Long-term Market Analysis 2018-40 About this years Long-term Market - - PowerPoint PPT Presentation

Long-term Market Analysis 2018-40

About this years Long-term Market Analysis (LMA)

• Why LMA?
• Understand and quantify long term development
• Understand challenges and opportunities early – better decisions
• Support for Network Development Plan (NUP) and other analyses
• Transparency for open discussions about our assumptions
• Main analysis – expected development and uncertainties
• Forecast and analysis – not a political position
• Base case within consensus – conservative for Norway
• Three updated scenarios (Base, High and Low)
• Sub-analysis for Norway and the Nordics
• Consequences of profitable wind power without subsidies
• Price differences between north and south
• Tighter capacity margins

Our main scenario is even more clear and certain

• Increasing wind and solar power and falling technology cost
• Coal decommissioning even more certain
• More Transport become electric
• Need for more flexibility in the long term
• Coal, gas and CO2 prices have risen – which makes our long-term forecast more probable

→ Still a lot of uncertainty, but the main direction become more clear

Trender og forutsetninger

Globalt, Europa og Norden

Europe

Bullish prices since 2016

• Trend change after years of price fall
• More optimism in the energy markets
• Higher thermal short-run marginal cost and higher power prices

German power price

€/MWh

Coal price (API2)

$/ton

Gas price (TTF)

€/MWh

Small changes in long-term coal and gas prices

• Gas – same level as in LMA 2016
• Full costs of LNG important for the price
• Low price period in the 2020s is still possible
• Coal – price increase in all scenarios
• External analysis indicates around 60-80 $/ton
• Our base case is in the middle of this price range

CO2 price has increased, but more moderate in the long run

• Sharp price increase the last year, despite quota surplus
• More trust in the system, MSR reform approved
• Financial actors
• Short-term speculations
• More likely with higher prices in the long run, but still a lot of uncertainty

50 €/t 35 €/t 15 €/t

Wind power, solar power and batteries still getting cheaper

LCOE for onshore wind power

Kilde: BNEF

Battery investment costs LCOE for German solar power

Electrification continues and demand increases

Consumption in EU11 2040: 300 times as many EVs than today

TWh

Green revolution in the power system towards 2040

Generation mix EU11

GW GW

Capacity mix EU11

50 100 150 200 250 300 350 400 450 500 2025 2030 2040 50 100 150 200 250 300 350 400 450 500 2012 2014 2016 2018 2022

Vind Sol

Lower average prices towards 2040, but very uncertain

• Stable prices the next 10 years, renewables pushes prices down to 2040
• Price range of 30-60 €/MWh – renewables curbs upside potential to 2040
• Gas and CO2 prices are most uncertain factors for average power prices

Average prices in Base scenario German price range British price range

Lower prices after 2030 compared to LMA 2016

• Higher coal, gas and CO2 prices result in higher prices to 2025
• Renewables pushes down prices more after 2025

Comparisons of German prices Duration curves of German prices in LMA 2018 and LMA 2016 2040 2030

More volatile prices in Europe

Duration curve of German price in Base scenario Volatility during a year in Germany

Huge variations in solar and wind generation

Solar and wind power need a lot of flexibility

• More demand response and storage is necessary in 2040
• Difficult to achieve more than 50% solar and wind share without this flexibility
• Replaces thermal plants
• Much more efficient integration of solar and wind power

German price with and without flexibility Flexibility EU11

Example of flexibility contributions

Summer average day Peak price week

Big diversity: demand shifting, demand shedding, batteries, EVs and other storage types

More market driven development is possible

Limited need for subsidies in our Base scenario

Norway and the Nordics overview

20% Nordic consumption growth to 2040

• Nordic consumption grows from 390 TWh today to 460 TWh in 2040
• More growth than in LMA 2016, both in Norway and Nordics
• May increase more – big potential in industry and data centers

Norway Nordic countries

Huge growth in wind power

• Nordic wind power increase towards 145 TWh in 2040
• 14 TWh in Norway in a few years – profitable to build more without subsidies
• Sweden builds more wind power to cover up for less nuclear power

Swedish nuclear phase-out, Finland builds new

• Assumes that Sweden will cut all nuclear generation within 2040
• Finland remains its capacity with new reactors
• Total Nordic nuclear generation down to 60 TWh in 2040

