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SWEDISH-NORWEGIAN GRID DEVELOPMENT THREE SCENARIOS


Foreword The Swedish and the Norwegian power systems are tightly integrated. Reinforcement of one system affects the other. Hence, the incentives are strong for Svenska Kraftnät and Statnett to find solutions for reinforcements that are favourable for both parties. In 2008, Svenska Kraftnät and Statnett initiated a strategic partnership, of which one of the results is this joint report about Swedish-Norwegian grid development. The purpose of this report is to be one of the planning tools of our common power systems, disregarding national borders. The report is also important in order to handle the impacts of a common Swedish-Norwegian green certificate market. This Swedish-Norwegian report represents a first step of our common planning. The report is a supplement to Statnett’s national grid development plan and to the European grid development plan of ENTSO-E. The report is also meeting the goal of Nordic Council of Ministers which aims for a Nordic perspective in the grid development planning.

Statnett and Svenska Kraftnät will continue developing our common power system.

November 2010

Mikael Engvall Svenska Kraftnät

Gunnar G. Løvås Statnett

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Executive Summary The Swedish and the Norwegian power systems are tightly integrated. Reinforcement of one system affects the other. Hence, the incentives are strong for Svenska Kraftnät and Statnett to find solutions for reinforcements that are favourable for both parties. Joint studies by Svenska Kraftnät and Statnett have shown that different scenarios lead to different needs to reinforce the grid. This report presents a basis for reinforcing the Swedish and the Norwegian transmission grids. Already announced reinforcements are presented in the report. These projects are all important for the integration of the Nordic Electricity Market. Statnett and Svenska Kraftnät are working on realizing these projects. Some of the described reinforcements are likely to be realized due to drivers such as additional generation from renewable sources. These projects are highly prioritized by both TSOs. However, no final decisions have been taken. Finally the report describes possible future reinforcements. In a low-growth-scenario the need of reinforcements are expected to be quite modest. Only previous announced reinforcements are expected to have a net positive socio-economic value. These reinforcements are marked as blue lines in Figure 0.1. Among these are the reinforcements presented in the Nordic Grid Master Plan 2004 and 2008. Svenska Kraftnät and Statnett will carry out these reinforcements as a necessary first step for developing the Swedish-Norwegian transmission grid. A scenario with emphasis on the energy and climate policy (Scenario Renewable+) will lead to a very positive Swedish-Norwegian energy balance. This leads to a growing need not only to reinforce the northern and the middle part of the grid in a north-south direction but also to reinforce in the southern part in order to prepare for interconnections to other markets. According to socio-economic and technical analyses Svenska Kraftnät and Statnett recommend the reinforcements marked as red lines in Figure 0.1 as a possible next step towards a reinforced Swedish-Norwegian transmission grid. Svenska Kraftnät and Statnett will make efforts to make these potential projects realized, provided that the expected new generation is built. In a scenario with even more emphasis on the energy and climate policy (Scenario 202020) it is assumed that the Swedish-Norwegian green certificate system is functioning well and that the 202020-targets of EU have been realized. This will lead to a very high investment rate in renewables, which will result in a large increase of the Swedish-Norwegian energy surplus. According to socio-economic and technical analyses, Svenska Kraftnät and Statnett recommend the reinforcements red dotted in Figure 0.1 as a possible further step towards a reinforced Swedish-Norwegian transmission grid. Svenska Kraftnät and Statnett will continue to work together monitoring the development of the market and to plan for a future realisation of these projects. The need for new interconnections to other markets is related to security of supply, climate policy and economy. The number of needed new interconnections to other markets depends on, for example, the future Nordic energy-balance, future prices on different markets (power, oil, gas, coal, CO2) and the future European climate policy. No ranking between interconnection-projects has been made in this report. However, characteristics of the national power generation system and the distance to the external network of interest are examples of factors evaluated in calculations of the profitability of interconnection projects.

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Figure 0.1: The reinforced Swedish-Norwegian power system.

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TABLE OF CONTENTS INTRODUCTION AND OBJECTIVES ........................................................................... 11 1.1 1.2 2

THE SWEDISH-NORWEGIAN COOPERATION ................................................. 13 2.1 2.2

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INTRODUCTION ....................................................................................................... 11 OBJECTIVES ............................................................................................................ 12

THE HISTORY OF THE SWEDISH-NORWEGIAN COOPERATION ................................. 13 OTHER GRID DEVELOPMENT PLANS....................................................................... 14

THE NORDIC AND THE EUROPEAN MARKET ................................................ 16 3.1 3.2

FROM A NORDIC TO A EUROPEAN MARKET............................................................ 16 THE CLIMATE POLICY OF THE EUROPEAN UNION – IMPLICATIONS FOR SWEDEN AND NORWAY .................................................................................................................... 16 3.3 GREEN CERTIFICATES ............................................................................................ 18 4 ACTIVITIES FOR A JOINT MARKET AND SYSTEM OPERATION DEVELOPMENT ................................................................................................................ 19 4.1 4.2 4.3 4.4 4.5 5

PROSPECTS FOR THE ENERGY BALANCE ...................................................... 23 5.1 5.2 5.3 5.4 5.5

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DRIVERS FOR IMPROVING SYSTEM ADEQUACY ...................................................... 33 SHORT TERM PROSPECTS FOR POWER BALANCE.................................................... 33 LONG-TERM PROSPECTS FOR POWER BALANCE...................................................... 35 SUMMARY OF THE CHAPTER .................................................................................. 37

INTERNAL SWEDISH-NORWEGIAN GRID DEVELOPMENT ........................ 38 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8

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DRIVERS FOR THE ENERGY BALANCE .................................................................... 23 PAST TRENDS AND SHORT TERM PROSPECTS FOR THE ENERGY BALANCE............. 23 PROSPECTS FOR YEAR 2020 ................................................................................... 26 WIND POWER GENERATION: HOW MUCH, WHERE AND WHEN? ............................ 30 SUMMARY OF THE CHAPTER .................................................................................. 31

PROSPECTS FOR THE POWER BALANCE ........................................................ 33 6.1 6.2 6.3 6.4

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DRIVERS FOR SYSTEM AND BALANCING SERVICES ................................................ 19 SWEDISH-NORWEGIAN DEVELOPMENT OF SYSTEM AND BALANCE SERVICES ....... 19 EUROPEAN NEED FOR SYSTEM AND BALANCING SERVICES ................................... 20 CONGESTION MANAGEMENT .................................................................................. 21 SUMMARY OF THE CHAPTER .................................................................................. 21

DRIVERS AND CHALLENGES FOR GRID EXTENSIONS .............................................. 38 TRANSMISSION PATTERNS IN THE SWEDISH AND THE NORWEGIAN GRIDS ............. 40 GRID DEVELOPMENT, NORTHERN REGION ............................................................. 44 GRID DEVELOPMENT, THE MID REGION ................................................................. 47 GRID DEVELOPMENT, SOUTHERN REGION ............................................................. 49 OTHER NATIONAL PROJECTS OF IMPORTANCE TO THE NORDIC SYSTEM ................ 52 THE PERMIT PROCEDURE ....................................................................................... 54 SUMMARY OF THE CHAPTER .................................................................................. 54

INTERCONNECTIONS TO EXTERNAL NETWORKS....................................... 56 8.1 8.2 8.3 8.4 8.5

DRIVERS AND CHALLENGES FOR GRID EXTENSIONS .............................................. 56 EUROPEAN MARKET INTEGRATION IN THE SCENARIOS .......................................... 60 PLANNED AND POTENTIAL EXTERNAL GRID EXTENSIONS ..................................... 61 PROFITABILITY EVALUATION OF EXTERNAL PROJECTS.......................................... 63 SUMMARY OF THE CHAPTER .................................................................................. 65

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Summary From a Nordic to a European Market New and present interconnections will make the Nordic power market more integrated into the European power market. The different characteristics of the power generation systems in Sweden and Norway and the rest of Europe make interconnections to external power systems valuable in several ways; e.g. by transmitting power and offering balancing services between areas with low and high prices. Another driving force for the integration of the Nordic and the European electricity markets is the policy of EU through its basic objectives, which are to increase the security of supply, mitigate the effects of climate changes and to support competition in the energy sector. The European political movements towards a single electricity market have also changed the form of collaboration; in 2009, the Nordic TSOs were incorporated into the European TSO association ENTSO-E. The worldwide focus on climate change is strongly related to generation and consumption of energy. The European Union is a strong player in the climate discussion, and has, among other measures, issued the Climate Change Package. The Climate Change Package contains the so-called 20.20.20 legislation that obligates members of the EU to cut emissions by at least 20 % of 1990 levels by 2020. This emission target is supported by three objectives, which all should be achieved until 2020. Firstly, there should be a 20 % reduction in energy consumption through improved energy efficiency. Secondly, there should be an increase in renewable energy’s share of consumption to 20 %. Finally, as a part of the renewable energy effort, in the transport sector of each Member State a 10 % share of sustainably produced biofuels and other renewable fuels should be achieved. Although not a member of the EU, there is a possibility that Norway could be committed to all the 20.20.20 targets. At present, Norway is negotiating the targets with EU. As a means to promote the generation of renewable energy, Sweden incorporated Green Certificates in May 2003. Green Certificates is a tradable commodity, assuring that a prescribed amount of electricity is generated using renewable energy sources. In January 2012, Norway and Sweden have an intention to integrate Norway into the certificate market. A joint electricity certificate market will include a long term and binding cooperation to develop renewable energy in Sweden and Norway.

Prospects for 2020, More Renewables The three scenarios Recession, Renewable+ and 202020 are described in this report. The purpose of the scenarios is to recognize and examine future challenges and opportunities. In a joint Swedish-Norwegian planning study, Svenska Kraftnät and Statnett have identified the need for reinforcements in these scenarios. Firstly, reinforcements that already are decided, secondly reinforcements that are very likely to be realized, and finally possible future reinforcements. The scenario Recession is characterized by low economic growth and a low level of integration between the EU countries. The Swedish-Norwegian energy balance is expected to be kept at the same level as today. The scenarios Renewable+ and 202020 have their emphasis on the climate. In the scenario Renewable+ investments into renewable power generation have led to a surplus of 30 TWh in the Swedish-Norwegian energy balance. In the scenario 202020, the 202020-targets of EU have been fulfilled and the surplus of the Swedish-Norwegian energy balance will

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amount to 40 TWh. As positive energy balances are expected in Sweden and Norway in the near future mostly due to a strong political will to invest in renewable energy generation, the future seems more likely to be close to the situation in Renewable+ and 202020 than the situation in the Recession scenario. Moreover, with a large increase of renewable energy generation and a need to transmit a large electricity surplus to other systems, the 202020 scenario is the most challenging scenario.

Transmission Patterns, Northďƒ South and Import/Export The transmission pattern in the Swedish and the Norwegian transmission grids depends mainly on the inflow into the hydro power system and the distribution of generation and consumption. In Sweden, most of the hydro power generation is located in the north or the mid region, while nuclear and thermal generation, as well as the main consumption, takes place in the south. The northern Sweden and the southern Sweden are connected through several high voltage power lines. In Norway, generation and consumption are more evenly distributed, and the direction of the power flow varies somewhat during the day due to the power exchange on the interconnections. In general, power flows from the surplus area in the north to the deficit area in Mid-Norway, and from the large hydro power plants in the west and central part of Norway to consumption areas in the east and to the interconnections in the south. Altogether, during years with normal inflow, the power flows from the north to the south in the Swedish-Norwegian system. This pattern is enhanced during wet years and weakened during dry years. A large increase of new generation from renewable sources, as described in the scenarios Renewable+ and 202020, will enhance the current north-south power flow, and would require considerable reinforcements of the Swedish and the Norwegian transmission grid. The expected power surplus in the north and mid region needs to be transmitted to the large consumption areas in the south, and further on as export on the interconnections to other markets.

Reliable System Adequacy and Security of Supply The Swedish-Norwegian power balance is positive, both in the short and in the long run. The Swedish power balance is slightly negative during peak hours in a severe winter situation (one out of ten winters). However, the total Swedish-Norwegian power balance is positive even in severe winter situations. This is supported by the decision in June 2010 to allow for reinvestments in Swedish nuclear power plants. During the winter 2009/2010, it was shown that the Swedish and the Norwegian power systems are vulnerable to a common mode failure in nuclear power generation. In combination with other problems, this may cause a difficult situation for the security of supply. An expansion of the wind power generation in combination with a reduction of the thermal power generation in Sweden, would affect the system’s remaining capacity. Substituting well-regulated thermal power for unregulated renewable power constitutes a challenge for the security of supply. In case of peak demand and no wind, situations similar to those which happened during the winter 2009/2010 could occur again. In such situations, additional interconnections to other markets could support the Swedish and the Norwegian system. EU is initiating a shift from thermal power generation to power generation from renewable sources, all over Europe. Generally, this will increase the share of unregulated power

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generation, and thus the demand for regulated power generation. In this sense, interconnections to other markets create a win-win situation. They utilize the fact that it is highly improbable that a peak load and no wind situation will occur in a larger area. Thus, interconnections will make it possible for Sweden and Norway to support other countries with well regulated power, as well as to improve the import capacity in situations with low wind power generation in Sweden and Norway.

Need for Swedish-Norwegian Grid Reinforcements Svenska Kraftnät (SvK) and Statnett have already carried out several investments to handle an increased power flow from north to south. Amongst others, during the summer and autumn 2009, the power line between Mid-Sweden and MidNorway was upgraded from 300 kV to 420 kV. The increased capacity improves the security of supply in MidNorway. Furthermore, autumn 2009 Statnett commissioned a new line on the south coast, Skåreheia-Holen, which improves utilization of the interconnections. The Swedish and the Norwegian transmission grids are tightly integrated. Reinforcement of one network affects the other. Hence, the incentives are strong for Svenska Kraftnät and Statnett to find solutions that are favourable for both parties. In order to facilitate the management concerning operational and market aspects of the transmission grids, a close cooperation between Svenska Kraftnät and Statnett is inevitable. This is for example taking place in the South-West Link-project which is a prioritized project by both TSOs. As mentioned, Svenska Kraftnät and Statnett have identified the need for reinforcements in the scenarios Recession, Renewable+ and 202020. On basis of these scenarios this report presents reinforcements in three steps: firstly reinforcements that already are decided, secondly reinforcements that are very likely to be realized, and finally possible future reinforcements.

Interconnections, Valuable for both Europe and Norway/Sweden The need for new interconnections to other markets is related to security of supply, climate policy and the economic situation. How many new interconnections to other markets there will be, depends on factors related to the future Nordic energy-balance, future prices in different markets (power, oil, gas, coal, CO2) and to future European climate policy. The greatest benefit of a better integration with other markets is an efficient use of generation resources. Sweden and Norway are the only countries in Northern Europe where hydro power is a main ingredient of the electricity power system. The reservoirs can store energy and regulate power generation at a low cost, resulting in a flat price structure. A thermal power generation system on the other hand, has no such way of storing energy. Moreover, it is expensive to start and stop thermal generation. Therefore, markets dominated by thermal generation have a large variation in the prices. The difference in prices will create profitability prospects for new transmission capacity from Sweden and Norway to other markets. From a perspective related to the expected energy surplus, the minimum need for new interconnections depends on the chosen scenario which is analysed. The minimum need of capacity to external networks in the least probable scenario Recession is 5500 MW. In the scenario Renewable+ the minimum need of capacity is 9500 MW. Finally, 10200 MW is

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required in the scenario 2020. The current total capacity to external networks is about 6900 MW. In addition, the planning process for FennoSkan2, NordBalt and SK4 has proceeded quite far. These interconnections will increase the total cross-border transmission capacity from the Swedish-Norwegian system with 2100 MW, to 9000 MW. Thereby the need of cross-border transmission capacity in the scenario Renewable+ will be met. However, from a perspective related to a commercial potential, even more capacity could be profitable. This aspect is not treated in this report. No joint Swedish-Norwegian ranking between interconnection projects has been made in this report. However, characteristics of the national power generation system influence how attractive different interconnection-projects are. For an example, there is a strong emphasis on wind power development in Sweden as well as in the northern continental Europe. This may infer reduced benefits of interconnections between two such areas as the generation patterns may be very similar due to the impact of wind variations (surplus in both areas at the same time). The generation pattern in the eastern part of Europe differs from the one in Sweden. This could make interconnections from Sweden to the eastern part of Europe more valuable. For Norway, interconnections to the western part of Europe are very beneficial as they would help regulating the continental system. The different drivers will probably result in a diversification of the “interconnection-portfolio” which is advantageous for the Nordic countries with respect to stability and security of supply. Other factors also affect the benefits of interconnections from Sweden/Norway to the rest of Europe. Interconnections from Sweden are generally shorter and therefore less expensive than interconnections from Norway. On the other hand, both costs of internal reinforcements and costs of transmission losses must be taken into account. Many of the Norwegian hydro power plants with their regulating potential are closer to the mentioned interconnections than the Swedish ones in the north. These are factors that must be evaluated in an overall calculation of the profitability of suggested interconnection projects.

