav Johan Botnen looks at the developments and shares scenarios and predictions for the years ahead.

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In the years leading up to 2030, the Nordic power market will change fundamentally. From a major increase in power consumption to growing transmission capacity, Senior Analyst Olav Johan Botnen tells us what to expect in the next decade.

#1 Oversupply of wind power in the north

Over the past decade, the northernmost part of Scandinavia has welcomed a new industry – wind power.

Sweden, in particular, plans to shift away from fossil fuels earlier than other European countries – by 2040 – and counts on wind to do this.

Currently, 28 TWh is generated by a fleet of 4,000 turbines. By 2040, Sweden’s wind power capacity will reach 100 TWh.

But one of the consequences of this new industry is the large oversupply of power. In the north of Sweden, we have seen a jump in the oversupply from 35 to 55 TWh compared to 10-15 years ago.

In addition, some oversupply has developed in the north of Norway, leading to a total of 25 TWh/y oversupply in the northernmost price zones.

Currently, the excess wind power is creating internal north-south grid bottlenecks as well as grid bottlenecks between the Nordics and continental Europe.

It is also one of the reasons for the strong area price differences and the price differences between the Nordics and Continental Europe (during this and the next 2-3 years, there’s a gap of 20-40 Euros between the Nordic system price and the UK and Germany, and an even bigger gap between the north of Norway and Sweden, and Europe).

#2 Growth of Nordic power consumption

However, all this will change with the addition of several new industries in the north. Battery, hydrogen, and green steel production, amongst others, will gradually exhaust the Nordic oversupply in the years leading up to 2030.

The total growth of Nordic power consumption by 2030 is expected to reach 100 TWh/y, comprising power demand from battery production, hydrogen and electric transport.

#3 New transmission capacities from Nordics

Several grid upgrades will reduce the bottleneck problem step-by-step during the 2020s. Upgrades of the grid are planned for 2024, 2026, 2028, and 2030.

In addition to the upgrades, in the 2030s, several planned extensions of the grid capacity between north and south will be developed.

The new transmission capacity from the Nordic area will reach 11GW in 2022, 13GW in 2025 and 16GW in 2030 – nearly 3 times more compared to 2019 when transmission capacity was 6GW.

The new transmission capacity will impact the Nordic and European power markets significantly.

Euro data forecast

#4 Reduced price differences between Nordics and Europe

The large price differences between the Nordics and neighbouring countries will continue well into next year. In 2022, Germany's average price is expected to be 25 EUR / MWh higher than in the Nordics, and the UK’s average price is expected to be 40 EUR / MWh higher than in the Nordics.

However, due to the growth of Nordic power consumption and the increased transmission capacity, price differences will be significantly less post-2022, both internally between the north and south in the Nordics, and externally between the Nordics and Continental Europe.

In 2028, the average price difference, on a yearly basis, between the Nordic system price and Germany will be 3 Euros, and between the Nordic system price and the UK – 4 Euros.*

The NordLink cable from Germany to Norway and the North Sea Link cable linking the UK and southern Norway, in combination with the 100 TWh package of new power consumption, will lead to harmonization of prices during the late 2020s.

* The price forecast is based on an average of over 30 weather years. On an hourly basis, the results can be completely different.

Volue Insight simulations

Germany vs. system price

Gradually reduced from 25 (2022) to 3 €/MWh (2028)

UK vs. system price

Gradually reduced from 40 (2022) to 4 €/MWh (2028) – driven by UK carbon prices/links

System price vs. NO3, NO4, SE1, SE2

Gradually reduced from 10-15 (2022) to 2 €/MWh (2026)

South Norway, SE3, SE4, Finland vs. system price

Gradually reduced from 4-9 (2022) to 0-1 €/MWh (2026)

Germany vs. DK1, DK2

Gradually reduced from 2-3 (2022) to 0 €/MWh (2026)

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