Wind power in Scandinavia

A friend who spent a significant part of his childhood with his father—a very successful Mexico City architect / property developer—is someone who can always be counted on to provide the views of the Latin American oligarchical classes.  One day we were discussing the boast made by Hugo Chavez that Venezuela had the investment capital to provide her with the "industrial density of Sweden."  Friend laughed uproariously and then said, "Well, that may be true because she has an almost continuous trade surplus from her oil exports and can buy whatever machines she could possibly want, but what she is missing are the Swedes to run them."  (This is the sort of remark that almost always elicits a nod of approval in Minneapolis so friend was probably being more charming than analytical, but it certainly has a large element of fact built in.)

I thought about that remark today while reading how the Nordic countries plan to manage the VERY tricky transition from coal and gas to wind power as the way to power their societies.  A lot of fossil-fueled electrical generating capacity must soon be mothballed yet this does not seem to cause much distress.  For the Nordics, reducing the national carbon footprint is just another problem to be solved—and these are people who solve complex problems for pure enjoyment.

As my friend would point out, almost everyone has the same set of energy problems.  What they are missing are the Swedes (Norwegians, Danes, Finns).

Wind Power Blows Away Coal and Gas in Nordic Countries

By Nerijus Adomaitis October 17, 2014

OSLO (Reuters) - Wind power is blowing gas and coal-fired turbines out of business in the Nordic countries, and the effects will be felt across the Baltic region as the renewable glut erodes utility margins for thermal power stations.

Fossil power plants in Finland and Denmark act as swing-producers, helping to meet demand when hydropower production in Norway and Sweden falls due to dry weather.

The arrival of wind power on a large scale has made this role less relevant and has pushed electricity prices down, eroding profitability of fossil power stations.

"Demand for coal condensing power in the Nordic power market has decreased as a result of the economic recession and the drop in the wholesale price for electricity," state-controlled Finnish utility Fortum said, booking an impairment loss of about 25 million euros($31.67 million).

Nordic wholesale forward power prices have almost halved since 2010 to little over 30 euros per megawatt-hour (MWh) as capacity increases while demand stalls on the back of stagnant populations, low economic growth and lower energy use due to improved efficiency.

Short-run marginal costs (SRMC) of coal generation were 28.70 euros per megawatt-hour (MWh), the Nordic power regulators said, while costs of gas-fired power generation were much higher, at 53 euros/MWh in 2013.

"The Nordic system price will likely more often clear well below the production cost for coal fired power production," said Marius Holm Rennesund Oslo-based consultancy THEMA.

"This will, in our view, result in mothballing of 2,000 MW of coal condensing capacity in Denmark and Finland towards 2030," he added.

Adding further wind power capacity at current market conditions could lead to power prices dropping towards as low as 20 euros per MWh, the marginal cost for nuclear reactors, Rennesund said.

PART OF A PLAN

Denmark and Finland have about 11,000 MW of coal, gas and oil-fired generating capacities, Reuters estimate shows.

Pushing fossil-fueled power stations out of the Nordic generation park is part of government plans across the region.

Denmark wants to phase all coal use in power generation by 2030 and to generate all power and heat from renewables by 2035.

Wind power is expected to meet half consumption in Denmark by 2020, up from 33.4 percent in 2013.

In neighboring Sweden, wind meets about 8 percent of total consumption, and installed capacity has more than doubled to about 5,000 MW in 2014 from 2010. Its wind power association predicts the capacity to rise to some 7,000 MW by 2017.

In Norway, the government has pledged to change tax rules to catch up with Sweden.

These plans are beginning to bear results.

Naturkraft, a joint venture between Norway's Statoil and Statkraft [STATKF.UL], said this month it would put its 420 megawatt (MW) Kaarstoe gas-fired power plant in "cold reserve" from January.

Mothballing the 2 billion crowns ($302 million) plant, which had operated for only a few days per year, would help to save 50-80 million crowns per year, Naturkraft's chief executive John Terje Staveland told Reuters.

Earlier this year, Finnish utility Fortum shut its 695 MW Inkoo coal-fire power plant.

Sweden's Vattenfall [VATN.UL] said in May it will shut down its 409 MW coal-fired Fyn power plant in Denmark from May 2016.

The state-run utility sold its 314 MW coal-fired Amager power plant in Copenhagen to a Danish utility HOFOR, which plans to replace coal with biomass.

The developments in the Nordic countries is also beginning to affect utilities in the Baltic states as their grids get more integrated.

Estonia's energy group Eesti Energia saw its power sales to drop by 30 percent during the first half of the year after a 650 MW link to Finland came online at end-2013.

Cheaper power imports from the Nordics have halved Eesti Energia's profit margin to 12 euros per MWh in the second quarter, the company said in its quarterly report.

Lithuania, which expects to have a 700 MW interconnection to Sweden by end-2015, has said it would shut 900 MW of gas-fired capacity by 2016 due to negative margins.(1 US dollar = 6.6199 Norwegian krone) (1 US dollar = 0.7895 euro)
more