Energy transition is changing the electricity landscape in the Nordic region. The Nordic power system has been undergoing dramatic changes since the liberalisation of the power markets over two decades ago. The changes are driven by the region’s climate policy and the availability of more economical solutions. On the supply side, the electricity generation mix is changing, with more intermittent renewable generation and distributed energy resources (DERs). The demand patterns will also witness substantial changes due to electrification, urbanisation and new industrial sectors.

These developments are driven by the aggressive national decarbonisation targets set by the four Nordic countries. Finland aims to become carbon neutral by 2035; Sweden by 2045 [with interim milestones for 2030 (63 per cent) and 2040 (75 per cent)]; Denmark by 2050 (with a 70 per cent milestone for 2030); and Norway aims to become a low-emission society (with 80-95 per cent reduction) by 2050. All carbon reduction targets compare to the level in reference year 1990.

The Nordic transmission system operators (TSOs) face the challenges of the transition to a cleaner energy system and are preparing to act as enablers. In this context, the four TSOs – (Denmark), Fingrid Ojy (Finland), Statnett SF (Norway) and Svenska Kraftnät AB (Sweden) – are in the process of formulating a common strategy for the next 10 years (up to 2030) to meet the developments in wind power and sector integration. The TSOs launched the consultation process for the same in November 2020. Subsequently, they released theNordic TSO draft strategy and background report and held a webinar on March 12, 2021. The draft strategy was open for stakeholder feedbackup to April 2, 2021.

The TSOs are seeking answers to questions regarding the challenges facing wind development and sector integration as well as the plans and actions the TSOs should take to promote and develop the same. After the consultation, the Nordic TSOs will amend the strategy and arrange the next webinar in the autumn of 2021. The strategy will be finalised and made public in the spring of 2022 as part of the next Nordic TSOs’ joint solutions report, which is released once every two years. Earlier, the 2020 solutions report described how rapid changes in the energy system required innovation and agility in addressing the identified challenges (relating to system flexibility, transmission and generation adequacy, frequency quality and inertia) and how the four TSOs were continuing to work closely with stakeholders to understand the requirements of the market participants.

Going forward, developments in both wind energy and in sector integration will be dependent on multiple actors. The draft strategy sets out short- and long-term milestones to ensure an efficient integration of wind and to support and utilise the integration of energy systems. The strategy covers plans for energy markets, network operation, infrastructure and planning to support the energy transition. The strategy will utilise the special knowledge of each Nordic TSO. Energinet has been working with both offshore and onshore wind development and Power-to-X (PtX); Statnett has gained experience in handling flexibility in distribution grids; Svenska Kraftnät has accommodated vast amounts of onshore wind; and Fingrid is integrating more and more wind but also following power-to-heat projects being undertaken in Finland.

The strategy will comprise a Nordic vision and actions for reaching this vision. It will also recognise and consider the developments and requirements taking place at the EU level and in surrounding regions such as the Baltic Sea and the North Sea regions. Global Transmission Report presents the key features of the draft strategy and the takeaways from the recently held webinar.

Highlights of draft TSO strategy document

The Nordic strategy is being built on four key elements – electrification is a tool for competitiveness and climate neutrality; wind power is a Nordic resource for electrification, but its variability is a challenge; flexibility enables wind integration and improves system security; and sector integration enables flexibility, electrification and business opportunities.

The Nordic vision statement for 2030 is ‘Clean and affordable electricity enabling a climate neutral, secure, and integrated energy system in the Nordics’. The three elements or pillars of the vision are:

  • An optimised Nordic energy ecosystem where infrastructure (including electricity and gas grids, electric vehicle charging and district heating infrastructure) is based on the potential of climate-neutral electricity, incorporating the needs of stakeholders.
  • Harmonised Nordic energy market design supporting coordinated flexibility on a cross-border level and secure system operation with a level playing field for all technologies.
  • Adequate transmission capacity (electricity, gas and heat) within and between countries enabling an integrated Nordic market for renewable resources as well as direct and indirect electrification (refers to electricity used indirectly for decarbonisation, for instance for producing clean hydrogen).

The foundation of the vision refers to prerequisites and favourable conditions that already exist in the Nordics. Nordic TSOs have a long history of successfully cooperating and communicating at all organisational levels, finding and implementing harmonised solutions, sharing resources and sharing a joint position within Europe. The conditions for onshore and offshore wind power in the Nordics are excellent and advanced electricity and reserve power markets are easily accessed. The already high degree of climate-neutral power and, to some extent the geography and climate, attract new innovations, businesses and investors. There is also a long-standing practice of engineering and research and development (R&D) in many business sectors.

Figure 1: Nordic Vision 2030
Source: Presentation by Daniel Gustafsson, Nordic Planning Group and Jussi Matilainen, Nordic R&D at Webinar organised by the Nordic TSOs in March 2021.

Roadmap for sector integration: The roadmap presents strategic milestones for reaching the Nordic vision and are divided into three categories according to the TSOs’ internal working streams – market development, integrated system operations and system planning. Particularly, an optimised energy system is considered in all three working streams, a harmonised market and secure power system fit mainly within market development and integrated system operation,

 while adequate infrastructure is retained under system planning.

