Regional electricity cooperation and Nordic perspectives on Europe

Opening address at the Nordic Conference on the Electricity Market in Oslo 22 November 2017. The conference was organised in relation to the Nordic annual energy ministerial meeting.

Introduction

Ministers, colleagues, friends, good morning! Welcome to Oslo and to the conference on Regional electricity cooperation and Nordic perspectives on Europe.

It is great to see such a high-level attendance from both the Nordic and the European level.  

The Nordic region enjoys a strong and well-functioning cooperation in many areas. It is only natural that cooperation in the power sector, so crucial to everyday life in our at times cold and dark countries, is strong and well-functioning, too.

 I look forward to fruitful discussions of these issues, both during today's seminar and the ministerial meeting tomorrow.

The Norwegian starting point

In order to know where we are headed, we need to know where we are coming from. To be sure, Norway is extremely fortunate in terms of access to renewable energy resources, but we have also managed and developed them well.

Our transformation towards being a major energy producer began more than 100 years ago. The development of the modern Norwegian society started when energy from running water in rivers and waterfalls was converted into electricity.

Today, the Norwegian economy benefits from an efficient and climate-friendly energy system. Flexible and renewable hydropower is the battery that energizes our industries, our businesses, our households and our electric vehicles.

98% of our electricity production comes from renewable sources. We have 50% of the reservoir capacity in Europe and we are the world's 7th largest hydropower producer.

Even with this starting point, Norway did not get to where we are today on our own. Despite the large reservoir capacity, the Norwegian energy supply is vulnerable. In years with little rain and snow, we have relied on our neighbours.

Cooperation and an integrated Nordic Electricity Market has for a long time been  one of the main building blocks of our power system.

I am certain that this will continue to be the case as we continue to develop more renewable production, while ensuring security of supply and cost efficiency.

However, the energy markets are changing rapidly.  Therefore, the challenges we are facing today are not necessarily the same as those of yesterday.

Developments in the energy sector

Climate change is a major driver of changes to energy policies across regions. The Paris Agreement has given new impetus to the efforts to keep global warming below 2 degrees Celsius. The Nordic region is certainly no exemption, even if our point of departure is very different from other regions.

Most European countries are in the midst of a costly transformation of their energy systems.

As part of the effort to decarbonise the power sector, we are seeing a rapid growth in intermittent renewable power production, such as solar and wind power.

The development of more intermittent power is happening in our part of the continent, as well.

More renewable power is in itself a good thing, but it does pose new challenges for the power system as a whole. It becomes more challenging to manage a system that relies more heavily on sources that fluctuate with the weather.

Furthermore, electricity is being used for new purposes. In Norway, we already use electricity to a much greater extent than most other countries. Still, we are moving in the direction of further electrification of society.

Through the state enterprise Enova, the Norwegian Government supports initiatives to make low and zero emissions solutions competitive.

Enova’s primary objective is to fund projects to reduce greenhouse gas emissions and strengthen security of energy supply. The aim is to promote the adoption of new solutions and technologies by the industry, in the transport sector and in society as a whole.

The Norwegian support for electric vehicles is well known. According to some estimates, half of all new cars sold this year will be either fully electric or hybrid models.

There is also a great potential for increased use of electricity in the power intensive industry, including in new areas such as large data centres. Global IT companies such as Google, Facebook and Amazon have all recognized the benefits of building data centres in the Nordic region with a cool climate and excellent access to reliable, clean electricity.

This development is in itself an illustration of a trend that affects not only the power sector, but also society as a whole, namely digitalisation.

Technology changes the behaviour of consumers and provides new services and opportunities.

Due to the technological development, we use electricity for more purposes than before. It also provides consumers more opportunities to influence their consumption, and ultimately their energy bills.

The installation of smart meters that is currently going on or completed in our region, is a good example of how digital tools are put to use in the power sector. I believe that we have only seen the start of this development in the power sector.

As a whole, the changes I have described makes the energy system more complex and more costly to operate.  These changes represent new challenges and opportunities for Norway and the Nordic region.

With the close integration of the Nordic energy market, changes that are felt in one country has an impact in others, as well.

The International Energy Agency (IEA) has highlighted the integrated Nordic electricity market as a role model for other countries and regions on how to organize energy markets.

Infrastructure – Nordic perspective

The Nordic countries have decades of experience of exchanging power between ourselves. The first Nordic interconnector was built between Sweden and Denmark way back in 1915. The first Norwegian interconnector was built to Sweden in the 1960s. Since then, we have built interconnectors to all our Nordic neighbours and the whole Nordic region is today well-connected.