A common platform Svenska Kraftnät and Statnett are facing several common challenges in the near future. Because of the close connection between the Swedish and the Norwegian power systems, both companies find it valuable to search for joint solutions to these challenges. This report focuses on four prioritized areas: 

Security of supply To ensure the security of supply is Svenska Kraftnät’s and Statnett’s main task. To maintain a high level of security of supply is especially important now, in view of the current and projected future needs of uninterrupted power supply. Subsequently, the security of supply is an important driving force in the majority of the grid reinforcement projects.

More renewable power generation Integrating more renewable power is one of the challenges that Svenska Kraftnät and Statnett are facing. The connection of the new plants as well as reinforcing the main grid is necessary, this also to keep an adequate level of security of supply. More renewable power generation is therefore an important driving force in many of the grid reinforcement projects.

Reduced price differences In both Sweden and Norway, there is a political objective to reduce the price differences within the countries. Reinforcements of critical cross-sections will provide an important measure to reduce the price differences between the bidding areas. Reduced price differences are an important driving force in many of the grid reinforcement projects.

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

Handling the increasing energy surplus To accommodate a large energy surplus in Sweden and Norway additional internal and external reinforcements are required. An increased export of clean power would replace carbon intensive power generation and in turn contribute to the efforts to reduce CO2-emissions. Handling the increasing energy surplus is an important driving force in many of the grid reinforcement projects.

Based on this common platform, Svenska Kraftnät and Statnett present three steps for reinforcing the Swedish and the Norwegian transmission grids. The first step is a confirmation of already announced reinforcements. All these projects are important for the integration of the Nordic Electricity Market. Statnett and Svenska Kraftnät are working on realizing these projects. The second step includes reinforcements that are very likely to come due to drivers such as additional generation from renewable sources. These projects are highly prioritized by both TSOs, however no final decisions have been taken. The third step includes reinforcements that are described as possible future reinforcements.

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Introduction and Objectives 1.1

Introduction

Sweden and Norway have a long history of cooperation in the field of electric power supply. This cooperation has mainly taken place within the Nordic cooperation program Nordel. An important trend concerning electricity markets that has strong impact on Svenska Kraftnät and Statnett is the European policy to create a single electricity market. Provisions of the European 3rd Package have changed the form of collaboration, from the Nordic TSO association Nordel, to the European association ENTSO-E. EU’s efforts to curb CO2 emissions through the Climate Change Package and the legislative 20.20.20 targets will be important frameworks that Svenska Kraftnät and Statnett must take into account. A consequence of the 20.20.20 targets will probably be a large increase of renewable energy generation in Sweden and Norway. Therefore, the challenges Svenska Kraftnät and Statnett are facing are to connect and adjust the transmission grids to the power generated by these expected new renewable energy plants. These challenges are examined in three scenarios: Recession, Renewable+ and 202020. The scenario Recession is characterized by low economic growth and low level of integration between the EU countries while the scenarios Renewable+ and 202020 have their emphasis on the climate and consequently, large increases of the generation from renewable sources. The results of a common study on how to increase the capacity of the Scandinavian transmission grid in the north-south direction are presented in this report. In the study the benefits of possible reinforcements are investigated in the scenarios Recession, Renewable+ and 202020. The Swedish and the Norwegian transmission grids are tightly integrated. Reinforcement of one network affects the other. Hence, the incentives are strong for Svenska Kraftnät and Statnett to find solutions that are favourable for both parties. The purpose of the common study was to coordinate reinforcements in the Northern and Mid Sweden and Norway in order to find win-win solutions. Through the proposed reinforcements Swedish and Norwegian common objectives like ensuring high levels of security of supply and increasing transmission capacities could be reached. In addition to grid reinforcements, the expected large increase of renewable electricity generation in Sweden and Norway as well as on the Continent entails a strong need for effective and standardized arrangements for balance settlement, short-term markets as well as system and balance services. This report provides general information about current implementation of a common balance settlement in the Nordic countries and the SwedishNorwegian cooperation in these respects. It also describes the methods of Svenska Kraftnät and Statnett for congestion management. The power balance and security of supply of the Swedish-Norwegian power systems is described and discussed. In a year with average winter temperatures, Sweden and Norway have a positive power balance. However, an expansion of wind power generation will affect the system’s remaining capacity. Replacing well-regulated thermal power with unregulated renewable power, constitute a challenge for the security of supply both in the short and the long run. Measures to keep a satisfying level of the security of supply are discussed. The advantages and challenges for building interconnections to neighbouring systems are discussed. Based on the scenarios, the need for of new capacity to other markets has been analysed. The more generation from renewable sources that is established, the more capacity is needed due to the Swedish-Norwegian need of exporting the positive balance and due to the continental need of regulation of the large wind power generation. Potential interconnections to the UK, the Continent and the Baltic States are also described, compared and assessed.

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This report aims at strengthening the support of the Swedish and the Norwegian Governments’ actions in the climate and energy policy areas. This report also aims at presenting projects that seem to have positive socio-economic benefits. The Swedish-Norwegian Grid Development report is publicized at nearly the same time as ENTSO-E’s Ten Year Network Development Plan (TYNDP) and as Statnett’s Grid Development Plan. This report intends to provide a complementary perspective on these plans with emphasis on Swedish-Norwegian cooperation.

1.2

Objectives

The objectives of this report are:  

    

To describe trends and developments of the electricity market. Highlighted trends are the European policy to create a single electricity market and EU’s work against climate changes. To present the results of the common Swedish-Norwegian study on how to increase the capacity of the Scandinavian transmission grid in the north-south direction. Through the study, Svenska Kraftnät and Statnett wish to build consensus concerning common grid developments. This common study is an important part of the preparatory work for adaptation to the 20.20.20 legislation. To present three scenarios for year 2020 and to examine future challenges and opportunities in these scenarios. In addition, the scenarios are used in the common study mentioned above. To describe and discuss the system adequacy and security of supply of the Swedish-Norwegian power systems. To provide up-to-date information of planned and ongoing grid reinforcements. To support measures to reach common targets for Svenska Kraftnät and Statnett, i.e. to ensure high levels of security of supply and to find efficient market arrangements. To present complementary perspectives on the Ten Year Network Development Plan (TYNDP) of ENTSO-E with emphasis on Swedish-Norwegian cooperation.

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2 The Swedish-Norwegian Cooperation The first section describes the historical context of the Nordic electricity cooperation, with focus on the Swedish- Norwegian cooperation. The second section gives an account of other Swedish, Norwegian and European development plans.

2.1

The History of the Swedish-Norwegian Cooperation

2.1.1 The Starting Point The opening of the railway between Kiruna and Narvik in the early 1900s was the starting point of the SwedishNorwegian cooperation on electric power. In the 1960s, the planning of the Nea power plant at the border between Sweden and Norway started. Nea was supposed to supply Trondheim, but the plan was to build the power plant with a larger capacity than the expected demand. To get capital, a cooperation with Stockholm electric company started. The repay should be done by electricity delivery to Stockholm. An interconnection from Nea to the Swedish grid was built. However, because of low generation the first spring during which Nea power plant was running, power was actually flowing from Sweden to Norway. This clearly showed the usefulness of Figure 2.1: The Swedish and the Norwegian interconnections, and contributed to transmission grids at 300 kV and 400 kV. further cooperation.

2.1.2 Nordel In 1963, Nordel was established as a Nordic cooperation program in the field of electric power supply. From this time on, most of the cooperation between Sweden and Norway took place within Nordel. During the 1960s, electric power consumption increased considerably, and the opportunities for linking together different kinds of generation resources and for creating shared generation reserves attracted greater attention. Benefits from coordinating the expansion and the operation of the grids were explored. In 2000 Nordel was transformed into an association solely for the Nordic TSOs, due to the restructuring of the power industry during the 1990s. Until mid 2009, the Nordic TSOs have continuously cooperated within Nordel. The Nordic TSOs have e.g. conducted joint studies of how the Nordic electricity network should be developed. In 2009, Nordel was replaced by the European TSO association ENTSO-E. At the same time as the European cooperation was intensified, Svenska Kraftn채t and Statnett paid attention to the advantages of a better Swedish-Norwegian coordination of the transmission networks. In 2008, Svenska Kraftn채t and Statnett initiated a strategic cooperation. Since then, several Swedish-Norwegian projects have started, e.g. analyses of power flow and grid developments in a joint Swedish-Norwegian perspective.

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2.1.3 Nord Pool An important step of the Swedish-Norwegian cooperation was the establishment of a common marketplace for electricity power contracts, Nord Pool. Nord Pool was born in 1993 as a Norwegian power exchange called Statnett Marked AS. In June 1995 the energy ministers of Sweden, Norway, Denmark and Finland declared that a common Nordic electricity exchange should be established. At that time Sweden decided to deregulate its electricity market. From January 1996 Statnett Marked became a Swedish-Norwegian electricity exchange. As Svenska Kraftnät purchased 50 % of the shares of Statnett Marked AS the exchange was called Nord Pool ASA. Today also Finland and Denmark have joined Nord Pool and Energinet.dk and Fingrid own shares of the physical power exchange Nord Pool Spot together with Statnett and Svenska Kraftnät. In March 2010 Svenska Kraftnät and Statnett sold Nord Pool ASA to Nasdaq OMX. Since then they are solely owners of shares of Nord Pool Spot. Nord Pool is divided into a physical and a financial market and is today two separate companies. The physical market is called Nord Pool Spot AS and consists of Elspot and Elbas. Elspot is the common Nordic market for trading physical electricity contracts with next-day supply, and Elbas is the common Nordic physical balance adjustment market. In addition, the Elspot market includes the Estlink area in Estonia while the Elbas market includes the Kontek area in Germany. The financial market, Nord Pool ASA, provides the market with financial instruments. Since its start Nord Pool ASA has increased its diversity of financial instruments. Today Nord Pool ASA offers contracts of up to six years' duration, with contracts for days, weeks, months, quarters and years. The financial power exchange also provide a carbon market, where trading and clearing of EU emission allowances (EUAs) is executed.

2.1.4 System Operation In the first years after the establishment of interconnections, the two countries were balanced separately using the Area Control Error (ACE) as input for control actions in each country. Gradually the countries started to cooperate using resources of each other for balancing. The exchange of power between the TSOs was determined as hourly contracts. In 2000 a common bid list for the regulating-power was established at the balancing market. The other Nordic countries joined the arrangement and in 2003 the use of ACE as the input for national balancing was abandoned in the Nordic region (except for Jutland). Svenska Kraftnät and Statnett share the responsibility for the balancing of the synchronous Nordic system. Consequently, the two TSOs have developed an especially close relation in many areas related to system operation. Lately this is proven in several bilateral development projects.

2.2

Other Grid Development Plans

2.2.1 Statnett’s Grid Development Plan and Power System Report Statnett’s grid development plan is published each year as a part of the “Power System Report for the Main Grid”. Focus is on long-term challenges for the transmission grid, but also for the power system in general. The plan is non-binding. The grid development plan aims at informing Statnett’s external stakeholders about:  development aspects of the power market and the physical power system  the plans for the main power grid.

2.2.2 Nordic Grid Master Plan Nordel published the first plan in 2002. It was based upon energy balance calculations and identified cross-sections where reinforcements could be made. Two years later, an analysis of the potential for new investments in the Nordic electricity transmission infrastructure was carried out. The resulting grid development plan proposed grid reinforcements in five

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prioritized cross-sections: Fenno-Skan 2, Nea-Järpströmmen, South Link, the Great Belt and Skagerrak 4. These reinforcements are shown in Figure 2.2. Four of these five projects were decided in 2005, the last project was decided in 2010. Two of these projects are already in operation, the rest are planned to be in operation before 2015. Nordel’s last grid development plan was published in 2008 and identified cost-effective reinforcements in scenario prospects for 2015 and 2025. These were the South-West Link, Ørskog-Fardal and Ofoten-Balsfjord-Hammerfest, as illustrated in Figure 2.2. Nordel’s plans were based on a Nordic socio-economic perspective.

Figure 2.2: Nordic Grid Master Plan’s (2008) prioritised reinforcements in the Nordic Grid.

2.2.3 ENTSO-E Ten Year Network Development Plan (TYNDP) ENTSO-E will publish a grid development plan, named “Ten Year Network Development Plan”, every second year, starting in 2010. This non-binding plan will be based on common scenarios of the expected development of the European transmission grid, and will identify infrastructure investments gaps. Through the plan, ENTSO-E will communicate how the grid will fulfil the European objectives of maintaining and improving the security of electricity supply, promoting integration of renewable energy sources and promoting the internal electricity market.

Figure 2.3: The planning areas of ENTSO-E.

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3 The Nordic and the European Market This chapter focuses on policy issues. The first section describes the development of the Nordic and the European markets with focus on the energy policy of EU. The second section describes the Climate Change Package and the Swedish and the Norwegian work to meet the 20.20.20 legislation. The chapter is concluded by a description of the SwedishNorwegian work with green certificates.

3.1

From a Nordic to a European Market

Through new and existing interconnections, the Nordic power market becomes more integrated with the European power market. The different characteristics of the power production systems in Sweden and Norway and the rest of Europe make interconnections to external transmission grids valuable in several ways; e.g. by transmitting power and offering regulation services between areas with low and high prices. Consequently, a more efficient power flow due to better utilization of resources can be expected as the transmission capacity to external transmission grids and thereby the international power exchange increases. However, it should be mentioned that a more integrated European electricity market requires efficient market arrangements. Therefore, European TSOs, including the Nordic focus on conditions for Figure 3.1: The Nordic market and its efficient trade solutions. interconnections with the The security of supply and effective utilization of the European market. generation resources have long been the main driving forces for integration of the Nordic electricity market into the European. However, in recent years the continuously growing amount of power renewables has become an increasingly important driving force for the integration of the markets. The European energy policy plays a central role in the integration of the markets. An important part of the European energy policy is the 3rd Energy Package which the Commission proposed in 2007. The intention of this package of legislation, on the internal electricity and gas markets, is to provide a new framework for competition in the energy sector. Besides the increased competition, cleaner energy and security of supply are at the centre of the package. The package consists of proposals for:  Separation of electricity generation from transmission grid owners.  An association for cooperation of regulators, Agency for the Cooperation of Energy Regulators (ACER).  The creation of European Networks of TSOs (ENTSO). The package also contains regulations on TSO cooperation on the regional level. It is stated that regional investment plans should be worked out within the European TSO cooperation. It is also stated that the member states are to cooperate and promote the regional cooperation between TSOs. Within the package the ENTSO-E will get a formal status in relation to the Commission. The political movements towards a single European electricity market are important for both Svenska Kraftnät and Statnett; large investments in the grids are necessary to meet the objectives of EU and to integrate the new generation from renewable sources.

3.2

The Climate Policy of the European Union – Implications for Sweden and Norway

The European Commission’s Climate Change Package was approved by the European Council in early 2009. The Climate Change Package contains the so-called 20.20.20

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legislation which declares the ambition of the European Union to fight climate change and promote renewable energy up to 2020 and beyond. The 20.20.20 legislation requires the members of EU to cut emissions by at least 20 % of 1990 levels by 2020. The emission target is supported by three objectives, which all should be achieved until 2020. First there should be a 20 % reduction in energy consumption through improved energy efficiency. Second, there should be an increase in renewable energy’s share of consumption to 20 %. Finally, as a part of the renewable energy effort, there should be a 10 % share of sustainably produced biofuels and other renewable fuels in transport in each Member State. The improvement of energy efficiency is a key objective of the EU. However, the improvements to reach this target are hard to measure and therefore it is a nonbinding target. Although not a member of the EU, Norway could be committed to all of the 20.20.20 targets. Norway is negotiating their targets with EU. Each member state in EU has to clarify how they will achieve the targets in a national action plan by latest in June 2010. The European Union as well as Norway has played important roles in the work of the United Nations to combat climate changes, e.g. by urging the formulation of United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. The last climate change conference was held in Copenhagen in December 2009. The conference did not result in any substantial agreement, or deadline for such agreement.

3.2.1 20.20.20 Legislation in Sweden and Norway Renewable Energy The climate change package will have a significant impact on the Swedish and the Norwegian electricity market. Sweden has an ambition to increase the electricity generation from renewable sources with 25 TWh until 2020, compared to the generation of renewable electricity in 2002 through the electricity certificate system (3.4 Green Certificates). Norway is still negotiating their targets with EU and the results are yet unknown. Precise targets for each generation type are not specified by the governments, but large investments in wind power generation are expected, which will change the system structure of the Norwegian and the Swedish power systems. Consequences for Svenska Kraftnät and Statnett will concern local grid investments for connecting the wind farms and comprehensive reinforcements of the transmission networks in order to increase transmission capacities. In addition, the variable output of wind power generation affects the market design and system operations. The new wind power generation will require effective and standardized arrangements for system and balance services (further reading in Chapter 4 Activities for a Joint Market and System Operation Development). Carbon Capture and Storage The Swedish government will strive to connect one of the planned demonstration plants for Carbon Capture and Storage (CCS) to the Swedish industry. In the present situation, there are several major on-going CCS projects in Norway. The Norwegian government and Statoil collaborate on a full-scale CCS plant at Mongstad. Another project plans to retrofit carbon capture facility at the Kårstø gas fired power plant. Energy Efficiency The Swedish target is to reach a 20 % gain in energy efficiency until 2020. However, the proportion of the gain in energy efficiency for the electricity consumption is not specified by the Swedish government. To reach a 20 % gain in energy efficiency until 2020, 1500 million SEK is invested in an energy efficiency programme which will be implemented during 2010 – 2014. The programme aims at energy efficiency activities in municipalities, and in the industry. 117 companies with an aggregated electricity consumption which corresponds to a fifth of Sweden’s total electricity consumption have chosen to participate in the programme. The programme will focus on raising the awareness of the opportunities of energy savings in the companies.

