Generation Adequacy in Finland

Electricity Market Day, 28 April 2015

Mikko Heikkilä, Specialist, Fingrid Oyj

Generation adequacy is a hot topic in Europe – now also in Finland

• EU energy politics has been driven by the climate

targets during 2000's

• The New Energy Union for the Commission

emphasises security of supply and sustainability

• Concern about generation adequacy has also risen

in Finland

– Pöyry's study about the generation adequacy

– Ministry of employment and economy's study about the

options of Finland's energy politics

Security of Supply

Sustaina-bility

Competi-tiveness

Finland's generation adequacy - conclusions from Pöyry's study

• Situation before Olkiluoto 3 is challenging –

Finland is dependant on electricity imports

• Commissioning of Olkiluoto 3 shall not solve

the situation completely

• Competitiveness of condensing power is low

now and also in the future

• Surplus of energy, the prices of energy

futures are low

Source: Pöyry Management Consulting Oy

Report available: http://www.tem.fi/files/42026/Kapasiteetin_riittavyys_raportti_final.pdf

Scarcity of peak power – What does it mean?

• Price peaks become more frequent and

stronger

• Probability of power shortages and load

shedding is rising

• However, power shortage and load shedding

is a situation which can be controlled and

prepared

– local brown-outs

Generation adequacy will be a challenge in the whole market area

• Decommissioning of nuclear is getting closer while

intermittent generation increases in Sweden

• Competitiveness of condensing power is low in

Denmark, peak load reserves are introduced

• Demand for Norwegian balancing power increases in the

Europe

• Competitiveness of Baltic condensing power is getting

lower

• The flexibility of power system will decreaseD

K1

F

The generation adequacy is a challenge for the

Baltic Sea market in 2020's

Common problem, common solutions

How to get more peak power and flexibility

to the Baltic Sea area in 2020's6

[MW]

0

10,000

20,000

30,000

40,000

50,000

60,000

0:00 6:00 12:00 18:00

20 GW wind power in the Nordics year 2020

Generation

+4 000 MW/h

Wind production

-1 200 MW/h at the

same time

• Condensing capacity is decommissioned,

thermal power capacity is getting older

• Intermittent generation capacity increases

• Commercial investments rely on nuclear

• Increase of demand response will help, but cannot change

the big picture

• Cross border capacity increases, but similar challenges in

the whole region

The need for flexibility increases –

Flexibility in generation decreases

Securing generation adequacy with reserves –

No extra flexibility to the power system

• Peak load reserve

– A fairly good arrangement to keep old

capacity with low competitiveness as a

reserve for short term period (max 5 years)

– Shall not increase flexibility or change

the big picture

• Emergency supply reserve

– Might be useful to maintain Finland's

security of supply in emergency situations

– Start up readiness of the plants would be

low, in practice the concept is about a

energy reserve

Generation adequacy – How to set the target?

• The discussion in Finland is often about self-sufficiency

• National self-sufficiency is not a relevant topic on the

Nordic electricity market – but the availability

of electricity is!

• Peak power and flexibility become scarcity,

the probability for forced reduction of electricity

consumption has risen

• Social discussion about the target level –

– What is the cost-effective level for generation

adequacy?

– Acceptability of forced reduction?

Development of the Nordic market

• Increase of cross border capacity within the market area

• Development of end-user market (e.g. Datahub)

• Development and integration of reserve and regulating power markets

• Promoting of demand side response

• Development of imbalance pricing principles

• Development of capacity calculation methodologies

• Increase of market transparency

Nordic Market Model v. 2.0 for 2020's

What if ... Be prepared for big changes

• Need for capacity investments which can provide

flexibility and peak power when needed

• Big if's:

Emissions trading and subsidies for renewables

• National capacity subsidies and fragmentation of

the market is a risk for the whole market

• One common Nordic view on capacity

mechanisms is needed

• Revolution of the energy system in Finland and in the Baltic Sea market area

• Probability for load shedding has risen in Finland

Scarcity of peak power and flexibility increases

• Nordic Market Model v. 2.0 for 2020's

• Common solutions for the whole market area

Development of

the Nordic Market

• National capacity subsidies and fragmentation of the market is a risk for the whole market

• One common Nordic view on capacity mechanisms is needed

Be prepared forbig changes