  • Market development: The key actions are to enable market-based flexibility where a new type of DER, consumption or production has a common market design and easy access to local markets as well as the Nordic reserve power and balancing power markets. All energy carriers will have a level playing field, there will be clear price signals for market players and the grid tariffs will incentivise customers to connect and use their resources in a way that is beneficial to the whole energy system. The TSOs would want to ensure that new potential flexibility, coming from different energy sectors, will be available in the markets when required. This requires knowledge about the business opportunities and real value added for market players when investment decisions (for flexibility) are to be made.
  • Integrated system operation: It is necessary to manage data and information to maintain real time situational awareness and to develop short- and long-term forecasts. TSOs are responsible for the entire power (and gas) system, but data is provided by the stakeholders of different energy sectors. Also, the development of new technologies and their flexibility potential, as well as volumes, geographical locations and timing of investments, should be known as early as possible to prepare for the change. Finally, new types of flexibility resources may have new features (opportunities and limitations) that should be taken into consideration in new (connection) requirements.
  • System planning: The main goal is to develop wholistic grid planning that takes into account all energy sectors i.e., power, gas and heating systems as well as road transportation. This will require knowledge about the modelling of new types of technologies and processes. There may be a need to redefine the roles and responsibilities of different actors.

Notably, sector integration may occur in several ways. First, the generation, storage, transmission and consumption of energy vectors (different forms of energy such as gas, heat and electricity) can be connected into one integrated system. This can be done at the system level, the (energy) end-user level, or both. Second, different energy (usage) sectors can be integrated into one energy system. All these aspects will be covered in the Nordic strategy.

Roadmap for wind sector integration: The roadmap presents strategic milestones, which are classified into four of TSOs’ internal working streams – R&D and technology; planning; markets and operations; and infrastructure. The short-term milestones are either ongoing or have been initiated. For the long-term milestones, the sector has to work on the following key areas:

  • In the area of R&D and technology, the key actions are to optimise performance of the existing system and assess the viability of expanding the grid technology mix. Performance optimisation of the existing system is particularly an effect of gaining speed in providing capacity and connections in the grid. Introducing large amounts of wind power will create a need to introduce new technologies to the grid including novel solutions that are harmonised and interoperable between vendors.
  • There is a need for more holistic planning methods and to take factors outside the power system into account. The TSOs in association with the stakeholders must develop the right scenarios with appropriate assumptions concerning how wind power will develop in the Nordics over the next decades.
  • With respect to markets and operations, the key actions will be to improve short-term forecasting, enabling proactive balancing. So far, the wind sector has not needed to participate in balancing markets and ancillary services. The barriers that hinder wind power from contributing must be discussed along with the expected contribution for system good. Hence, offshore market design needs to be investigated to reach a joint Nordic view.
  • The identified grid infrastructure to meet capacity needs within and between countries and to streamline connection to the grid must be built. To be fast and efficient, TSOs believe that success is dependent on close cooperation and making use of all the resources in the Nordics.

Role of TSOs: TSOs have a central role as enablers in building a climate-neutral energy system. With the rapidly progressing energy transition and upcoming electrification, this needs to be done at an unprecedented pace, while simultaneously ensuring that the future system is secure. This requires cooperation and communication between TSOs and stakeholders. A substantial part of needed TSO actions will continue to be related to core businesses – connecting new generation and demand, optimising the performance of the existing power system, building planned grid investments, facilitating players’ access to the common markets, and operating the system in a secure way. At the same time, new demand, generation, storage and grid technologies, as well as market mechanisms related to sector integration, require R&D and other development activities.

Key takeaways from the webinar

Asta Sihvonen Punkka, executive vice president markets, Fingrid Oyj, moderated and facilitated the webinar proceedings.

Daniel Gustafsson, senior vice president, Svenska Kraftnat, and Jussi Matilainen, R&D manager, Fingrid, highlighted that the Nordic experience in sector integration, advanced electricity markets, competitive electricity prices and tradition of cooperation make the Nordic energy system a potential forerunner and attractive area for investors. Sector integration will enable new flexibility for TSOs and DSOs, better cost-efficiency for customers and a clean energy system. Nordic wind power with its competitive cost will enable strong Nordic electrification and sector integration. Technologies that maximise the use of the existing grid are necessary. Planning methods need to be holistic to consider all energy sectors and to optimise the entire energy system. Ultimately, wind power participation in balancing markets and ancillary services must be ensured. Internal processes of the TSOs as well as external processes need to be fast and streamlined in order to make the grid and connections available in time. A strong Nordic voice towards EU regulations will have a positive impact.

Figure 2: Nordic TSO Wind Strategy Roadmap
Source: Presentation by Daniel Gustafsson, Nordic Planning Group, and Jussi Matilainen, Nordic R&D, at Webinar organised by the Nordic TSOs in March 2021.

Figure 3: Nordic TSO Sector Integration Strategy Roadmap
Source: Presentation by Daniel Gustafsson, Nordic Planning Group, and Jussi Matilainen, Nordic R&D, at Webinar organised by the Nordic TSOs in March 2021.