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The main vehicle to promote energy efficiency and renewable energy in Norway is Enova. Over the last years Enova’s budget has increased substantially. Enova has a budget of 1800 million NOK in 2010. Energy efficiency is also promoted through other kinds of measures like tougher building codes, eco labels and standards, targeted duties and taxes. Nuclear Power A parliamentary decision has in June 2010 been taken concerning the legislation for nuclear power. The legislation will gain legal force in January 2011. Since the nuclear power provides electricity with low CO2 emissions, the process of phasing out of the nuclear power supply will be cancelled. In addition, the prohibition to build new reactors will be cancelled. The new legislation allows the building of new reactors provided that they will replace one of the ten currently existing reactors in Sweden.

3.3

Green Certificates

Green Certificates or Renewable Energy Certificates (RECs) are tradable commodities proving that certain electricity is generated using renewable energy sources. The Swedish system for green certificates is called “The electricity certificate system”. The system has been a part of Sweden’s long term energy policy and came into force on 1 st May 2003. The system aims to reduce the emission of greenhouse gases by promoting the generation of renewable electricity in accordance with EU-directive 2001/77/EC. From January 2012, Norway will be integrated in the certificate market. A joint electricity certificates market will include a long term and binding cooperation to develop renewable energy in Sweden and Norway. The Swedish Energy Agency has recently proposed a new goal for the electricity certificates market to meet the EU’s 202020-legislation. The new objective of the electricity certificate system is to increase the use of electricity from renewable energy sources by 25 TWh by year 2020 compared to the situation in 2002. Norway is expected to have an objective as ambitious as Sweden, when they join the certificate system. The Swedish electricity certificate system is technology neutral; in other words it covers various kinds of renewable energy sources. The common Swedish-Norwegian system will also be neutral to technology. There are plans to develop the Swedish electricity certificate system to an electricity certificate market for several countries in addition to Norway. Electricity consumers are obligated to support the renewable electricity generation by purchasing certificates corresponding to a certain proportion of the electricity use. Producers of renewable energy which are approved by and registered at the Swedish Energy Agency receive electricity certificates in relation to their generation. Each MWh gives one certificate. The producers sell the certificate and receive revenue in addition to the revenue they receive from selling the electricity. Commercial electricity suppliers are obligated to buy electricity certificates in relation to how much electricity they sell. The electricity certificate system is expected to bring forth a large increase of renewable energy in Sweden as well as in Norway. The electricity certificate system will provide the framework for increasing the capacity of renewable energy generation. However, the location of the new generation is hard to predict. This will be discussed further in section 5.4 Wind Power Generation: How Much, Where and When?

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4 Activities for a Joint Market and System Operation Development The expected large increase of renewable electricity generation in Sweden and Norway, as well as on the Continent, leads to a need for effective and standardized arrangements for system and balancing services. This chapter provides general information about current implementation of a common balance settlement in the Nordic countries and the SwedishNorwegian cooperation on system and balancing services. It also describes the methods of Svenska Kraftn채t and Statnett for congestion management.

4.1

Drivers for System and Balancing Services

Balance between the total electricity generation and the total consumption in real time must prevail. This can be a challenge in a grid where generation and consumption are located in different areas, especially if there are congestions within the grid. System and balancing services are tools to ensure a satisfactory operational reliability in the power system. System services are used for the instantaneous balancing of generation and consumption. The distribution of generation and consumption in the grid, the regulation ability of generation units, bottlenecks between areas and power exchange on interconnections are driving forces for system and balancing services. Due to the large generation capacity of hydro power through reservoirs, the Swedish-Norwegian power system is very flexible. However, the expected increase of fluctuating renewable power generation will, together with new interconnections to other markets, create challenges in the operation of the power system, and thus be a driver for new and extended system and balancing services. Frequency quality of the Nordic synchronous system has decreased in recent years. The main reasons for this are large and frequent changes in the power flow caused by increased market adjustments by the power producers as a response to variations in consumption and exchange over interconnections. It is expected that more interconnections to other markets will further decrease the frequency quality unless preventive measures are taken. Interconnections to other markets make it difficult to balance the system, especially in handling changes in the power flow on interconnections and to ensure sufficient regulating power in periods with high or low consumption. Changes in the power flow on cross-border interconnections usually occur at the same time as changes in consumption, resulting in large variations in power flows. Situations with low load and high unregulated power generation may also increase the need for down-regulating reserves.

4.2

Swedish-Norwegian Development of System and Balance Services

To solve the challenges posed by increased fluctuating power generation and more interconnections, the Nordic TSOs have focused on operational cooperation and on developing different harmonizing means. One example is that Svenska Kraftn채t and Statnett are cooperating to implement a centralized, automatic reserve called Load Frequency Control (LFC). The objective of the LFC is to improve the frequency quality and system security. Improved frequency quality and system security will provide fewer restrictions in the market due to ramping on HVDC-interconnections, facilitate the European market integration and make it possible to offer system services to the Continental Europe in a large extent. In a second step, the objective is to extend the LFC to the entire synchronous Nordic system. In addition, an improved and more controlled planning and execution of generation changes are essential in order to maintain frequency quality within acceptable limits. Svenska Kraftn채t and Statnett are also cooperating in a project regarding a common marketplace for primary reserves. As of today, the TSOs have different routines, e.g. rules regarding time periods and price setting and when to purchase primary reserves. Therefore, Svenska Kraftn채t and Statnett investigate the technical and market oriented prerequisites for

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harmonizing procedures. The project aims at presenting a solution that ultimately can be implemented in all Nordic countries. As a part of the strategic cooperation between Statnett and Svenska Kraftn채t, a project was established in the first quarter of 2009 to develop a principal model and a decision document for a common balance settlement in Norway and Sweden. In the later part of the project, it was decided to establish a new project where Fingrid and Energinet.dk also were included in the process. It is assumed that new laws can be decided formally by May 2011, and that the market players will need a one year adaptation period. At the earliest a common balance settlement can then be operational by May 2012. Efficient market mechanisms for long-term, day-ahead and intraday markets can be important tools to handle the challenges posed by unregulated power generation and new interconnections. Today, the capacities of the interconnections between the Nordic countries are exclusively allocated for day-ahead trade. However, to improve the function of the market, it could be beneficial to allocate a part of the capacity to other time frames than dayahead. Cross-border intraday trade would provide increased trading opportunities and means to control balancing risks. It might also facilitate the national intra-day trade.

4.3

European Need for System and Balancing Services

The estimated net generation mixes in the European countries in 2020 are shown in Figure 4.1. For an example, Germany expects that wind power will make up almost 40 % of its net generation capacity in 2020. A large amount of intermittent power generation in Europe will create a large need for system and balancing services. With its large share of clean and cheap regulating power, the Swedish-Norwegian system has a solid product to offer Continental Europe. The new interconnection that is planned between Norway and Denmark, SK4, will be the first of its kind in Europe where a part of the capacity is reserved for system and balancing services. Assuming the Figure 4.1: Estimate of the net generation mix current plans for establishment of new in 2020 (data from ENTSO-E). power generation in Europe are carried out, there will be an energy surplus not only in Sweden and Norway, but also in large parts of Europe towards 2020. Due to generation characteristics, it is far more expensive to regulate the generation in a thermal dominated power system, like the Continental European one, than in a hydro dominated power system, like the Swedish-Norwegian one. Therefore, the demand for these services is expected to increase in the coming years. Sweden and Norway will also benefit from the opportunity to import system and balancing services in certain situations. Already today there are periods when consumption can be covered by unregulated power generation and low-priced imports from the cross-border interconnections. Cross-border exchange may pose challenges for the operation of the power system. Nevertheless, it will be a necessary ingredient to facilitate the implementation of large amounts of wind power, to take advantage of complementary generation mixes, for

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transmitting electricity surplus to deficit regions and not least for the exchange of regulating power. Several studies (e.g. EWIS) have shown the importance of new grid investments, pointing out the necessity of sufficient availability of flexible resources.

4.4

Congestion Management

In the long term, structural congestion can be relieved by building new infrastructure, i.e. transmission lines and associated switching stations. In the short term, congestion management methods are used to limit the flows of electricity through the system to levels determined by security criteria of the system. The methods are the area price model with pre-defined bidding zones in the market and counter trade in the opposite direction of the congestion. It is also possible to combine the two methods. Current practice in the Nordic area is the last alternative. The use of bidding zones will result in different market prices when congestions occur (market splitting). Congestion management methods have been discussed between the Nordic TSOs for several years. An advantage with bidding zones is that they make actual capacity constraints in the system apparent through prices differences when the market is split. Consequently, congestion management through pre-defined bidding zones lead to more representative spot prices and facilitates a rational allocation of resources. On the other hand, a market with several bidding zones increases the risks for the market actors as the electricity spot market prices will be harder to predict, than in a system which is treated as a single bidding zone. Since the Nordic market model was established in 1996, Sweden has been treated as a single bidding zone. Thus the Swedish market has had a single price. Transmission capacity in the Swedish national transmission network has usually been sufficient to meet domestic Swedish needs. However, the frequency of congestions has increased since the liberalization of the electricity market. The European Commission expressed its concerns that Svenska Kraftnät´s actions to limit the capacity at the national borders to prevent internal congestions are not in accordance with the competition law of EU. In order to comply with the Commission, Svenska Kraftnät offered commitments to subdivide the Swedish transmission system into four bidding zones defined by the three cross-sections (cross-section 1, 2 and 4) where congestion occurs. These commitments were adopted in April 2010 by the European Commission and Svenska Kraftnät will operate the system on this basis from 1 November 2011. Congestion management in Norway is handled with bidding zones, supplemented with counter trade within the bidding zones. Norway is usually divided into two or three bidding areas but depending on the physical conditions Statnett sometimes defines additional bidding areas. On 11 January Statnett introduced a fourth bidding area because of reduced capacity on the 420 kV line Rød-Hasle. On 15 March 2010 a fifth bidding area was introduced by Statnett. This time an additional bidding area was required because of a possible lack of energy due to low reservoir content in the South-West.

4.5

Summary of the Chapter

System and balancing services arrange for an efficient utilization of unregulated power production as well as interconnections. The balancing of the Nordic power system takes place in close cooperation between Svenska Kraftnät and Statnett. The power systems of the two countries have characteristics that in many situations will benefit from interaction. In addition, these services will be better used when optimizing over a larger area. The exchange of system and balance services requires transmission capacity. The opportunity for both countries to obtain gains from cooperation on the system and balancing services will increase through stronger interconnection. Sweden and Norway are also about to start using the same principles for congestion management. By using bidding zones in both Sweden and Norway, capacity constraints in

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the system will be more visible due to price differences. It is expected that the bidding zones with equal price will change to some extent, and that the common Swedish-Norwegian cross-sections will be the border for such areas, rather than national borders. In case of frequent congestions and significant price differences, benefits of reinforcing the grid will be very obvious, and an important driver for a more efficient power system.

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5 Prospects for the Energy Balance - Demand and Generation Scenarios, Year 2020 This chapter describes the prospects for the future energy balance in Norway and Sweden. The first section describes drivers for the energy balance. The second section describes the short-term prospects for the Swedish and the Norwegian energy balance. The sections thereafter focus on the long-term prospects. The prospects are defined as shown in Figure 5.5 as a status of the system today, as short term prognosis 2012, and as three different developments to year 2020. The three different prognoses for year 2020 are called Recession, Renewable+ and 202020.

5.1

Drivers for the Energy Balance

One of the main drivers for the energy balance is the green certificates. The electricity certificate system is expected to bring forth a large increase of renewable energy in Sweden, and in Norway, when the system is implemented there. The target for the Swedish certificate system is 25 TWh. Norway is expected to have as ambitious objectives as Sweden. In Sweden the main alternatives for new renewable energy generation are wind power and biofuel plants. In Norway the new renewable energy generation is expected to come from hydro power and wind power. As both Sweden and Norway have hydro power dominated power systems, the inflow into the hydro power system is the most influential single factor of the electricity generation. Political decisions concerning the nuclear power influence the electricity generation and thereby the energy balance. In June 2010, the Swedish Parliament took a decision to allow reinvestments in existing nuclear power plants. In addition the process of phasing out the nuclear power was cancelled. These decisions are important in order to ensure a SwedishNorwegian energy surplus. On the demand side, factors as economic growth, industrial activity, demography, climate change and energy efficiency affect the energy balance. Another factor affecting the power demand is fuel prices, e.g. high oil prices encourage switching from fossil fuels to electricity by e.g. replacing fuel-oil boilers with heat pumps. Changed consumption patterns due to new technology are also drivers for the energy balance. For both Norway and Sweden the industry are a big consumer. In Norway the development of the energy-intensive industry (e.g. alumina-production) and petroleum-related industry are very important for the outcome of the future total consumption. For Sweden the pulp/paper-industry plays an important role.

5.2

Past Trends and Short Term Prospects for the Energy Balance

5.2.1 Past Trends for Generation In Figure 5.1 Swedish and Norwegian net generation capacities in year 2009 are shown. In Table 5.1 the Swedish and the Norwegian electricity generation in year 2008 and 2009 are shown. The Swedish-Norwegian power system is a mixed hydro and thermal power system. In an average year, hydro power makes up 50%, thermal power 48%, and wind power 2% of the total power generation. The generation capacity in Norway consists mainly of hydro power (98%), while the generation capacity in Sweden consists of 45 % hydro power and 45 % nuclear power in an average year. Lengthy stoppages, due to e.g. difficulties with the capacity upgrades in the Swedish nuclear plants, resulted in a reduced nuclear power generation in 2009. This explains the low share of nuclear power generation in Sweden in 2009 in Table 5.1.

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Figure 5.1: Net generation capacity, 2009. Data provided by ENTSO-E.

Generation (TWh)

Sweden 2008 2009

Norway 2008 2009

Sweden and Norway 2008 2009

Hydro power

68,4

65,3

138,8

128,3

207,2

193,6

Wind power

2,0

2,5

0,9

1,0

2,9

3,5

Nuclear power

61,3

50,0

0

0

61,3

50,0

Other thermal power Sum

14,3

15,9

1,2

3,5

15,5

19,4

146,0

133,7

140,9

132,8

286,9

266,5

Table 5.1: Electricity generation in Sweden (Statistics Sweden) and Norway (Nord Pool), 2008 and 2009. The Swedish and the Norwegian electricity markets were deregulated in 1996 and 1991, respectively. Before the deregulation in Norway, the regional suppliers were obliged to provide unconstrained power supply in nine out of ten years. This resulted in an energy surplus in years with average water precipitation. When competition was introduced into the power market, this surplus was reduced. In Figure 5.2, the consumption and generation in Sweden and Norway during 2009 are illustrated.

2009 3500

3000

3000

2500

2500

2000

2000

GWh

GWh

3500

1500

1500

1000

1000

500

500

0

0 1

5

9

13

17

Consumption SE

21

25

29

33

37

41

Production SE

45

49

53

1

5

9

13

17

Consumption NO

21

25

29

33

37

41

45

49

53

Production NO

Figure 5.2: Generation and consumption in Sweden and Norway during 2009. In 2009, the total electricity output in Sweden and Norway was about 134 TWh and 133 TWh, respectively. This is somewhat less than in 2008. In Sweden, there were problems concerning the capacity upgrade of several nuclear power plants. The nuclear generation in 2009 can be compared to the all time high nuclear power generation in 2004, which was about 75 TWh. In Norway, different reservoir filling at the beginning of 2008 and 2009, in

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addition to less inflow in 2009, contributed to a reduction in the hydro power generation from 2008. Wind power in Sweden and Norway increased its total generation to 3,5 TWh, which is still a marginal contribution to the total Swedish-Norwegian power supply.

5.2.2 Past Trends for Consumption In Figure 5.3 the Swedish and the Norwegian electricity consumption for the period 19902009 are shown. In recent years, the growth in consumption has flattened out. The trend of non-growing consumption has been attributed to increases in electricity prices, mild winters, and increased energy efficiency. As an example, the Norwegian consumption during the period 2000-2007 has been on average 3.1 TWh lower than the expected consumption corrected for temperature variations.