Today we are looking beyond our Nordic region. A number of new interconnectors that together amount to over 5000 MW has been commissioned or is under construction to the UK, Germany and the Baltics. Two Norwegian subsea interconnectors to the UK and Germany are part of this number.  

The integration of the Nordic power systems have served us well. It has contributed to efficient resource management and good security of supply.

The interconnection with our neighbours underlines the importance of well-developed infrastructure for a safe and efficient power system.

This mission is never complete – a reliable power supply requires constant maintenance and further development. As you all know, this takes a lot of time, effort, and not least, money.

To give you an indication of what is required the Nordic TSOs plan on using over 15 billion Euros on grid investments by 2025.

With our closely integrated power market, it is important that we do not see infrastructure development as a strictly national business. It is important that we also consider total Nordic benefit like we agreed at the Nordic Ministerial Meetings in Umeå in 2008 and in Copenhagen in 2010.

A further option for managing the investment needs is demand flexibility. Instead of carrying out huge grid developments, could we achieve the same effect through less costly and invasive measures?

Such measures would entail moving consumption from the hours when the demand is at its peak, to period where the grid is utilised less.

The development and adoption of new digital solutions, which I referenced a moment ago, will be key for demand flexibility to play a significant role in the power system.

The EU and common Nordic interests

There is no doubt that developments on the European stage has a strong impact on the Nordic region. That includes Norway, even if our and Iceland's form of attachment to the European institutions is somewhat different from that of the other Nordic countries.

The Norwegian government supports the EU's ambitions to develop and promote a well-functioning internal energy market. This is also in Norway's interest.

Recently we reached a milestone in this process. The Norwegian government proposed changes in the Norwegian Energy Act and asked for the Parliament's consent to implement the Third Energy Market Package in the EEA Agreement.

The implementation of the Package underlines and ensures Norway's role as an active member of the internal European electricity market. Even if some of our European partners will probably say that it was about time! 

Because of course, the development of the European market is not complete with the Third Package. There has been a rapid development of policies in this area in recent years, and I am sure that we will see further initiatives in the years to come.

The latest addition is the European Commission's "Clean energy for all Europeans" package, presented in November last year. The package included eight different proposals and a huge number of pages. 

New and modified policies and legislation are under way. As negotiations are ongoing, it is too early to say with any certainty how these developments will affect Norway and the Nordic countries. I am sure that the representative from DG Energy will touch upon this in his remarks later on.

What I think we can say, is that the Nordic countries have worked hard both between ourselves and with other likeminded countries in sending our message across to the European Commission.

We are at the forefront when it comes to regional cooperation and integration. As far as I can see, the European Commission would like to see other regions move in a similar direction.

In the future, it is important that we continue to explore common Nordic approaches where we have similar interests on EU initiatives. We stand stronger together than as separate countries.

While I do not wish to lecture other countries on which policies they should pursue, I do think that the Nordic approach can serve as an example as it is fundamentally a sensible one.

Put simply, I believe that market-based solutions and efficient price signals should remain the guiding principles of the energy markets. This is the basis for the power system in the Nordic countries, and I think we can say that it has delivered the results we wanted and that it will continue to serve us well in the future.

At the Nordic ministerial meeting tomorrow, we will also be discussing how we can improve our power system even further.  

Jorma Olilla presented me with a strategic assessment on Nordic Energy cooperation earlier this year.  One of his recommendations was to improve the dialogue with our stakeholders. I hope and expect that the event today and the ministerial meeting tomorrow can contribute to the idea of a forum for dialogue on energy policy matters, including the power market.

Concluding remarks

Dear Nordic friends, it is time for me to conclude. The Nordic cooperation in the power sector is in many ways a success story.

It is an integrated system with production resources that complement each other. It

reduces the overall cost of energy,

increases security of supply

and makes it easier to integrate new intermittent production in to the power system.

These qualities would be attractive in every power system. Policy-makers in Europe are certainly striving to achieve these goals. The Nordic region enjoys all of these benefits.

In addition to being integrated among ourselves we are all becoming increasingly integrated in to the internal European electricity market, albeit with different institutional arrangements.

Therefore, we need to continue and strengthen our common Nordic voice on matters that affect us all.

Today's conference and the ministerial meeting tomorrow is a good occasion to discuss such issues further. I look forward to exchanging views with you on these matters. Thank you for listening!