The impact of renewable energy on the Nordic electricity market

Research output: Book/ReportCommissioned reportProfessional

Abstract

Wind power production in the Nordic region has increased on average at one percent monthly rate over the last 13 years. The Nordic renewable energy expansion path for the coming 5-10 years will further speed up the entry of the renewable capacity. The subsidized entry of technologies that operate with zero marginal costs lead to a potentially significant reduction in the final wholesale prices. This presents a serious challenge to the Nordic market design that is based on the idea of marginal cost pricing. The traditional technologies may face a situation where they can no longer cover their running costs in a market-based manner. In this report, we first quantify the pressure on prices and operating revenues that follows from the current subsidized entry of wind generation. We find that about 20-30 percent of the price reduction in the Nordic market is attributable to the wind generation. We then quantify the impact of the Swedish nuclear power phase-down on the market. We find that the phase-down plan can more or less neutralize the impact of wind on the market prices, although the transition - increasing wind and declining nuclear - creates winning and losing technologies.
Original languageEnglish
Commissioning bodyEnergiforsk – The Swedish Energy Research Centre
Number of pages22
ISBN (Electronic)978-91-7673-319-6
Publication statusPublished - 2016
MoE publication typeD4 Published development or research report or study

Keywords

  • Electricity
  • Climate change
  • renewable energies
  • STORAGE

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