160 150 140

TWh

130 120 110 100 90 80 1990

1993

1996

1999

Sweden

2002

2005

2008

Norwa y

Figure 5.3: The Swedish and the Norwegian electricity consumption during the period 1990-2009. The electricity consumption is closely linked to economic activity. Since the financial crisis began in 2008, it has contributed to a reduced power demand, especially in energy-intensive industries, triggered by a fall of raw material prices. Even before the financial crisis, the pulp and paper industry was struggling with profitability and prospects of downscaling. In 2008, the Swedish-Norwegian power consumption decreased mostly due to the financial crises. In 2009 this trend continued, and the power consumption decreased by about 4 % compared to 2008. The Swedish and the Norwegian total electricity consumption in 2009 were about 138 TWh and 112 TWh, respectively. 2009 was a milder year than average, which makes the temperature adjusted consumption somewhat higher.

5.2.3 Energy Balance for Sweden and Norway, 2009 and 2012 Short Term Prospects for Generation Due to the electricity certificates system, a large increase of generation from renewable sources is expected in Sweden in a near future. Besides the increased generation from renewable power sources, the upgrade of the Swedish nuclear power plants plays a significant role for a strong energy balance in coming years, in spite of proposals to close down oil and coal power plants. The power balance in Norway is likely to be strengthened in the coming years as well. The new gas power plant at Mongstad will contribute to this. Furthermore, as a part of the climate policies, there is a strong political drive to invest in renewable energy generation.

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Short Term Prospects for Consumption In the coming years, the Swedish and the Norwegian electricity consumption rates are expected to be slightly reduced due to increased energy efficiency, efforts to reduce environmental impact, higher fuel and electricity prices and due to the economic downturn since autumn 2008. Energy Balance 2009 and 2012 In Figure 5.4 the energy balances for Sweden and Norway in 2009 are shown together with prospects for year 2012. Sweden had a 4 TWh negative energy balance in 2009, while Norway had a positive energy balance of 9 TWh. As a matter of fact, 2009 was a very abnormal year, especially for Sweden. The generation was much lower than in a normal year, because of very low nuclear generation. Also the consumption was much lower than in a normal year, this because of the financial crisis. Due to expected increase in generation capacity, higher inflow and reduced consumption, a positive energy balance is anticipated in the coming years. The balance for an average 2012 year is shown to the right in Figure 5.4. Expected changes in the energy balance discussed in the previous sections are incorporated into this figure. As the figure shows, Norway and Sweden are expected to be surplus areas in 2012. Especially Sweden is expected to have an increased positive energy balance. This is both related to the expected upgrade for the Swedish nuclear power plants and to increased generation from renewable power sources.

Figure 5.4: Energy balance statistics 2009 (left) and expected energy balance in 2012 (right).

5.3

Prospects for Year 2020

Svenska Kraftnät and Statnett have developed prospects for the future electricity market situation in order to make analyses of investments, given different future pathways. The scenarios shown in this chapter are based on previous studies as Nordic Grid Master Plan 2008, Statnett’s Grid Development Plan 2009 and Statnett/Svenska Kraftnät’s common grid planning study. The scenarios are defined as shown in Figure 5.5 as the state of the system today, as a short term prognosis 2012 (Nordel), and as three different developments to year 2020. The three different prognoses for year 2020 are called Recession, Renewable+ and 202020.

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202020 Renewable +

Prognosis 2012 (Nordel)

Nordic power system 2009/10

Recession

Figure 5.5: Scenarios 2020 for the Swedish-Norwegian power system. The focus on the environment and the level of international cooperation are two of the significant driving forces in the development of generation, consumption and interconnections. The scenarios have been defined within the framework of these parameters (integration and climate focus). The three scenarios are defined as shown in Figure 5.6. • • •

202020

High climate focus

High economic growth Strong climate agreement Strong EU energy integration and coordination Energy-balance Sweden/Norway + 40 TWh

Renewable + • • • • High integration

Low integration

• • • •

Low economic growth National climate focus Weak EU integration Energy-balance Sweden/Norway + 10 TWh

High economic growth International climate focus Swedish-Norwegian certificates EU energy integration and coordination Energy-balance Sweden/Norway + 30 TWh

Recession

Low climate focus

Figure 5.6: The three different developments illustrated in the dimensions "integration" and "climate focus".

5.3.1 Common Features in the Scenarios As both Sweden and Norway have hydro power dominated power systems, the inflow into the hydro power system is the most influential single factor of the electricity generation. Increased inflow has been noted since 1980. This increase of inflow is assumed to be a result of climate changes. In the scenarios presented below, the climate changes are assumed to continue to increase inflow and consequently increase the hydro power generation. In addition, the scenarios include Vattenfall’s major power station upgrades of existing hydro power facilities in Sweden and the 9 TWh of hydro power which are currently projected in Norway. In the scenarios it is assumed that the ten Swedish nuclear power reactors not will be decommissioned in the near future. In addition, increased capacities of the currently existing reactors due to major capacity upgrades are assumed.

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5.3.2 Recession This scenario is strongly related to the “National focus” scenario of Nordic Grid Master Plan 2008 and to the “Stillstand” scenario of Statnett’s Grid Development Plan 2009. Based on today’s policy (climate-focus) this scenario is expected to be the most unlikely scenario. This scenario describes a future situation with little development in most respects. The economy experiences a kind of global economic cooling. Reduced economic growth reduces willingness to prioritize climate policies. Bad times put more focus on national employment, and exert less pressure on developing a common European power market further. With this as a background, the European Union is unable to meet its renewables goal, and the commitment to renewables in Norway and Sweden will be weak. The fuel prices and the CO2 price in this Figure 5.7: Energy balance year 2020 pr. scenario are relatively low, which leads area in the Recession scenario. to a low power price. This also leads to smaller price differences between the hydro dominated area and the thermal dominated area, due to the low fuel prices. Therefore, new lines from the Nordic countries to the Continent will be less beneficial than in the other scenarios. The Swedish-Norwegian green certificate system and the EU 202020goals have been terminated. Both this and the low power prices lead to a very low investment rate in renewables. The Swedish-Norwegian energy balance is expected to be at the same level as today.

5.3.3 Renewable+ This scenario is strongly related to the “Climate and Integration” scenario of the Nordic Grid Master Plan 2008 and to the “Vind og Integrasjon, Eksport og Utveksling” scenarios of Statnett’s Grid Development Plan 2009. The scenario has also been one of the scenarios in Statnett and Svenska Kraftnät’s common grid planning study. In this scenario there is an emphasis on climate. However, the international agreement on emission reductions and the 202020-goals of EU have not been fulfilled.

Figure 5.8: Energy balance year 2020 pr. area in the Renewable+ scenario.

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The fuel prices and the CO2 price in this scenario are high. This leads to relatively high power prices. Yet, the growing positive power balance is moderating the power prices. Because of very good wind conditions a lot of wind farms have been built in Norway and Sweden. The price difference between the hydro dominated area and the thermal dominated area is large and fluctuating. This is due to both high fuel prices, variation of the wind generation and high regulation cost of thermal generation. Therefore, new interconnections from the Nordic countries to the Continent will be very beneficial in this scenario. The Swedish-Norwegian green certificate system is functioning well. This has led to a high investment rate in renewables. The Swedish-Norwegian energy balance is expected to be very positive, with a balance of + 30 TWh in 2020.

5.3.4 202020 This scenario is strongly related to the “Climate and Integration”-scenario of Nordic Grid Master Plan 2008 and to the “Vind og Integrasjon, Eksport og Utveksling”-scenarios of Statnett’s Grid Development Plan 2009. The scenario has also been one of the scenarios in Statnett and Svenska Kraftnät’s common grid planning study. In this scenario there is an emphasis on climate with a strong international agreement on emission reductions. The fuel prices and the CO2 price in this scenario are high. Despite this the power prices are relatively low. This is due to a very positive power balance all over Europe, because of all the new generation from renewable sources. The price difference between the hydro dominated area and the thermal dominated area is large and fluctuating, mostly because of variation of the wind generation and because of the high regulation cost of thermal generation. Therefore, new interconnections from the Nordic countries to the Continent will be beneficial in this scenario. The Swedish-Norwegian green Figure 5.9: Energy balance year 2020 pr. area certificate system is functioning in the 202020 scenario. well and the 202020-goals from EU have been fulfilled. This has led to a very high investment rate in renewables. The Swedish-Norwegian energy balance is expected to be very positive, with a balance of + 40 TWh in 2020.

5.3.5 Energy Balances in the Scenarios Figure 5.10 shows the actual Swedish-Norwegian energy balances from 1990 to 2009 and the balances in the three different developments up to 2020. In general, the energy balance for Sweden and Norway has been positive the last 20 years. More than 70 % of the years had a positive energy balance, with an average value of +5 TWh. The most negative balance was

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in 2003 with an import of 21 TWh, while the most positive year was in 2005 with an export of 19 TWh. For the years to come, the energy balance behind the three different scenarios is described. In 2020, the energy balance in an average year is expected to be + 10 TWh in scenario Recession, + 30 TWh in Renewable+ and + 40 TWh in 202020.

TWh 40

202020

30

Renewable+

20

Recession

10 0 -10

-20 -30

Actual 1990-2009

Figure 5.10:

5.4

Prognosis 2010-2020

Energy balances for Sweden/Norway 1990 – 2020.

Wind Power Generation: How Much, Where and When?

In the scenarios Renewable+ and 202020 a large share of the surplus is expected to come from wind power generation. As the increase of wind power generation poses many challenges for Svenska Kraftnät and Statnett, this section is devoted to a discussion of the development of wind power generation. The core questions are: How much? Where? and When? There is a huge difference between the expected increase of wind power generation and the plans for wind farms, i.e. there is an uncertainty of how much wind power will be built. In Sweden, Svenska Kraftnät has been notified of wind power projects with a total capacity of about 36 000 MW. The electricity certificate system, which is expected to provide a framework for how many renewable power generation farms that will be built, have the target 25 TWh in Sweden. This implies that a lot of the planned wind power will not be built. National goals for the amount of renewables have not yet been set in Norway. However, how much wind power that will be built depends on funding. Thus, the targets of the possible electricity certificate system, the future power prices as well as subsidies for renewables will be the determining main factors. Currently, both the prospects for the power price and the level of subsidies are higher in other countries than in Norway. Therefore, wind-investments in countries like Germany, Spain, France and Great Britain are preferred by the larger power-producers. In addition, small-scale hydro power generation and other renewables e.g. biogas-driven thermal generation will be competing for the generation subsidies in the certificate system as the system is neutral to the way of generation. There is also a large uncertainty of where in Norway and Sweden new power plants will be built. As shown in Figure 5.11, the numbers of planned wind power plants are much higher

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in the north and in the middle of Norway than in the south of Norway. In Sweden many of the wind power plants are planned south of cross-section 2. However, the figure does not show how probable it is that a plant will be built. The permit process for wind power farms is much easier in the sparsely populated areas of North Sweden and North Norway. In addition, the expected wind generation is expected to be higher in the north, because of stronger wind. On the other hand, the tariff of the transmission grids is lower for generation in the south of Sweden and Norway. Finally, the implementation of bidding areas in Sweden could signify that generation in the south of Sweden will be more beneficial. In Figure 5.11 official wind power projects in Norway are shown. The Norwegian data represents wind power projects notified to NVE. These data includes projects with ongoing permit processes as well as projects which have been granted permit. The Swedish statistics in Figure 5.11 represents wind power projects which Svenska Kraftnät has been notified of. It should be noted that the wind power projects in Figure 5.11 are independent of the assumptions for wind power in the scenarios, both concerning the amount and the geographical distribution. Sweden has today a capacity of 1400 MW in operation while Norway has a capacity of 440 MW. The last question, when, could be transformed to how fast the wind power will be built. The current economic Figure 5.11: Official wind power projects in situation may have a negative effect on the Sweden and Norway. building of renewable power plants. (Source: Svenska Kraftnät and NVE) Moreover, to be able to make use of the increase of renewable energy generation, grid reinforcements are necessary. The problem is that the lead time to build new power lines is longer than the time it takes to build a wind farm. Svenska Kraftnät has pointed out, in the report “Storskalig utbyggnad av vindkraft – Konsekvenser för stamnätet och behovet av reglerkraft”, that the limiting factor for establishing new renewable energy generation is the time that the authorisation process for power lines takes rather than factors concerning the building of renewable power plants. It is necessary for Swedish and Norwegian authorities to facilitate the authorization process in order to make integration of the new renewable energy generation possible.

5.5

Summary of the Chapter

A more positive energy balance is expected in Sweden and Norway in the near future. The main reasons for this are a political drive to invest in renewable energy generation, the efficiency upgrade of the Swedish nuclear power plants and a steady level of the Swedish and Norwegian electricity consumption. The three scenarios Recession, Renewable+ and 202020 describe different developments for the Swedish-Norwegian power system. The purpose of the scenarios is mainly to make an analysis of investments for different future pathways but also to recognize and examine future challenges and opportunities. With a large increase of renewable energy generation and a need to transmit large electricity surplus to other systems, the 202020 scenario is the most challenging scenario. At present, the future seems more likely to be close to the situation in Renewable+ and 202020 than the situation in the Recession scenario. All the

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scenarios are strongly related to former studies of Statnett and Svenska Kraftnät such as Nordic Grid Master Plan 2008, Statnett’s Grid Development Plan 2009 and Statnett/Svenska Kraftnät’s common grid planning study. Especially the common Swedish-Norwegian grid planning study is important for the common long term strategic planning of the power system. A main challenge for Svenska Kraftnät and Statnett will be to integrate the new wind power generation. However, there is a huge difference between the expected increase of wind power generation and the plans for wind farms, implying that a lot of the planned wind power will not be built. There is an uncertainty of how much, where and when new wind power plants will be built. Among the most important factors for the outcome are; future level of power prices, the impact of green certificates and possible subsidies within different countries. Also the permit process is an important factor. Svenska Kraftnät and Statnett recognize a need to facilitate the authorization process for new lines in order to make integration of the new renewable energy generation easier.

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6 Prospects for the Power Balance -System Adequacy, Prospects for 2020 In this chapter, the development of Sweden’s and Norway’s power balance will be discussed, both in the short and long term. Furthermore, the situation during the winter 2009/2010 will be related to ENTSO-E’s assessment of the margin to capacity shortage in the hour of operation.

6.1

Drivers for Improving System Adequacy

The short term prospects show that Sweden and Norway possess a positive power balance, even during severe winter conditions. Together, Sweden and Norway can cover peak demand and be net exporters. In case of failures, interconnections to other markets can also serve as power reserves. The system adequacy is likely to improve with the expected development of wind power and small scale hydro power, and new interconnections will make the power surplus available to the Continent. Thus, Sweden and Norway have the opportunity to operate as power reserves for the Continent. In the long run, the unregulated characteristics of wind and small scale hydro power may weaken the system adequacy in case it replaces existing well regulated power generation. This can make Sweden’s and Norway’s ability to export electricity somewhat unpredictable. Another factor that influences the system adequacy in Sweden and Norway is the availability of nuclear power generation. Nordel pointed out in “Power and Energy Balances 2011-2012” that a common mode failure in nuclear power plants is a most dramatic situation for the Nordic grid and would lead to a most difficult security of supply situation. It was underlined that the risk of such a situation is very low, but this winter has in fact verified the relevancy of Nordel’s worst case scenario. The Swedish nuclear power generation was abnormally low, and in combination with several other challenging conditions, the power and energy situation was in periods tight.

6.2

Short Term Prospects for Power Balance

Figure 6.1: Power balance statistics. Data provided by Nord Pool. A power balance with country-specific peak demand in 2009/2010 is shown to the left in Figure 6.1. The consumption in both Sweden and Norway was higher than the generation in

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the peak hours. In Norway, there was an all time high peak demand during this season, while in Sweden, the national all-time high peak demand is 27 000 MWh/h. This winter, the Nordic peak load was all time high, with 69639 MW. The right part of Figure 6.1 illustrates the situation. It happened at the eighth of January, a cold winter day with temperatures estimated to occur every tenth year. The previous peak load was about 69000 MW, and took place the fifth of February in 2001.

6.2.1 Capacity Shortage Sweden and Norway have system requirements for maintaining satisfactory security of supply. The security of supply is evaluated by using statistics of interruption and by using a calculated status indicator for the security of supply. This status indicator is called Loss of Load Probability (LOLP). The system requirement is such that the Loss of Load Probability should not exceed 1‰. This requirement corresponds to the requirements for security of supply in ENTSO-E. There are two different criteria for security of supply: one for the risk of capacity shortage in the hour of operation and another for the risk of capacity shortage on the spot market; in other words when the Figure 6.2: Margin to capacity shortage in supply bids are not able to meet the 2010/2011. demand bids the day before the operation day. Since the Swedish-Norwegian system has a positive energy balance, it is most relevant to look at the risk of capacity shortages in the hour of operation. The security of supply calculations are made with the MAPS model for Nordel’s Nordic Grid Master Plan 2008 and the Power and Energy Balances 2011-2012. Internal transmission capacities are taken into account, and import possibilities from neighbouring systems are assumed to provide half of the existing capacity. Figure 6.2 shows the margins down to the system requirements of 1‰ for capacity shortage in the hour of operation. In case of a common mode nuclear failure, system reserves have to be used, but the risk of this situation is small. According to the calculations, the risk of a capacity shortage during the coming years is acceptable. This means that the security of supply situation is calculated to be acceptable.

