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Nordic Energy Day 2021 Preview

August 23rd, 2021

Montel’s annual Nordic Energy Day takes place this Thursday 26th August, in virtual format once again. Ahead of the free to attend webinar, we take a look at some the key subjects to be discussed, with the help of our presenters from Volue Insight, Vertis Environmental Finance and Thema Consulting Group.  

Even if we can’t quite yet welcome you to Oslo, Montel has prepared a free programme of virtual discussions, talks and roundtables for our Nordic Energy Day this year. It’s an interesting moment for the Nordic markets, as ongoing trends (green policies, high price levels) interact with newer issues (discussions over the future of price areas, carbon price, the rise of PPAs). Our aim with Nordic Energy Day is to shine a light on some of these issues, and provide a platform for exchange and discussion, as you’d expect from a Montel event.  

You can find the full program for the day - which runs from 14.00 to 17.00 CET - here, where you’ll also find registration details (it’s free to sign up and attend). But if you need any more encouragement, we spoke with a few of the speakers and panellists to hear what they’re going to be talking about. 

EPADs and Nordic Area Prices  

Julian Hentschel, Manager, Thema Consulting Group  

The majority of Nordic market participants are not satisfied with the possibilities available to hedge power price risk, especially area-price risk. There is a widespread belief that a lack of liquidity for EPADs is making it difficult to hedge local exposures. Given the dramatic price differences between areas that we observed last year and the threat of growing area-price differences as new interconnectors come online, greater concern about the effectiveness of the current system is understandable. 

In that context, and with regulators currently consulting on possible interventions, we’ve been conducting a variety of projects for different clients looking at reforms to improve hedging opportunities. These cover everything from enhanced market-making arrangements to the sale of transmission rights, with much else besides. 

Julian will participate as a panellist in “The future of the Nordic power market – Are price areas here to stay?”. 

Carbon market and compliance under Fit For 55 

Bernadett Papp, Senior Market Analyst, Vertis Environmental Finance

There are many questions surrounding the draft Fit for 55 legislation and how it will impact the carbon market. I'm going to try and answer some of them during my presentation.

A particular concern is the Carbon Border Adjustment Mechanism. Industrial companies that have been covered by the CBAM are afraid of losing their free allocations and having to shoulder a double burden for the CO2 content of their products. They are also afraid that compliance obligations will increase their administrative burden and costs. Those industrials that are not listed in the “first round” would like to know when they will be included and covered by the CBAM. 

Overall, free allocation is quite a critical issue for these installations, especially with current high prices, which are expected to increase further in the future. Installations are asking when and how the rules of free allocation will change and when the next review of product benchmarks will take place. 

In addition, many companies see the inclusion of other sectors in the EU ETS as a threat: they might increase the demand for allowances, which will tighten supply and increase the price of EUAs. 

Last but not least, there are concerns that the Commission has proposed to limit the activity and the positions financial entities can have in the EU ETS, in light of concerns that this was responsible for the price increases since 2018.

Bernadett will present “Fit for 55. Effects for the carbon market - Carbon market fundamentals and price forecasts” on behalf of Vertis Environmental Finance. 

Nordic Power Prices to 2030 

Olav Johan Botnen, Senior Analyst, Volue Insight

I’m going to focus on three subjects that will be important for understanding the potential evolution of Nordic prices over the next decade: current status, grid bottlenecks and area-price differences, and the Nordic power balance and associated perspectives to 2030. 

This past year has seen a bullish market with high prices, especially on gas and EUAs. Spot power prices are also climbing towards the levels seen in the rest of Europe. We can explain some of this due to weather (especially reservoir levels in Norway and wind levels) but I'll also look into how interconnections and high prices in neighbouring have had a significant impact. 

Grid bottlenecks and the associated area-price differences have been an increasingly hot topic in the Nordic markets in recent years, and the picture for the next ten years is mixed: we can expect some improvements when new grid projects come online and inter-connector capacities increase, but this won’t be until the second half of the decade. From the mid-2020s we also expect consumption to rise more strongly in northern Sweden and Norway than elsewhere (due to expected battery manufacture and hydrogen-related industries), which will soak up the current oversupply in those areas and reduce north-south grid congestion. 

I’ll also look at our models for the next years, where we continue to see an upward trend for prices, in part because of what I’ve mentioned above.  

Olav will present “Implications for prices towards 2030” on behalf of Volue Insight. 

Take a look at the full programme for our free Nordic Energy Day webinar here, or sign up right now