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 CO 2 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 Europe Globalt, Europa og Norden
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 Gas price (TTF) Coal price (API2) €/MWh €/MWh $/ton
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
CO 2 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 LCOE for German solar power Battery investment costs Kilde: BNEF
Electrification continues and demand increases Consumption in EU11 TWh 2040: 300 times as many EVs than today
Green revolution in the power system towards 2040 Capacity mix EU11 GW GW Generation mix EU11 500 500 Sol 450 450 400 400 350 350 300 300 Vind 250 250 200 200 150 150 100 100 50 50 0 0 2012 2014 2016 2018 2022 2025 2030 2040
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 CO 2 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 CO 2 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 2030 2040
More volatile prices in Europe Volatility during a year in Germany Duration curve of German price in Base scenario
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 Flexibility EU11 German price with and without flexibility
Example of flexibility contributions Big diversity: demand shifting, demand shedding, batteries, EVs and other storage types Summer average day Peak price week
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 11 GW import 14 GW export Forbruk 2 GW load shedding 16 GW curtailment Magasinkraft Elvekraft Vind og sol Termisk
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 Annual wind power generation Net annual surplus
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 North Mid South
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 2016 1988 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 Southern Norway prices are robust to more wind power Wind power revenues
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 1 52 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 Average prices and wind power revenue in Northern Norway price with gradual Northern Norway in our Base scenario consumption and wind power development 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 from huge deficit in Southern Sweden in 2040 Imports cover 50% of demand in a winter week in SE3 Price spikes lead to demand shedding Small amounts of dispatchable generation
NO1 more exposed to high prices in Southern Sweden Prices in NO1, NO2, SE3 and Germany in a 2040 winter week Price of NO3 equal to low German prices, but NO1 price set by high Swedish prices
Recommend
More recommend