6.2.2 Retrospect Winter 2009/2010 During winter season 2009/2010, the relevance of Nordel’s worst case scenario was verified. The Swedish nuclear power generation was abnormally low. In combination with several other challenging conditions, the power and energy situation was in periods tight. Circumstances contributing to the challenging situation:  Swedish nuclear capacity was less than 70 % of installed capacity for several months  Cold weather resulted in less inflow than normal and extraordinary high consumption  Low capacity from South-Norway to Sweden due to high consumption in Oslo and reduced capacity on a sea cable that dimensions the export to Sweden

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Sweden was importing power from its connected neighbours, and power reserves were started to cover demand. The prices in Sweden and Mid- and North-Norway thus got extraordinary high, at 1400 â‚Ź/MWh at maximum. The system handled the stressing conditions this winter, but it is worth asking how it would have been handled with a large share of unregulated power, like the situation in the scenarios Renewable+ and 202020. Obviously, the system would have been very sensitive to demand and wind forecast, as the ability to regulate would have been less than today. In case of low wind power generation, the system might also have been more dependent on import from other markets.

6.2.3 Forecasts for Regional System Adequacy in Normal Winter Conditions In normal winter conditions, the maximum available generation capacity exceeds the sum of national peak demand by 4 500 MWh/h. This is illustrated in Figure 6.3. The simultaneous peak demand is estimated to be somewhat lower; making the capacity margin even bigger. Sweden and Norway are thus capable of exporting to the Continental market during the peak load. Furthermore, the generation is a conservative estimate, assuming that only six percent of the wind power is available during winter time.

6.2.4 Forecasts for Regional System Adequacy for Severe Conditions The national peak demands corresponding to a probability of once in ten years 2015 is shown in Figure 6.3 (right side). The sum of these national peak demands correspond to an even lower probability, and is estimated to be 2 800 MWh/h higher than in average temperature conditions in 2015. Yet, the Swedish and Norwegian generation capacity is estimated to be sufficient to cover the simultaneous peak demand in a 10-year winter day in 2015.

Figure 6.3: Available power capacity and peak demand 2015 for average winter condition and a cold winter day. (Source: Nordic Grid Master Plan 2008)

6.3

Long-term prospects for Power Balance

The figures on the next page are taken from ENTSO-E’s system adequacy forecast for 2010. They show the development of import and export capacity for Sweden and Norway for the third Wednesday in January at 7 pm from 2010 to 2025. Both the Swedish and the Norwegian capacities are expected to increase significantly by 2020. The figures also show the development of the difference between the remaining capacity (RC) and the adequacy reference margin (ARM) for a conservative scenario A and a best

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estimate scenario B. ARM accounts for unexpected events affecting load and generation, and is the part of net generating capacity that should be kept available at all time to ensure the security of supply. When remaining capacity is higher or equal to the adequacy reference margin, it implies that the power system has sufficient capacity to handle unexpected situations, and that the spare generation capacity can be exported. When reading the figure, it is important to bear in mind the difference between power and energy, and how it is affected by an increasing share of unregulated power generation. Development of new renewable power generation will increase the energy balance because more energy is available to the system. However, the power balance will not improve proportionally to the energy balance because it is not possible to control at what time the energy from unregulated power is available for generation. Therefore, a positive energy balance can actually result in periods with shortage of power. This is especially valid if there is a large share of unregulated sources of energy. GW 15

Sweden - January 7 p.m.

10 5 0 -5

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

-10 -15

Import Capacity GW 15

Export Capacity

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RC-ARM B

Norway - January 7 p.m.

10 5 0 -5

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

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Import Capacity

Export Capacity

RC-ARM A

RC-ARM B

Figure 6.4: Sweden’s and Norway’s development of capacities and adequacy reference margin from 2010 to 2025. The development in the difference between RC and ARM is influenced by the planned development of wind and small scale hydro power generation towards 2020. This will result in more unregulated power, and can make it more challenging to meet peak demand. Sweden’s plans to phase out some of the thermal generation also affect the development of the remaining capacity. The Swedish curve declines around 2015 and turns negative for the best estimate scenario B in 2022. The Norwegian curve improves towards 2015 before it declines, but it stays positive during the whole period. Altogether, the Swedish-Norwegian system is likely to export during peak load conditions more than 10 years ahead.

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When reading Figure 6.4, it is worth noting that the estimate of the remaining capacity is based on the conservative assumption that only six percent of the installed wind power is available during peak load. Normally, the wind power generation will be considerably higher. Availability of six percent is used to stress the fact that it is not possible to control the generation of unregulated power, and that the power situation needs to be closely monitored when the share of unregulated power generation increases. To cope with the development indicated in the figure, transmission capacity to other markets, and possibly even power reserves, needs to be developed correspondingly to keep an appropriate level for the security of supply.

6.4

Summary of the Chapter

The Swedish-Norwegian power balance is positive, both in the short and in the long run. The Swedish power balance is slightly negative during peak hours in a severe winter situation (one out of ten winters). However, the total Swedish-Norwegian power balance is positive even in serve winter situations. During the winter 2009/2010, it was demonstrated that the Swedish and Norwegian power system is vulnerable to a common mode failure in nuclear power generation. In combination with other problems, this can cause a difficult situation for the security of supply. An expansion of the wind power generation in combination with a reduction of the thermal power generation in Sweden will affect the system’s remaining capacity. Replacing wellregulated thermal power with unregulated renewable power, constitute a challenge for the security of supply. In case of peak demand and no wind, it is possible that situations similar to what happened the winter 2009/2010 could occur again. In such situations, more interconnections to other markets can support the Swedish and Norwegian system. EU is initiating a shift from thermal power generation to renewable power generation all over Europe. Generally, this will increase the percentage of unregulated power generation, and thus the demand for regulated power generation. In this sense, interconnections to other markets create a win-win situation. They utilize the fact that it is highly unlikely that a congruent peak load and no wind situation occurs in a larger area. Interconnections will thus make it possible for Sweden and Norway to support others with well regulated power, as well as improve the import capacity in situations with low wind power generation in Sweden and Norway.

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7 Internal Swedish-Norwegian Grid Development Three common Swedish-Norwegian regions have been defined in order to serve as references in this report; the Northern Region, the Mid Region and the Southern Region. The first section lists the main drivers and challenges for internal Swedish-Norwegian grid extensions. The second section describes transmission patterns for the electricity through the Swedish and the Norwegian grids. The sections thereafter describe three steps with reinforcements in the Northern Region, the Mid Region and the Southern Region, respectively. Section six describes the permit procedure and section seven gives an account of other national projects.

7.1

Drivers and Challenges for Grid Extensions

7.1.1 Overall drivers for investments Svenska Kraftnät has identified seven drivers for investments listed in order of priority below: 1. 2. 3. 4. 5. 6. 7.

Needs for reinvestments Political considerations for integration of the European electricity markets and for renewable energy generation New generation (mainly wind and nuclear power) Joint investments for network and interconnections within the Nordic countries and other neighbouring countries Changes of the network infrastructure in major cities Increased capacity - elimination of bottlenecks Increased security of supply and personal safety

Statnett’s three main drivers are listed below. They are somewhat more general, summing up the main features of the seven drivers above.  Improved security of supply  Increased value creation  Improved climate solutions

7.1.2 Drivers and Challenges for Grid Extensions Security of Supply The security of supply is a main driving force in the majority of grid reinforcement projects. The reinforcement projects Stockholm Ström (Stockholm), Sima-Samanger (west of Norway) are examples of projects mainly initiated in order to keep a satisfactory level of the security of supply. Integration of Renewable Power Generation The policy of EU, particularly the 20.20.20. legislation, and the national policy measures to meet the climate policy requirements of EU will provide strong incentives for renewable electricity generation in both Sweden and Norway. The electricity certificate system in Sweden creates economic incentives for an increase of up to 25 TWh of renewable electricity generation to year 2020. When Norway joins the system in 2012, the same incentives will apply to Norway. Hence, a main challenge for Svenska Kraftnät and Statnett will be to develop the grids to support the growth of renewable electricity generation, which entails not only the inclusion of e.g. wind farms into the grids but also the adjustments of the transmission grids to new transmission patterns. A key for enabling implementation of large amounts of intermittent energy sources, as the wind power, could be the design of the transmission grids. With a large share of intermittent energy in the generation mix, additional interconnections to external markets are required; both for transmitting the surplus to the demand and for the exchange of regulating power.

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However, the current grid has limited capability of handling new interconnections to external networks. Therefore, cross-border reinforcements alone will not provide for an efficient power exchange; the internal grids must have sufficient transmission capacity as well. In parallel with cross-border reinforcements the internal grid must be reinforced. Combined generation peaks of wind power and of hydro power have not been analysed in this report. During a combined generation peak of wind power and hydro power e.g. during flood situation in combination with good wind conditions, the required transmission capacity would far exceed the current Swedish-Norwegian capacity in the transmission grid and the electricity price will be influenced. Cross-border Reinforcements There is a strong political will to integrate the electricity market through cross-border reinforcements. In addition, additional cross-border interconnections are required in order to accommodate the expected large amounts of new wind power generation as well as to take advantage of complementary generation mixes and resources. As mentioned above, to arrange for these additional cross-border interconnections, internal grid reinforcements are required. Location of New Generation According to current plans, it seems likely that a significant part of the new power generation in Norway will be developed in the Northern Region, north of Tunnsjødal. In Sweden, new generation is expected to be allocated more evenly over the country. While most of the plans in Sweden are to establish wind power, small scale hydro power will dominate the development in Norway. Altogether, this gives Svenska Kraftnät and Statnett a common driver; to transmit the power from the generation areas in the north to the consumption areas in the south. Currently, congestions in the SwedishNorwegian grid are limiting the power flow from the north to the south. The most important cross-sections are marked in the figure, and further described in the next section. To allow for export of the energy surplus during normal years and for imports during dry years, the Swedish-Norwegian system needs to have sufficient transmission capacity to other markets. Time Consuming Processes for Establishing New Interconnections The implementation of an interconnection project can take several years. Especially the authorization procedures are very time consuming (further reading in section 7.7). Therefore, Svenska Kraftnät and Statnett need to be proactive regarding the integration of new Figure 7.1: Common Swedish-Norwegian cross-sections. renewable power generation. Cooperation Between Svenska Kraftnät and Statnett A major challenge for Svenska Kraftnät and Statnett is to arrange for Swedish-Norwegian reinforcements between the two transmission networks. A good cooperation between the two TSOs is necessary though differences in drivers and investment criteria may infer difficulties to agree on which Swedish-Norwegian reinforcements that should be implemented.

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7.2

Transmission Patterns in the Swedish and the Norwegian grids

7.2.1 The Northern, Mid and Southern Region Three common Swedish-Norwegian regions have been defined in order to serve as references: the Northern Region, the Mid Region and the Southern Region. As shown in Figure 7.2, the three regions embrace important cross-sections of the Swedish and Norwegian transmission grids. The Northern Region embraces the Ofoten cross-section. In the south it is limited from the Mid Region by the Swedish cross-section 1 and the Tunnsjødal cross-section. It also includes the Arctic region. The Mid Region continues further south to the Norwegian cross-section Møre/Trøndelag and the Swedish cross-section 2. The southernmost part is called the Southern Region. It embraces the Swedish crosssection 4 and the Norwegian Southern Figure 7.2: The Northern, the Mid and the cross-section as well as the Hasle crossSouthern Region. section between southern Sweden and southern Norway.

7.2.2 Current Transmission Patterns The transmission pattern in the Swedish and the Norwegian transmission grids depends on the inflow into the hydro power system, the location of generation and consumption and the differences between the Swedish-Norwegian and the continental electricity prices. Normally, Northern Sweden is a surplus area. Most of the Swedish hydro power generation is located in the Northern and in the Mid Region. Northern Sweden is very sparsely populated and the total consumption is relatively low. Conversely, the large population centres are located in the Southern Region where consumption is high. The generation capacity in the Swedish part of the Southern Region mainly consists of thermal generation: nuclear power generation but also power plants fired by biomass, waste, natural gas etc. Northern Sweden and Southern Sweden are connected through several high voltage power lines. The flow in Sweden generally goes from the north to the south. Northern Sweden exports power to Finland during wet and average years. There is a power flow transit through Finland and back to Sweden through Fenno-Skan 1. During dry years power is imported from Finland. In Norway, generation and consumption are more evenly distributed, and the direction of the power flow varies during the day due to the power exchange on the interconnections to external networks. In general, power flows from the surplus area in the north to the deficit area in Mid-Norway, and from the large producers in the west and central part of Norway to consumption areas and the interconnections in the Southern Region. The general north-to-south power flow varies in strength between seasons, between day and night, and between weekdays and holidays. The capacity is fully used in periods with high generation, e.g. during the spring inflow, and in periods with high consumption, e.g. daytime during weekdays in the winter time. The seasonal variation is caused by the inflow. Typically, the power flow is at its strongest in periods with high inflow, like when the snow melts in the spring and when the heavy showers occur in the autumn. In such periods, hydro

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power producers can be forced to produce at a low price in order to avoid spilling water. Except from these periods, the power flow depends mainly on the demand. During winter period the power demand is high, driven by electric heating of houses. In addition, demand is also at its highest in daytime on weekdays. In these situations, it is a strong power flow from the north to the south. During nights and holidays, demand in deficit areas can be covered by local generation and imports through the interconnections, and the north-to-south power flow declines. The grids in Sweden and Norway are already today limiting the power flow in case of very wet or dry years. In wet years, the congestions are more frequent. There are bottlenecks in the grid constraining flow both from the North Region to the Mid Region (Tunnsjødal and the Swedish cross-section 1), and the flow from the Mid Region to the Southern Region (Møre/Trøndelag and the Swedish cross-section 2). In case of more inflow due to climate changes and more generation capacity in the north, the existing problems will increase. In dry years with imports from Denmark and the Continent, the Swedish west coast section is limiting. In recent years, problems during nights concerning power flows towards the north on the west coast of Sweden have occurred. At such occasions, Norway has imported power from Denmark and Germany that has passed through Sweden. Figure 7.3 shows the energy flow from 2007 to 2009, and the minimum, average and maximum power flow in this period on the common Swedish-Norwegian cross-sections. It illustrates how the flow increases from the Northern Region to the Southern Region, and the large variation in the flow pattern. The maximum power flows on the cross-sections are equal to the capacities. However, the maximum capacities vary. They depend on circumstances like the distribution of generation and the power flow elsewhere in the grid.

Figure 7.3: Energy flow year 2007, 2008 and 2009 and minimum, average and maximum power flow in the period 2007-2009.

7.2.3 Transmission Patterns for Power and Energy in the Scenarios Factors Affecting the Transmission Patterns in all Scenarios The Nordic Grid Development Plan in 2004 proposed grid reinforcements in five prioritized cross-sections: Fenno-Skan 2, Nea-Järpströmmen, South Link, the Great Belt and Skagerrak 4. All of these are expected to be in operation by 2015. In Nordel’s grid development plan from 2008, the South-West Link, Ørskog-Fardal and Ofoten-Balsfjord-Hammerfest were recommended. These lines are expected to be in operation by 2016. Interconnections from

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the Nordic countries were also investigated. NordBalt, NorNed2, NORD.LINK and NorGer are examples of such interconnections. When the planned internal reinforcements have been implemented, they will increase transmission capacity in the cross-sections of the SwedishNorwegian grids. However, the planned interconnections to external networks will increase the transmission through the cross-sections. Other factors affecting the transmission pattern are changes in generation and consumption, also outside of Sweden and Norway. For example, the new nuclear reactor in Olkilouto in Finland and a possible sixth Finnish nuclear power plant will have a considerable effect on the power flow in the Swedish-Norwegian power system. In case the sixth nuclear reactor is built in the north of Finland, the export of the Swedish-Norwegian generation surplus to northern Finland will be reduced. This will contribute to an even stronger SwedishNorwegian north-south power flow. Thus, the development of the Finnish nuclear power generation might accelerate the need for reinforcements in the Swedish-Norwegian grid. It is also worth mentioning that Sweden will implement bidding areas. The bidding areas will create economic incentives for the actors on the electricity market to establish new generation in areas with power deficit, and conversely, to create new consumption in areas with power surplus. Thus, the implementation of bidding areas in Sweden might slightly reduce the north-south power flow. Expected Transmission Pattern in the Scenario Recession In the Recession scenario the surplus in the energy balance is 13 TWh. Due to low economic growth, there is only a slight increase in demand. The increase of generation is also small due to a low investment rate in renewables. The transmission pattern in the Recession scenario is similar to the current transmission pattern in Sweden and Norway with a general increase of the flow from the north to the south. The additional capacity which the SouthWest Link provides in the Swedish cross-section 4 is mainly used for export on NordBalt and other interconnections.