Intermittent generation become dominant in the Nordics

• Maximum intermittent generation may rise above consumption
• Other hours with maximum consumption is higher than available capacity

Large variations in Nordic intermittent generation in 2040

Termisk Magasinkraft Vind og sol Elvekraft Forbruk

14 GW export 16 GW curtailment 11 GW import 2 GW load shedding

More interconnection to the rest of Europe

• Capacity out of the Nordics increases a lot towards 2025
• More may come – few new interconnectors after known projects in the Base scenario

Increasing annual surplus in Norway

• Wind power increases faster than consumption growth
• New wind power after 2025 built mostly in Southern Norway
• More consumption and increased grid capacity can lead to other development

Net annual surplus Annual wind power generation

Analysis of Norway

Increased wind power, consumption, price differences north/south and price areas

More renewables reduce prices

• The price in Southern Norway rises until 2025, then more wind power lowers them
• Bottlenecks out of Northern Norway result in lower prices
• Price in Middle Norway (NO3) stays in between Northern and Southern prices
• Larger price differences internally in Sweden

Norwegian prices Nordic prices

Upside potential may be limited by wind power

Range of Norwegian prices South Mid North

More stable between seasons, then more volatile

• Connections out of Southern Norway lead to less price impact of hydrology
• We end up back to where we are today, but with even more variations

Price per quarter for all weather years and scenario 2018, 2025 and 2040

1988 2016 1988 2016

Less market share for hydro power – more volatility

• Reservoir hydro power loses market share
• Renewables, European prices and load shedding more important for Nordic prices
• More spread between water values of different reservoirs make a steeper supply curve

Simulated prices in a random winter month 2018 and 2040 Simulated prices in a random summer month 2018 and 2040

A lot of wind power in Southern Norway becomes profitable

• Large profits from new wind power early in the period, but less towards 2040
• Power prices in Southern Norway are not very sensitive to more wind power
• European prices are uncertain and important to profits

Wind power revenues Southern Norway prices are robust to more wind power

Dynamic relation between wind power and consumption

• Wind power and consumption balance each other due to available hydro power
• Lets wind power maintain high revenues despite increasing share of production
• Large surplus in our 2040 dataset – consumption growth increases profitability

Lower prices in north than mid and south towards 2025

• Increased congestion out of Northern Norway with wind power under construction
• General market development also lead to increased price differences
• Additional wind power will lead to further increased congestion

Flow out of NO4 Average price per week in 2018 Average price per week in 2025

1 52 1 52

Price in Northern Norway close to wind power LCOE

• Northern Norway has a lot of wind power resources
• Consumption (and grid) can facilitate a small wind power expansion
• In the long term, lower power prices in Southern Norway and Northern Sweden

pushes down the prices with or without more wind in the north

• The long-term price will probably be close to the wind power LCOE

Northern Norway price with gradual consumption and wind power development Average prices and wind power revenue in Northern Norway in our Base scenario

Vi har stabil kraftbalanse i Nord-Norge etter 2025

Splitting NO4 utilizes the grid better

• Easier to cope with bottlenecks and grid operations by splitting NO4 in two areas
• More information on placement of production and balance in the market clearing
• Only a small price difference between the areas after splitting
• Most likely after flow-based market coupling (FBMC)

Flow out of Northern Norway Flow on Ofoten-Ritsem

Southern Sweden will manage, but at a cost

Price spikes lead to demand shedding Small amounts of dispatchable generation Price spikes from huge deficit in Southern Sweden in 2040 Imports cover 50%

• f demand in a

winter week in SE3

NO1 more exposed to high prices in Southern Sweden

Price of NO3 equal to low German prices, but NO1 price set by high Swedish prices

Prices in NO1, NO2, SE3 and Germany in a 2040 winter week

Larger internal and external price differences

• Price differences increase internally in Norway
• Bigger price differences towards Denmark than Sweden
• New cables reduce the price difference to the rest of Europe, but then increase again

Price differences depend on European price development

Price differences in our alternative price scenarios in 2025

More changes in Norway are likely

• More capacity and pumped hydro in the hydro system
• More internal grid in Norway and more to other countries
• Demand which is able to exploit seasonal price variations

Simulated hourly prices in 4 winter weeks in Southern Norway Reservoir hydro increase in value, while intermittent decrease

Lower prices than in LMA 2016

• Earlier increase in continental prices pushes Norwegian prices up
• In the long term, more renewables results in lower prices