According to David Kulin, strategic analyst, Svensk Vindenergi, a truly fossil-free economy can be achieved through electrification and accelerated growth in wind energy. While technology development is expected to take place, infrastructure and markets (including that for ancillary services) need to be developed appropriately. Wind power capacity in wide geographic areas in the Nordic region make a stronger, more resilient system. Wind power is ready to be one of the technology pillars that support modern society.

Henrik Sætness, EVP, Statkraft, emphasised that the Nordic power market, which is characterised by high electrification levels (consumption per capita), low carbon intensity, world-leading onshore wind resources (with one of the lowest levelised costs of energy) and low power prices, has a strong starting point. Offshore wind will benefit the Nordics in several ways including to help reduce emissions in the power sector, build industrial capabilities in a growing market and meet other decarbonisation objectives.  In the Nordic region, offshore wind is expected to grow by seven times over the next two decades from about 2 GW in 2020 to 14 GW by 2040. Grid strategy, planning and connection (with the national and cross-border onshore grids) are crucial and must be discussed and implemented in consultation with all the stakeholders involved. While Denmark is planning to build offshore islands to support development of large-scale offshore wind capacity, Norway is preparing to develop 3 to 4 GW of offshore wind capacity in the Sørlige Nordsjø II area. The large-scale development of offshore wind capacity will help accelerate the electrification process, capitalise on hydropower flexibility besides providing a fillip to industrial development.

Jero Ahola, Professor, Lappeenranta University of Technology, spoke about the role of hydrogen in the Nordic TSO sector integration strategy. The hydrogen economy is expected to initiate from industrial clusters. At the global level, there will be a huge demand for carbon-neutral fuels, ammonia, chemicals and steel, and hydrogen will be a key element in the production of these products. This offers a huge business opportunity for the Nordic countries. Green hydrogen (hydrogen produced from renewable energy) will be the main energy carrier or raw material in manufacturing PtX products. The window of opportunity for blue hydrogen (produced from natural gas) will likely be short.

The cost of green hydrogen production as well as of the fuels and chemicals manufactured from it depends heavily on electricity price. Hydrogen stored as gas in salt and rock caverns is a cost-efficient way to store energy. For instance, the capex of lined rock hydrogen storage for 1,000 tonnes of hydrogen (equivalent to 33 GWh lower heating value) amounts to EUR1.5 per kWh while the capex for battery energy storage amounts to EUR200-500 per kWh. Particularly, a wind power-based electricity system, once scaled up in the Nordic countries, will need weekly level energy storage, which can be provided by hydrogen storage and pumped storage to a certain extent. Daily level balancing with battery storage may be sufficient in southern Europe.

Industrial use of hydrogen and infrastructure built for it will support the utilisation of hydrogen for grid balancing, especially in demand response when linked with gas grid and storage. However, due to low round-trip efficiency (PtXtP ~25 per cent), wide-scale use of hydrogen to reproduce electricity leads to increase of average electricity price.

According to Peter Møllgaard, chairman, Danish Council on Climate Change (DCCC), Denmark’s major step towards green transition is the adoption of the Climate Act 2020. As per DCCC’s assessment, the current government policies may not be adequate to achieve the country’s carbon emissions reduction targets, which require substantial emission reductions across all sectors. The main elements in sector integration are electrification of heat, industry and transport and high increase in the demand for renewable energy. The potential additional electricity demand in Denmark by 2030 is estimated at 10-19 TWh in the low scenario and 37-65 TWh in the high scenario. To secure increasing demand for renewables, the ambitious government plan to scale up offshore wind capacity through the creation of energy islands needs to be successful. For this, a concrete plan must be finalised regarding the framework for ownership, responsibility, government support, location and deadlines. There has to be a cost-optimal approach. Integration of variable renewable energy would require attention to be paid to flexibility in consumption, storage, PtX, grid expansion and new market models. Given that emission reductions and electrification are needs in all countries, it must be ensured that renewable energy is utilised and not curtailed within the national borders; strong interconnections are established throughout Europe; and expansion of offshore wind beyond the need of the Nordic countries helps replace fossil fuels in neighbouring countries by making it a cost-optimal option.

In conclusion, the Nordic TSOs are exploring innovative ways to develop infrastructure, system operation and market design. Largely, market-based solutions will be the guiding light. Green energy is driving sector growth and in the next phase, massive offshore wind development is expected. The TSOs acknowledge the complexity and opportunities when moving offshore. In this context, developing an appropriate grid strategy, planning and connections become crucial. Green hydrogen is expected to play a key role in the times to come. The green transition has gained significance in the international context of commitments to the Paris Agreement and the EU Green Deal. This requires substantial CO2 emission reduction across all sectors. The increasing demand for renewable electricity requires securing the production capacity and its integration through a variety of new solutions. Here, system flexibility is important and could be traded in a new market model. Nordic TSOs will facilitate the change and be enablers towards a climate-neutral energy system. 

The article has been sourced from Global Transmission and can be accessed by clicking here