Figure 7.4: Energy and power flow in the Recession scenario. In Figure 7.4 the transmission with unlimited capacity at the cross-sections in Sweden and Norway in the scenario Recession is shown. The flow during an average year through the Swedish-Norwegian system corresponds quite well to the historical values in Figure 7.3. Expected Transmission Pattern in the Scenario Renewable+ In this scenario, a lot of wind farms have been built in Norway and Sweden, leading to a surplus of 30 TWh. The price difference between the hydro power dominated area and the

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thermal dominated area is large and fluctuating. Consequently, there are considerable and frequent variations in the transmission pattern. The interconnections to external systems are mainly used for export of the new renewable energy generation. The net export to Finland is also considerable higher in this scenario compared to Recession. In Figure 7.5, the transmission with unlimited cross-sections in the scenario Renewable+ is shown. The northsouth power flow is rather similar to the power flow in Recession in Figure 7.4. This is because a part of the surplus is exported to Finland.

Figure 7.5: Energy and power flow in the Renewable+ scenario. Expected Transmission Pattern in the Scenario 202020

Figure 7.6: Energy and power flow in the 202020 scenario. A very positive power balance is expected in the 202020 scenario due to the new generation from renewable sources. The surplus in the Swedish-Norwegian energy balance amounts to 40 TWh. The flow in this scenario has large variations caused by the unregulated power generation. Figure 7.6 shows that in 202020, the north-south flow is strongly enhanced

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compared to the other two scenarios. The export to Finland is close to maximum already in Renewable+, so the extra energy surplus in 202020 has to be transported to the south and exported via the interconnections. Due to the large amount of renewable energy generation and more interconnections to external systems, more internal congestions are expected. There is a risk that these congestions can be even more pronounced since new wind power plants can be built faster than it is possible to implement the necessary reinforcements. On the other hand, the amount of new renewable power generation in this scenario might not be that realistic. It will result in low power prices, making it less attractive to invest in new generation.

7.3

Grid Development, Northern Region

The Northern Region embraces the Ofoten cross-section. It is in the south limited by the Swedish cross-section 1 and the Tunnsjødal cross-section. It also includes the Arctic region.

7.3.1 The Current Situation The Northern Region is a surplus area with a lot of hydro power generation and low consumption. The Swedish part of the grid southwards out of the region consists of four parallel 420 kV transmission lines, while the Norwegian part consists of a 132 kV-line in the northernmost part, a 420 kV line from Balsfjord (north of Ofoten) to Nedre Røssåga, and two 300 kV lines from Nedre Røssåga to Tunnsjødal. There are three lines between Sweden and Norway in the Northern Region; Ofoten-Ritsem, Nedre Røssåga-Ajaure and Tornehamn-Sildvik (130 kV). Ofoten-Ritsem is a 420 kV transmission line, while Nedre Røssåga-Ajaure is a 220 kV line. The total capacity for the cross-section between Sweden and Norway in this area is approximately 600 MW in the direction towards Sweden and about 800 MW in the direction towards Norway. The total transmission capacity of the three interconnections exceeds 800 MW. However, the capacity between Sweden and Norway is limited by dynamic stability. Congestions related to the power flow around Ofoten regularly occur, both northwards towards the Arctic region, and to Sweden. Furthermore, the Norwegian part of the grid is from time to time limiting the power from the Northern Region to the Mid Region.

7.3.2 Expected Development in the Scenarios The consumption in the Arctic region is expected to increase due to higher petroleum activities close to the Hammerfest and mining industry in Varangerbotn, in the northeast part of Norway. The demand is lower in Recession than in the other two scenarios. However, the transmission capacity of the grid is not sufficient for covering the consumption in the Artic region in any of the scenarios. This situation occurs in spite of the fact that new power generation is expected. The new power generation is mainly unregulated and will not be sufficient for a secure power supply. Reinforcing south of Ofoten is therefore important for the security of supply of the north eastern part of Norway. The duration curve for the power flow on Ofoten-Ritsem without any capacity restrictions is given in the Figure 7.7. The curve is based on results from simulations with the EMPS model, and Ofoten-Balsfjord-Hammerfest is included in all scenarios. The current maximum capacities are marked as dotted lines in the figure, showing that the power flow is much higher than the maximum capacities. In Recession, the peak flow exceeds the current crosssection capacity with more than 500 MW in both directions. In the other two scenarios the flow exceeds the current capacity to an even greater extent. An efficient power flow could be achieved by reinforcing the transmission capacity between Ofoten and Ritsem, or by reinforcements between Northern Norway and Mid Norway. The latter reinforcements would reduce the flow through the cross-section and thereby the need for additional capacity. Further south, a large development of wind and small scale hydro power generation is expected. Some of this power will flow northwards, but it will also contribute to a larger

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Figure 7.7: Duration curve for the flow on Ofoten-Ritsem (to the left) and the common Swedish-Norwegian cross-section 1 in the scenarios (to the right) (southwards +/northwards-). power flow southwards. This will cause congestions both in the Swedish and Norwegian part of the grid. The right part of Figure 7.7 shows a duration curve for the power flow southwards on the common Swedish-Norwegian cross-section 1 without any capacity restrictions. The expected capacity in 2015 is 4500 MW, marked as the lower dotted line in the figure, and this capacity will restrict the expected power flow in all scenarios. The upper dotted line represents the capacity after reinforcements of the Swedish-Norwegian crosssection as proposed in the common Swedish-Norwegian grid planning study. These reinforcements are described in the following sections.

7.3.3 Proposed Reinforcements Arctic Region To ensure the security of supply in the Arctic region, licence applications for two new 420 kV lines has been sent to NVE. In addition, a 132 kV line is under construction. The 420 kV lines will be connected from Ofoten to Balsfjord and from Balsfjord to Hammerfest. The new transmission lines enable growth in consumption and increased wind and small scale hydro power generation in the Arctic region, and are needed in all scenarios. As a consequence of plans for development in the region, Statnett and Fingrid, the Finnish TSO, have started an assessment of additional reinforcements of the grid. The study is referred to as the Arctic Circle study. The Arctic Circle will be a reinforcement of the Ofoten – Balsfjord – Skaidi transmission line and will consider further reinforcement between Norway and Finland. This study is linked to the ongoing study between Svenska Kraftnät and Fingrid regarding a third AC-transmission line between Sweden and Finland. Southward Power Flow There are several alternatives for handling the expected increase of renewable power generation and the subsequent increase of the north-south power flow. However, three main paths could be recognized:   

Separate reinforcements of the Norwegian and the Swedish transmission grids. Strengthening of the lines between Sweden and Norway and reinforcements in the Swedish transmission grid. Coordinated reinforcements of both the Swedish and the Norwegian grids in combination with reinforcements of the lines between Sweden and Norway.

The first alternative is the easiest to implement as the reinforcements could be carried out independently of the other TSO. However, it could mean that benefits of coordinating the reinforcements are lost. The main advantage of the second alternative is that it could be a cost effective way of reinforcing the grid if e.g. the Swedish cross-section 1 is series compensated. It will also

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strengthen the security of supply in the northernmost part of Norway by allowing for increased import from the northern part of Sweden. However, if the power from Northern Norway flows into Sweden, the benefits of reinforcements of the Norwegian transmission grid could be underestimated. This could lead to postponements of Norwegian reinforcements, which may intensify congestion problems in Norway. In addition, it could mean that the Swedish grid must be further reinforced to handle the increased north-south power flow. The Swedish grid may be strong compared to the Norwegian grid but the need of transmission capacity is also high. A larger north-south flow may infer additional congestion problems. The third alternative will provide the strongest grid and is technically feasible. This alternative will make the southward power flow efficient. In this alternative sudden failure of transmission lines will easily be managed. Further studies are needed to find the best common approach of how to reinforce the northern part of the Swedish-Norwegian grid in order to handle the increased north-south power flow. Other aspects moreover the technical must be considered. In Scenario Recession, further reinforcements are not expected to give positive values of the socio-economic benefits. In scenario Renewable+, series compensation of the Swedish cross-section 1 and a new 420 kV transmission line between Svartisen and Nedre Røssåga are recommended by the Swedish-Norwegian grid planning study. Furthermore a new parallel line from Ofoten via Ritsem to Porjus, as well as series compensation and transformers for power flow control south of Ofoten and other alternative reinforcements will be further analyzed by Statnett and Svenska Kraftnät. The above described reinforcements would increase the capacity in the common Swedish-Norwegian crosssection 1 with 900 MW, from 4500 MW to 5400 MW. The duration curve shows that this capacity will be sufficient during 99 % of the time. Scenario 202020 requires additional reinforcements from Nedre Røssåga and southwards. The common Swedish-Norwegian grid planning study has proposed two solutions that from a technical and market perspective seem good; either a voltage upgrade from 300 kV to 420 kV of the line southwards from Nedre Røssåga passed the Tunnsjødal cross-section and a split of the transmission line between Nedre Røssåga and Gejmån, or a new 420 kV line between Nedre Røssåga and Grundfors. Based on the first socio-economic evaluation, the alternatives seem to be equal. Thus, other perspectives need to be considered, like Statnett’s strategy of voltage upgrading of transmission lines to 420 kV. Further analyses are required.

7.3.4 Conclusions for the Northern Region Based on the analyses the following reinforcements are proposed for the grid in the Northern Region: First step (scenario Recession)  New 420 kV line Ofoten-Balsfjord-Hammerfest Second step (scenario Renewable+)

  

Series compensation of the Swedish crosssection 1 New 420 kV line Svartisen-Nedre Røssåga Reinforcements from Ofoten (to be further Figure 7.8: Proposal for reinforcements in analyzed) the Northern Region. o Ofoten-Ritsem-Porjus o Series compensation and transformers for power flow control in Norway o Other reinforcements (e.g. a HVDC)

Third step (scenario 202020)

Alt.1 New 420 kV Nedre Røssåga-Grundfors or Alt.2 Voltage upgrading from 300 to 420 kV Nedre Røssåga-Klæbu

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7.4

Grid Development, the Mid Region

The Mid Region extends from the common Swedish-Norwegian cross-section 1 and embraces the common cross-section 2.

7.4.1 The Current Situation The characteristics of the Swedish and the Norwegian parts of the Mid Region differs. The Mid Region in Sweden is a surplus area with a lot of hydro power generation and low consumption. There are several, parallel 420 kV transmission lines, and the region is also a transit area for the power flow from the Northern Region to the Southern Region. The surplus accumulates in the Swedish Mid Region and pushes further south to the large consumption areas. This results in a general power flow from north to south, which also influences the transmission pattern on the Norwegian side of the border. Mid-Norway is a deficit area. Some major consumption units, like Hydro Aluminium, Norske Skog and Ormen Lange, are located in this area. The region is dependent on imports from the Northern Region and from Sweden. The transmission grid is relatively week with mainly 300 kV and 132 kV lines, and only one 420 kV line from the border of Sweden to Ørskog. Mid-Norway imports normally from the Northern Region, and has an exchange with Sweden and the Southern Region. The power flow from Mid-Norway and southwards is, due to physical laws, dependent on the power flow on, among others the Swedish crosssection 2.

7.4.2 Expected Development in the Scenarios There are plans for new wind power and small scale hydro power generation in the Mid Region. In Sweden, this will increase the load on cross-section 2, while it will reduce the energy deficit and create internal congestions on the Norwegian side of the border. The development of the pulp and paper industry in Mid-Norway is highly uncertain. All scenarios have reduced the consumption within this industry, but the reduction is somewhat higher in Renewable+ and 202020 due to higher power prices. Furthermore, there are plans to increase the petroleum activity in Mid-Norway, but it is somewhat uncertain to what extent. The increase is assumed to be less in Recession than in the other scenarios. Altogether, the energy balance in Mid-Norway improves in all scenarios. An improved energy balance in the Mid Region will result in more internal congestions, as well as congestions for the power flow southward. A new 420 kV transmission line between Ørskog and Fardal is expected to be completed by 2015, and is included in all scenarios. The line will improve the security of supply in Mid-Norway, unload the Swedish cross-section 2 and allow for new generation. The duration curve for the common Swedish-Norwegian cross-section 2 without any restriction is displayed in Figure 7.9. The expected capacity in 2015 (with Ørskog-Fardal) is 8500 MW, marked as the lower dotted line in the figure. In Recession, Ørskog-Fardal provides sufficient reinforcement of the cross-section. However, it is not sufficient in Renewable+ and 202020. The two upper dotted lines represent the capacity with additional reinforcements.

7.4.3 Proposed Reinforcements Additional reinforcements in the north-south direction are needed. In Sweden, reactive compensation of cross-section 2 will improve the capacity at a low cost. Technical analyses show that it is also necessary to reinforce the Norwegian part of the cross-section due to voltage conditions. Therefore, the Swedish-Norwegian grid planning study recommends the upgrading of the weak part of the Norwegian transmission line between the Mid Region and the South Region. Together, these two reinforcements will improve the capacity on the cross-section 2 with 1400 MW, from 8500 MW to 9900 MW.

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The internal grid in Mid-Norway needs to be reinforced to handle a stronger power flow from the north and from new power generation in the area. Thus, a new transmission line from Namsos and southwards is necessary. To allow for wind power generation in Fosen, which is on the west coast, the new line will pass this area and continue further south to Trollheim and/or Orkdal. In 202020, cross-section 1 needs to be reinforced either by splitting the grid between Nedre Røssåga and Gejmån Figure 7.9: Duration curve for the power flow and reinforcing the grid southwards on the common Swedish-Norwegian crossfrom Nedre Røssåga, or by building a section 2 in the scenarios new transmission line between Nedre (southwards +/northwards -). Røssåga and Grundfors. In the first case, the voltage upgrading from Nedre Røssåga needs to be continued from Tunnsjødal to Klæbu, to allow for an increased north-south power flow in Norway. However, if a new transmission line between Nedre Røssåga and Grundfors is built, more of the power will flow in the Swedish grid, reducing the need for this voltage upgrade in Norway. The increased power flow from north to south in 202020 requires additional reinforcements of cross-section 2. Two new transmission lines through the cross-section are recommended, one in parallel with the existing Swedish transmission lines, and one between Mid-Norway and South-Norway. Nea and Frogner are possible locations for the end stations of the Norwegian transmission line. Two new lines between the Mid Region and the Southern Region will increase the capacity to about 11 800 MW (+1900 MW).

7.4.4 Conclusions for the Mid Region

Figure 7.10: Proposal for reinforcements in the Mid Region. Based on the analyses the following reinforcements are proposed for the grid in the Mid Region: First step (scenario Recession)  New 420 kV line Ørskog-Fardal Second step (scenario Renewable+)

  

Reactive compensation (shunt capacitors) of the Swedish cross-section 2 New 420 kV-line Namsos-Fosen-Trollheim and/or Orkdal Upgrading of Øvre Vinstra-Fåberg

Third step (scenario 202020)

  

New transmission line across the Swedish cross-section 2 New 420 kV line between Mid-Norway and South-Norway Voltage upgrading of Tunnsjødal-Klæbu provided that Nedre Røssåga-Tunnsjødal will be voltage upgraded

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7.5

Grid Development, Southern Region

The Southern Region embraces the Swedish cross-section 4 and the Norwegian Southern cross-section as well as the Hasle cross-section between southern Sweden and southern Norway.

7.5.1 The Current Situation The major consumption areas in Sweden and Norway are located in the Southern region. It is a deficit area. The generation is mainly nuclear and thermal power on the Swedish side of the border, and hydro power with storage capacity in the west of Norway and run-of-river in the east of Norway. In Sweden, the transmission lines from the Mid Region split up in three directions that supply major consumption areas. In Norway, the main route is from the major hydro power producers in the west towards the Oslo-region. From the Southern Region, there are several interconnections to other markets. Sweden is connected to Finland (Fenno-Skan), Poland (SwePol), Germany (Baltic Cable) and Denmark (Kontiskan and AC-lines). Norway is connected to Denmark (SK1-SK3) and the Netherlands (NorNed). The region is dependent on imports from the north and through the above mentioned interconnections to other markets. In peak load hours, congestions are frequent between the Mid Region and the Southern Region. In addition, internal congestions in the Southern Region occur. Southern Norway and southern Sweden are connected at the Hasle crosssection. This cross-section is important for an efficient power flow in the Southern Region. The Southern Region is also a transit area which at peak load situations imports power from the north and exports it through the interconnections. The power flow varies considerably. Typically exports occur during day and imports during night. The Hasle cross-section is the main transmission channel between Sweden and Norway. It consists of two parallel 420 kV AC-lines with a normal capacity around 2000 MW. However, operational issues often require that the capacity is reduced. This is both due to Swedish export restrictions to limit the power flow on cross-section 2 and to high consumption in the Oslo-region that occupies part of the transmission capacity. Congestions occur on both sides of the Hasle cross-section. Congestions in the power flow from Sweden to Norway occur typically during off-peak, while congestions in the power flow from Norway to Sweden occur during peak hours. The importance of the Hasle cross-section has been thoroughly demonstrated the last years. In 2008, two defects occurred on the cables crossing the Oslofjord, which affects the capacity of the Hasle cross-section. This resulted in locked-up power in the south of Norway during summertime and a limited export to Sweden in periods with high load. Even though the cables were repaired in autumn 2009, the damages caused permanent reduced capacity. In January 2010, Statnett established a new price area to deal with the congestions caused by the reduced capacity. Statnett will keep this arrangement until the capacity across the Oslofjord will be improved in 2012.

7.5.2 Expected Development in the Scenarios The general consumption is expected to increase towards 2020 in the Southern Region. In Recession, the development of new power generation in the region will not be sufficient to cover the increased demand. However, in the two other scenarios, the energy balance improves compared to the current situation. The expected wind power generation in the scenarios Renewable + and 202020 will in some cases be strictly connected to interconnections between Sweden and Norway as well as to other countries. In such cases the trading capacity and the amount of wind power generation that will be introduced into the system will be heavily affected. In the Southern Region the planned wind power in Bohusl채n and Dalsland will be connected through the regional grid

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to a new substation, which in turn will be connected to one of the transmission lines in the Hasle cross-section. In order not to cause severe limitations in either the trading capacity of the Hasle cross-section or of the amount of wind power generation that can be connected to the system, reinforcements of both the regional grids and the transmission grids in the area are required.

Figure 7.11: Duration curve for the flow on the Hasle cross-section (to the left) and the Swedish cross-section 4 (to the right) in the scenarios (southwards +/northwards -). The duration curves for the Hasle cross-section in scenario Recession is shown to the left in Figure 7.11. The duration curves for the other two scenarios are left out because the EMPSmodel does not handle DC-lines in parallel with AC-lines very well. Due to the frequent reduction in capacity at the cross-section, the current capacity, marked as the lower dotted line, is set somewhat lower than 2000 MW. The duration curve illustrates that it is necessary to reinforce the cross-section, even in scenario Recession. The western part of the SouthWest link will increase the capacity with 1200 MW, and the capacity with this reinforcement is illustrated in the figure by the upper dotted line. Increased power flow from the north and transmission capacity to external markets increases the power flow on the Swedish cross-section 4 as well. There is a need for 1000 MW higher transmission capacity in 202020 and Renewable+ than in Recession, and the additional capacity are needed in about half of the time. This is illustrated in the right part of Figure 7.11. The current capacity is represented by the lower dotted line, while the capacity with the South link is represented by the upper dotted line. The figure shows that a large increase of new renewable wind power generation might require further reinforcements in addition to the South link. New interconnections to other markets are expected to handle the accumulated surplus. Naturally this influences the power flow on the cross-section in the Southern Region. The duration curves for the Norwegian southern cross-section are shown in Figure 7.12. The figure illustrates that the need for capacity is 2000 MW higher in Renewable+ and 202020 than in Recession. This is because only one new interconnection (SK4) is assumed in Recession. Renewable+ assumes NorNed2 and an interconnection to Great Britain in addition to SK4. Scenario 202020 assumes that also NORD.LINK is in operation in addition to the interconnections in Renewable+.

Figure 7.12: Duration curve for the flow on the Norwegian southern cross-section in the scenarios (southwards +/northwards -).

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7.5.3 Planned and Decided Initiatives in the Southern Region The internal grid reinforcements in the Southern Region are driven by the need to transmit power surplus from the north, to eliminate existing bottlenecks and prevent new ones, to secure the power supply in dry years and to arrange for more transmission capacity to other markets. Several initiatives have been taken to increase the transmission capacity in the Southern Region.  A new 420 kV power line, Skåreheia-Holen (marked as a black line in Figure 7.13), was commissioned in August 2009. The line strengthens the Norwegian southern cross-section and improves the utilization of the interconnections.  The reconstruction of Hasle transformer station, which is important for the security of supply and the power transmission to Sweden, is in progress.  It is decided to purchase reactive compensating systems, primarily in the south-east part of Norway, to improve the voltage situation and also the capacity to Sweden in peak load.  The existing cables that limit the transmission capacity between South-Norway and South-Sweden are to be replaced. Also a standby cable will be prepared.  The most substantial initiative to reinforce the Southern Region is the South-West Link, which is the largest Swedish-Norwegian project in the latest 20 years, regarding the size of the investment.  Plans are prepared for voltage upgrading the Norwegian southern cross-section from 300 kV to 420 kV. This will increase the capacity of the southern part of Norway.  A new 420 kV power line will be built between Stenkullen and Lindome, reinforcing the Gothenburg area. The power line will also increase the capacity in the Swedish west coast area. Planned reinforcements of the main cross-sections are described below. The Hasle Cross-Section The western leg of South-West Link aims at reinforcing the grid between the southern part of Norway and Sweden. A more efficient power flow and improved security of supply are the main reasons for this investment. The Swedish-Norwegian project is still being planned, but a DC-line seems to be the most likely solution. It is expected to increase the capacity of the Hasle cross-section with 1200 MW. The Swedish Cross-Section 4 The northern and the southern legs of South-West Link will reinforce the Swedish crosssection 4. The reasons for the project are an enhanced transmission capacity, a more efficient power flow and improved security of supply. The northern part of the South link will be an AC-line, while the southern part will be a DC-line. The reinforcement will improve the capacity of cross-section 4 with 1000-1200 MW. The Swedish West Coast Limited transmission capacity in the West Coast cross-section has at times limited the power flow into Norway from nuclear generation in South West Sweden and from the interconnections to Denmark and the continent. The western leg of the South-West Link is intended to bypass these limitations and alleviate the congestions. In a shorter frame, a new 420 kV power line will be built in the area around Gothenburg between Stenkullen and Lindome. Concession for the power line is expected to be granted during 2010 and it is expected to be in operation in December 2011. The new power line will contribute to alleviating the congestions but it is primarily needed for the regional security of supply as the power demand in Gothenburg area has increased. The Norwegian Southern Cross-Section The transmission grid on the south coast of Norway needs to be reinforced to handle the expected increase in power flow into and out of the region, due to new interconnections and new generation. The eastern part of the Norwegian southern cross-section, the “eastern

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corridor”, needs to be reinforced from 300 kV to 420 kV before SK4 can be in operation. Application for concession was sent in February 2010. Additional interconnections require reinforcements of the western part of the cross-section, the “western corridor”.

7.5.4 Conclusions for the Southern Region

Figure 7.13: Proposed reinforcements in the Southern Region. Based on the analyses the following reinforcements are proposed for the grid in the southern Region: First step (scenario Recession)  South-West Link, South part  Voltage upgrade of the Norwegian southern cross-section  Reactive compensation in Hasle Second step (scenario Renewable+)

South-West Link, Western part

Third step (scenario 202020)

7.6

Further reinforcements of cross-section 4

Other National Projects of Importance to the Nordic System

Both Svenska Kraftnät and Statnett have other projects of importance for the Nordic market, but not defined as the most important for the Swedish-Norwegian co-operation. The most important of these projects are listed below: Description Rebuilding of substations Svenska Kraftnät is implementing a programme aiming to improve the layout of substations. This programme has rebuilt 2-3 substations per year in recent years and several more will be rebuilt in the coming years. Stockholms Ström is a project aiming to reinforce the grid around the capital region of Stockholm. Among the planned reinforcements, there are a new 400 kV cable called City Link connecting the 400 kV grids north and south of the city to each other and a new 220 kV cable (Danderyd-Järva).

Location Sweden

Main drivers Security of supply

Stockholm, Sweden

Security of supply

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Reinforcements in East Svealand region A 400 kV line, from Forsmark nuclear power plant to a new substation called Råsten, is planned. A new 400 kV line is also planned from the area where the new Fenno-Skan 2 will be connected, an area where a lot of wind power generation is expected.

South of Sweden, East Svealand

Increased import due to Fenno-Skan 2 Capacity upgrade of Forsmark Security of supply New wind power generation

Reinforcements in the Småland region: EkhyddanBarkeryd and a interconnection to Gotland

South of Sweden

Capacity upgrade of Oskarshamn

There are ongoing and planned reinforcements in the Småland region in Sweden. Because of insufficient switchgear performance, a substation at the Oskarshamn nuclear power plant is being replaced by two new substations. In addition, a new power line between Ekhyddan and Barkeryd will be built due to the capacity upgrades in the Oskarshamn nuclear power plant O3. An interconnection to Gotland is expected to be built and taken into operation in 2016. The interconnection to Gotland will require a new substation on the mainland. Furthermore, a large increase of wind power generation is expected in southern Sweden, which would require additional substations and power lines. All these reinforcements are expected to be carried out between 2010 and 2020.

New wind generation

power

Security of supply

Sima-Samanger In July 2010 Statnett received a licence to build a 420 kV line between Sima and Samnanger. However, in August 2010 the Norwegian Government decided to have a new external consideration on alternative technical solutions. The line will at the earliest be in operation in 2013.

West of Norway

Security of supply

Sauda-Liastølen Statnett will build a new 420 kV line between Sauda and Liastølen. The line will be in operation before April 2013, and will solve regional problems as well as arrange for improved utilisation of the interconnections.

West of Norway

Security of supply

Lyse-Stølaheia In 2001, the regional grid company Lyse applied for licence to build a 420 kV line between Lyse and Stølaheia. The line will improve the security of supply in the Stavanger-region, and increase the capacity on the south coast of Norway. In case of several new interconnections from the south coast, it is necessary to reinforce the grid in this area. If Lyse-Stølaheia is built, it will be easier to carry out this work.

West of Norway

Improved utilisation of the interconnections

Security of supply Reinforcing the Norwegian southern cross-section Arrange for voltage upgrading the western corridor

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7.7

The Permit Procedure

The aim for the permit procedure is to obtain a property for building and operation. Every part of the national grid needs permission from the regulator to build a new or upgrade an existing part of the grid. The whole process, which includes a statement of the project, a more detailed application and management in the national grid authority and ministry, can take up to 6 years. Approval and Permits In Sweden, the Energy Markets Inspectorate administers concession applications according to the Electricity Act and decides on a concession for this level of voltage in the cases where there are no opposing interests. If there are opposing interests, the decision is made by the government after administration by the Ministry of Enterprise, Energy and Communications. If the power line or cable is a foreign interconnection, the decision is always made by the government. Several exemptions and other permits may be required before the start of construction. This can be permits under other legislation such as the Road Law, the Act containing Special Provisions for Water Operations, the Forestry Act, the Act concerning Ancient Monuments and Finds or the Planning and Building Act. It’s possible to appeal formal faults to the Supreme Administrative Court. In Norway, Statnett makes a decision whether to send a license application to NVE based on grid planning and the Environmental Impact Assessment (EIA) program from NVE. A licence application normally includes expropriation and an advance possession. NVE organises, as for prior notification, public hearings in all municipalities affected by the line. NVE issues a license decision which includes the right of Statnett to use land for its power line. NVE’s decision can be appealed to the Minister. The Minister can give a legally valid license for the power line. The license is then final. Both Svenska Kraftnät and Statnett undertake an EIA for the network concession application (legal approval) and the consultation report. The EIA is an obligatory appendix and must contain an explanation as to why a certain route has been chosen and a description of the consequences if the line is not built. During the consultation, the EIA is submitted to local, regional and central authorities and interest organisations and land owners for comments. The EIA procedure including consultation takes approximately 1-2 years depending on opposing interests such as land-use or restricted areas. To receive a required approval and permits takes additional 1 to 3 years. After the permit is given, the decision can be appealed to the Government in Sweden or the Ministry of Petroleum and Energy in Norway. This normally extends the process with about one year. However, depending on the demands for the additional analyses from the authorities, the process can be longer. Land Access and Construction In Sweden, land access is a parallel process to the phase of approval and permits. Svenska Kraftnät strives to reach voluntary agreements with the property owners. Before construction can start, access to all properties must be settled. If voluntary agreements cannot be reached, a right to access can be given after review by the land survey authority. After a network concession is granted, the construction phase begins. In Norway, NVE issues a license decision which includes the right of Statnett to use land for its power line. Then the construction can start. Construction typically takes 2 years for a 100km power line.

7.8

Summary of the Chapter

This Swedish-Norwegian Grid Development report presents three steps for reinforcing the Swedish and the Norwegian transmission grids, based on a joint study by Svenska Kraftnät and Statnett. 1. The first step is a confirmation of already announced reinforcements. All these projects are important for the integration of the Nordic Electricity Market. Statnett and Svenska Kraftnät are working on realizing these projects.

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2.

3.

The second step includes reinforcements that are very likely to come due to drivers such as additional generation from renewable sources. These projects are highly prioritized by both TSOs. However, no final decision has been taken. The third step includes reinforcements that are possible future reinforcements.

In a low-growth-scenario the need of reinforcements are expected to be quite modest. Only previous announced reinforcements are expected to have a net positive socio-economic value. These reinforcements are marked as blue lines in Figure 7.14. Among these are the reinforcements presented in the Nordic Grid Master Plan 2004 and 2008. Svenska Kraftnät and Statnett will carry out these reinforcements as a necessary first step for developing the Swedish-Norwegian transmission grid. The total cost for these projects are estimated to be about 2 Billion Euro. A scenario with emphasis on the energy and climate policy (Scenario Renewable+) will lead to a very positive Swedish-Norwegian energy balance. This leads to a growing need not only to reinforce the northern and the middle part of the grid in a north-south direction but also to reinforce in the southern part in order to prepare for interconnections to other markets. According to socio-economic and technical analyses Svenska Kraftnät and Statnett recommend the reinforcements marked as red lines in Figure 7.14 as a possible next step towards a reinforced Swedish-Norwegian transmission grid. Svenska Kraftnät and Statnett will make efforts to make these potential projects realized. The total cost for these projects are estimated to be about 1,5 Billion Euro. In a scenario with even more emphasis on the energy and climate policy (Scenario 202020) it is assumed that the Swedish-Norwegian green certificate system is functioning well and that the 202020-targets of EU have been realized. This will lead to a very high investment rate in renewables, which will result in a large increase of the Swedish-Norwegian energy surplus. According to socio-economic and technical analyses, Svenska Kraftnät and Statnett recommend the reinforcements red dotted in Figure 7.14 as a possible further step towards a reinforced Swedish-Norwegian transmission grid. Svenska Kraftnät and Statnett will continue to work together monitoring the development of the market and to plan for a realisation of these projects. The total cost for these projects are estimated to be about 2 Billion Euro.

Figure 7.14: The reinforced Swedish-Norwegian power system.

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8 Interconnections to External Networks The first section deals with drivers and challenges for new interconnections from Sweden and Norway. The more focus on renewables, the more capacity is needed. This is both based on the Swedish-Norwegian need of exporting the positive balance and on the continental need of regulating the large number of wind power. At last, potential interconnections to the UK, the Continent and the Baltic States are briefly described.

8.1

Drivers and Challenges for Grid Extensions

Figure 8.1: Synchronous area in the Nordic countries and at the Continent.

An integrated European electricity market is a driver for a more efficient use of the whole power system. In the Swedish and Norwegian power systems, hydro power is the major energy source, while thermal power is the most important energy source of the power systems on the Continent, UK as well as in the Baltic States. Transmission capacity between markets with different power generation systems creates a better utilization of the generation capacity.

Figure 8.2: Net generation mix (data from ENTSO-E).

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The Value of Storage and Regulation in Power Generation One of the characteristics of the mainly hydro power dominated Swedish and Norwegian power systems are low and stable prices during peak/off-peak. The hydro power plants with reservoirs can store energy and regulate generation at low costs. In periods with low demand, typically during night and weekend, it is only necessary to run the plants with the lowest marginal costs. When demand increases, it is necessary to start plants with higher marginal costs. Starting and stopping a thermal generation unit is usually very expensive, causing high prices in peak load hours. The costs of starting and stopping a thermal power generation unit can make it profitable to run through the night, even if the price is lower than the marginal cost. This creates a price structure with quite big differences between periods with high and low demand. The actual price level is strongly dependent on the fuel prices. As it is illustrated in Figure 8.3, the continental price is high during day and low during night, while the Swedish and Norwegian prices show a flatter profile. Consequently, there are strong economic incentives for Sweden and Norway to export power during the day and, conversely, to import power during the night.

Figure 8.3: Illustration of price structure on the Nordic (hydro) and the Continental market (thermal). Price Structure Figure 8.4 shows average price structure during the week for Sweden and Norway and some countries that already are, or might be, connected to the Nordic market. The graph is based on prices from 2002 to 2009, and demonstrates “the normal price structure�. Changes in demand during the day and during the week affect the prices, and cause the pattern with higher prices during week day and lower prices during night and weekend. The figure shows that in average, the Netherlands (APX) has had the largest price structure, followed by Germany (EEX) and the UK. The large share of thermal power generation in these countries results in prices that rise above the Nordic prices when demand is high, and decrease below the Nordic prices when demand is low. Norway has almost exclusively hydro power generation, and can thus at a low cost store the energy in time. As a result, the Norwegian prices have very little structure. It is a bit larger in Sweden because of some thermal generation and more run-of-river. Denmark West takes an intermediate position between the Continent, and Sweden and Norway.

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100

90

80

70

€/MWh

60

APX DKW

50

EEX

40

SWE

NO1

UK 30

20

10

0

Monday

Tuesday

Wednesday

Thursday

Friday

Saturday

Sunday

Figure 8.4: Average price for the week’s different hours (price structure during the week), from 2002 to 2009. The prices in a hydro dominated power system depend on inflow and demand. While inflow is at its largest during the summer months, the demand is highest during the winter. The water storage keep the water from the summer to the winter, as a higher price during the winter gives incentives to save water. In a year with normal inflow, there are small differences in prices between the seasons. In dry years, the price during winter time increases, while in wet years, the price during summer time decreases. In wet years, the prices can remain low to the autumn showers in October. In markets dominated by thermal power generation, important price drivers are fuel prices and cooling conditions during the summer time. Figure 8.5 shows how the yearly price average varies between countries with different generation systems. Differences in inflow and fuel prices can result in relatively large variations in price level from one year to another. 90 80 70 60

€/MWh

APX DKW

50

EXX 40

UK NO1

30

SE 20 10 0 2002

2003

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Figure 8.5: Average price level per year, from 2002 to 2009.

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Due to the different price drivers between hydro and thermal dominated power systems, interconnections to other markets are profitable, even if Sweden and Norway do not get the expected power surplus. Furthermore, if the plans for development of wind power elsewhere in Europe are carried out, the price volatility, and thus the profitability, will increase. Increased trading capacity to other markets will not result in Continental prices in the Nordic countries. In an export situation, the Nordic prices need to be lower than the Continental prices. However, it is expected that a better integration of the Nordic and the European markets will cause an increased price structure in the Nordic countries. This will make it profitable to increase the power installations in the hydro power plants. Increasing Demand for Balancing Power The green certificates are expected to bring forth a large amount of new renewable energy generation. In turn, this new renewable energy is expected to lead to an energy surplus in Sweden and Norway and to a need of exporting this power surplus. Hence, a crucial task for Svenska Kraftnät and Statnett is to establish enough power exchange capacity, between Sweden and Norway and external systems, necessary for the appropriate utilisation of the generation capacity. A considerable development of wind power on the Continent is also expected due to the climate policy of EU. This will affect the generation compositions and generation volumes, which in turn will influence a potential, future power exchange. The expected composition and volumes for Sweden and Norway and neighbouring markets in 2010 and 2020 are shown in Figure 8.6. A general trend is that renewable power generation takes over for fossil fuel and nuclear power generation, and that the generation capacity is expected to increase somewhat. Sweden and Norway stand out with a generation capacity where 75 % is from renewable energy and where about 60 % can be regulated at a low cost. 100 %

200

80 %

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60 % GW

100 40 % 50

20 %

The Baltics

Denmark -West

Fossil Fuels Hydro Power

Germany

Great Britain

Nuclear Power Other

The Netherlands

Poland

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2020

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0 2010

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Sweden and Norway

RES Capacity (excl Hydro) Production capacity (GW)

Figure 8.6: Net generating capacity generation mix and generation capacity, in 2010 and estimate for 2020. (Data from ENTSO-E’s System Adequacy Forecast 2010-2025.) An increase of wind power generation on the Continent is likely to make the prices there more volatile. In periods with high wind power generation and low demand, the prices can get very low, even zero and negative. Connections to other markets give the opportunity to export power that otherwise would have been low priced or wasted, to places where it is more valuable. Thus, interconnections support the power prices and make it profitable to develop more renewable power generation also in these areas. Furthermore, connections to the well regulated hydro power help maintaining a high degree of security of supply with less total generation capacity.

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Large increases of renewable energy in combination with improved energy efficiency, can lead to a new state where European countries which were deficit areas become surplus areas. At the same time, the need for balancing power will increase considerably, a service that can be provided by the Swedish and Norwegian hydro power producers. In the long run, the demand for balancing power might exceed the demand for energy.

8.2

European Market Integration in the Scenarios

The three scenarios presented in chapter 5 generate different drivers and challenges for external extensions. This is because they represent a different degree of development in new renewable power generation, energy balances, fuel prices and willingness to invest in market integration. Investments in renewable power generation in Sweden and Norway will generate an energy surplus. This is likely to lower the average Nordic power prices somewhat, because the consumption will not grow correspondingly. Figure 8.5 showed the average prices in Sweden and Norway compared to other markets. The median price in Sweden and Norway is well below the other median prices. If the Swedish and Norwegian median price gets lower, the time with large price differences will increase, while the time with smaller price differences will decrease. Altogether, trading between the markets will be more beneficial if the prices in Sweden and Norway decrease. On the other hand, more renewable in the Continental market might lead to lower prices also there. Changes in fuel prices will also affect the benefits from transmission capacity between hydro and thermal dominated power systems. If the prices increase, this will influence the plants with low efficiency the most, which already have high costs. Furthermore, the costs of starting and stopping a thermal power plant will also increase with higher fuel costs. Thus, the difference in prices between peak and off-peak will rise, and the median price will also increase. In turn, higher fuel prices will improve the benefits of transmission capacity between Sweden and Norway and thermal dominated markets. Recession In this scenario the increase of generation from renewable sources is small. Therefore, the energy surplus is not a strong driver for building new cross-border interconnections. In addition, low fuel prices result in quite similar prices at the Continent as in the Nordic countries, affecting the financial incentives for building new cross-border interconnections. The 202020-goals from EU have been terminated and therefore the development of power generation from renewable sources at the Continent has come to a stop. Subsequently, the demand for balancing services is small. This scenario has a positive energy balance on 13 TWh, resulting from warmer and wetter weather and some increase in generation from renewable sources. Assuming the capacity to other markets is available 90 % of the time, and is used to export in 60 % of the time and to import in 30 % of the time, a surplus of 13 TWh requires minimum 5500 MW of transmission capacity from Sweden and Norway in a year with normal inflow. In years with more inflow than normal, the need for capacity to external markets will be higher. Renewable+ In Renewable+, there is a lot of new generation from renewable sources. This results in an energy balance of 30 TWh, which is an important driver to increase the transmission capacity to other markets. Furthermore, the share of unregulated power generation is high, causing fluctuating prices, and high fuel prices influence the power prices. Altogether, investing in new transmission capacity from Sweden and Norway is very beneficial. Assuming the capacity to other market is available 90 % of the time, and is used to export in 65 % of the time and to import in 25 % of the time, a surplus of 30 TWh requires minimum 9500 MW of transmission capacity from Sweden and Norway. The need of cross-border capacity is 4500 MW larger in this scenario than in the scenario Recession.

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202020 This scenario has the largest increase of generation from renewable sources and there is a surplus of 40 TWh in energy balance. Despite of high fuel prices, the power prices are rather low in Sweden and Norway because of a generation surplus all over Europe. The unregulated power generation and the regulation of thermal power generation result in high and fluctuating prices outside the Nordic countries. New transmission capacity from Sweden and Norway is very beneficial. Assuming the capacity to other markets is available 90 % of the time, and is used to export in 70 % of the time and to import in 20 % of the time, a surplus of 40 TWh requires minimum 10200 MW of transmission capacity from Sweden and Norway. Figure 8.7 summarizes the energy balance and minimum need for transmission capacity to external networks in 2020. The minimum need of capacity to external networks in the least probable scenario Recession is 5500 MW. In the scenario Renewable+ the minimum need of capacity is 9500 MW. Finally, 10200 MW is required in the scenario 2020. The current total capacity to external networks is about 6900 MW. In addition, the planning process for FennoSkan2, NordBalt and SK4 has proceeded quite far. These interconnections will increase the total cross-border transmission capacity from the Swedish-Norwegian system with 2100 MW, to 9000 MW. Thereby the need of cross-border transmission capacity in the scenario Renewable+ will be met. 12 000

Energy balance (TWh)

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30

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9 000

6 000 20 3 000

10

0

Transmission capacity (MW)

50

Recession Renewable + 202020 Energy balance (TWh) Transmission capacity (MW)

Figure 8.7: The energy balance and transmission capacities in the scenarios.

8.3

Planned and Potential External Grid Extensions

Both from Sweden and from Norway several interconnections to other markets are planned. This chapter shows the different projects and which level these projects are at today. Based on natural geographical aspects the Swedish interconnections have a south-eastern focus, while the Norwegian interconnections have a south-western focus. Figure 8.8: Planned and potential external grid extensions.

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8.3.1 Interconnection to the UK Together with National Grid, Statnett has resumed the study of a possible connection between Norway and Great Britain. The considered capacity is in the range of 1200 MW – 1400 MW. A likely connection point in Norway is Kvildal, on the west coast. A connection point on the west coast of Norway is considered as preferable to one at the south coast due to internal grid capacities in Norway. Acts and regulations in Great Britain prevent Figure 8.9: Interconnection to UK. such a cable connection from being integrated into the regulated grid, in the same way as Statnett’s interconnections. These regulatory differences complicate the establishment of an interconnection. The likely timeframe for commissioning the cable is between 2016 and 2020.

8.3.2 Interconnections to the Continent

Figure 8.10: Interconnections to the Continent.

Skagerrak4 In 2010 a fourth cable between Norway and Denmark (Skagerrak4) were decided by Energinet.dk and Statnett. The project, which is one of Nordel’s five prioritised reinforcements, is planned with a capacity of 700 MW. 100 MW will be reserved for system and balancing services the first five years, so the capacity between Norway and Jylland will increase with 600 MW to 1600 MW. The Norwegian connection point will be Kristiansand, and the earliest time of commission is 2014.

NorNed2 A cable between Norway and the Netherlands, NorNed, was in operation in May 2008. A new project between Statnett and TenneT has already started. The project is considering a new 700 MW cable, based on the experiences from NorNed. A lot of the work which was carried out in the NorNed project is valid also for NorNed2. With this in mind it is estimated that NorNed2 can be realized between 2015 and 2017. NORD.LINK and NorGer Statnett started in 2008 a joint project with Transpower (former E.ON Netz, now owned by TenneT), with the purpose to analyse the possibility of an interconnection between Norway and Germany. The project was called NORD.LINK. Both the application for licence (technical) and the commercial licence application have been sent. Estimated time of commission is between 2016 and 2018. An alternative project, NorGer, is looking at the same possibilities. This project is owned by Statnett (50%), by Norwegian producers (Lyse/Agder) and by EGL (Switzerland). Both the projects are planning for a capacity up to 1400 MW, with Tonstad, on the south coast of Norway, as the applied connection point. Krieger’s Flak The Swedish interconnection in the Krieger’s Flak project has been cancelled. At first, the Krieger’s flak project aimed at connecting the planned Swedish, Danish and German offshore wind farm with the transmission grids in the three countries. However, establishing a new interconnection as planned in the Krieger’s flak project is not sustainable for Sweden,

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as long as the Swedish part of the wind power generation is not built. The plan to build a Swedish wind power farm has, for the time being, been cancelled. Therefore, Svenska Kraftnät will not urge for support from the EU Commission.

8.3.3 Interconnections to the Baltic States NordBalt NordBalt is an HVDC interconnection, sub marine cable link, which is planned between Sweden and Lithuania. On July 9, 2009, TSOs of Sweden, Lithuania and Latvia signed a memorandum of understanding seeking to establish objectives of the implementation of the project. Besides agreements concerning a connection of the Swedish and the Lithuanian transmission grids, the memorandum clarifies the Latvian TSO’s commitment to strengthening the transmission grid in western Latvia. Figure 8.11: NordBalt NordBalt is one step towards achieving the long-term goal of integrating the Nordic and Baltic electricity markets. All technical details for the project are not decided yet. However, the capacity of the 300 kV link is planned to 700 MW. In December 2010, Svenska Kraftnät will submit an application for concession to the Energy Markets Inspectorate. The earliest possible commissioning date will be in 2016. Svenska Kraftnät is currently investigating the routing of the interconnection. The primary option is that the sub marine cable will reach land in the area around Sandvik (Kalmar); from where it will continue to the substation Nybro.

8.4

Profitability Evaluation of External Projects

Every investment in a market will influence the benefits of other investments. When one is realized, the system adequacy and prices in the connected areas will change and affect the benefits of the others. For example, SK4 will, in a year with normal hydrological conditions, somewhat increase the prices in Norway and reduce them in Jutland. This will to some extent affect the benefits of an interconnection between Norway and Germany. Likewise, a new interconnection between Denmark and the Netherlands (Cobra) will improve the benefits of SK4, while reducing the benefits of NorNed2. There is not so much competition between Swedish and Norwegian projects because of the difference in drivers for external networks. This is, amongst others, related to differences in the power generation systems in Sweden and Norway. Sweden is expected to develop more wind power towards 2020, while Norway will continue to have a large share of regulating hydro power. Figure 8.12 shows an estimate of the net generation mix in the north of Europe in 2020 (data from ENTSO-E’s System Adequacy Forecast 2010-2025). Compared to Figure 8.7, the net generation mix in 2010, it appears that Germany is facing a considerable development of wind power. According to current plans, a large share of the new wind power will be located in northern Germany. There are already significant internal congestions between the northern and the southern part of Germany. Assuming that the development of wind power generation is faster than internal grid reinforcements, the north of Germany may become a separate price area, strongly influenced by wind power. The estimated development towards 2020 indicates that Sweden and the north of Germany might develop rather similarly. Since interconnections are more valuable when they connect markets with different generation structures, it may be more beneficial for Sweden to connect to other markets. It is also worth asking if it is not better to export the “green”,

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Swedish wind power to a market dominated by thermal generation, like the Baltic, where it can arrange for downscaling of generation with high CO2-emissions. A link between Norway and Germany seems on the other hand to be beneficial. It will connect the wind and hydro power system, and the expected volatile prices in Germany will probably increase the profitability. There is no intention to determine a strategy for a joint prioritizing of Svenska Kraftnät’s and Statnett’s interconnection-portfolio in this report.

Figure 8.12: Estimate of the net generation mix in 2020 (data from ENTSO-E). It is clearly an advantage to integrate Sweden and Norway to several different markets. One area might have a large positive power balance and low prices for a period, while another depends on imports and have high prices. As a result, the Nordic countries will be less vulnerable to outages of nuclear power plants, low inflow and/or periods with low wind. Transmission capacity to different markets with rather various power systems and price structures contribute to stable prices, beneficial trading and security of supply. Sweden is geographically closer to other markets, thus reducing the investment cost of the interconnections. However, comprehensive internal grid reinforcements are required to increase the transmission capacity to other markets. Norway, on the other hand, is further away from other markets, resulting in long and costly projects. Conversely, the internal reinforcements are not as demanding as they are in Sweden. A prerequisite for establishing new interconnections is a strong internal grid in both ends. Prioritizing between projects must also take into account the plans for internal grid developments in the neighbouring markets. In this sense, ENTSO-E’s Ten Year Network Development Plan gives a useful overview of the activities affecting the European market integration.

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8.5

Summary of the Chapter

In this chapter, the value of increasing the capacity from Sweden and Norway to other markets has been emphasized. New interconnections will utilise the particular characteristics of the different markets, arrange for development of new renewable power generation and improve the security of supply. The greatest benefit of a better integration with other markets is the improved generation efficiency. Sweden and Norway are the only countries in Northern Europe whose power systems are dominated by hydro power. The reservoirs can store energy and regulate power generation at a low cost, resulting in a flat price structure. A thermal power generation system on the other hand, has no such way of storing energy. Moreover, it is expensive to start and stop the generation. Therefore, the prices vary much in markets dominated by thermal generation. The difference in prices will create profitability for new transmission capacity from Sweden and Norway to other markets. EU’s climate policies urge on investments in new renewable power generation all over Europe. In Sweden and Norway, this is expected to lead to a common arrangement, the Green Certificates, which gives incentives to develop wind and hydro power generation. This will most likely lead to a significant energy surplus. To efficiently utilize the new generation, the transmission capacity to other markets must increase. The trend to develop new renewable power generation in the rest of Europe will increase the share of unregulated power generation, and thereby the demand for balancing power. Connections to the Swedish and Norwegian hydro power with reservoirs can in a clean and inexpensive way contribute with balancing services, and help maintaining a high degree of security of supply with less total generation capacity. From a perspective related to the expected energy surplus, the he minimum need for new interconnections depends on the scenario analysed. In Recession, the transmission capacity with FennoSkan2, NordBalt and SK4 in operation will be sufficient, while in the more probable scenarios Renewable+ and 202020, the transmission capacity needs to be between at least 1500 and 2500 MW more than in Recession. This corresponds to 2-4 new interconnections to other markets. However, from a perspective related to a commercial potential, even more capacity could be profitable. This aspect is not treated in this report. Differences in power generation systems affect the attractiveness for interconnections to external networks. There is a strong emphasis on wind power development in Sweden as well as in the northern continental Europe. This may lead to reduced benefits when connecting two such areas, as the generation patterns may be very similar due to the impact of wind variations (surplus in both areas at the same time). This could make it more attractive for Sweden to focus on interconnections to the eastern part of Europe where another generation pattern may lead to higher benefits. For Norway, new interconnections to the western part of Europe will help regulating the continental system. The different drives will probably result in a diversification of the “interconnection-portfolio� which is advantageous for the Nordic countries regarding stability and security of supply. The cost of an interconnection depends very much on its length. The relatively short distances from Sweden to other markets as the Baltic and German markets make the cost of such interconnections low. Norway has very stable prices. In addition, many of the Norwegian hydro power plants with their regulating power are close to potential interconnections to the UK, the Netherlands, Germany and Denmark. These factors make such interconnections very profitable despite the long distances.

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Swedish-Norwegian Grid development  

This Swedish-Norwegian report represents a first step of our common planning. The report is a supplement to Statnett’s national grid develop...

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