The Nordic region constitutes the world’s 12th largest and the EU’s 5th largest economy – an economy that has experienced a prolonged and dramatic decoupling of emissions and economic growth. Part of the reason for this is the common Nordic electricity market and the use of economic incentives to promote sustainable energy.
By Páll Tómas Finnsson
Co-operation between the Nordic countries on energy is unique and longstanding. Clear examples are the close collaboration on developing the joint Nordic electricity market and sustainable energy systems. The Nordics complement each other in terms of energy resources, and over the years there has been a strong political will to expand and integrate energy cooperation in the region.
The Nordic energy co-operation promotes stable and secure energy supplies, sustainable growth, and welfare for the citizens of the Nordic countries. It also helps tackle climate and environmental challenges by promoting sustainable energy and an ever-increasing focus on energy efficiency.
Moreover, it serves as a tool for promoting Nordic positions of strength in the energy sector in the global arena. This helps produce energy solutions that are positive for the environment and climate and enable a transformation towards societies that are either climate-neutral or have very low levels of emissions.
Advanced and integrated Nordic electricity market
The electricity markets in Norway, Sweden, Finland and Denmark together form the joint Nordic electricity market, which is one of the most advanced cross-border energy markets in the world. It has grown from four national markets into one common Nordic wholesale electricity market since 2002. The intention is to complete the market with a common end-user market within a few years.
Market integration has coincided with significant interconnector build-out, which has allowed for a more efficient use of the diverse electricity sources across the region. Norway has primarily hydropower, Sweden hydro and nuclear, and Finland nuclear and biomass power plants. Denmark has coal and natural gas-fired combined heat and power plants. Waste and biomass are also used as fuel and wind energy plays an important role. Iceland relies entirely on hydro and geothermal resources for its electrical energy needs, and is not linked to the rest of the Nordic energy markets.
The Nordic electricity market is becoming increasingly integrated with neighbouring countries and other nearby electricity markets. Nordic countries are currently emerging as the backup or ‘green battery’ for the energy transformation within Northern Europe, thanks to the abundant flow of energy from non-intermittent renewable energy sources like hydropower and the increasing volumes of intermittent renewable energy like solar and wind.
Energy Efficiency in the Nordic Countries
Energy efficiency has been a key enabler in the decoupling of GDP and emissions that has taken place in the Nordic region. Nordic governments have facilitated energy savings through a number of initiatives across multiple sectors. Public research funding for energy efficiency has been substantial and has doubled over the past decade.
Several new technical building codes and product standards, energy efficiency labelling of products, awareness campaigns, as well as innovative tax and incentive schemes, are in place. This collection of initiatives promotes the cheapest and most environmentally friendly energy available, namely saved energy. In addition to more efficient use of resources, energy efficiency initiatives can also improve quality of life through better housing, cities, and air quality, and through reduced emissions of CO2 by displacing fossil energy.
The Nordic countries have also increased the efficiency of their district heating and cooling systems by promoting new and more energy-efficient combined heat and power plants (CHP). These plants, which produce both electricity and heat that is fed into district heating, are essential for widespread and efficient use of renewables.
The Nordic countries remain committed to the efficient transformation of their energy systems to greener systems, by using more renewables like wind, solar and hydropower in their common electricity market, and by using more biomass in their CHP and district heating and cooling systems. Energy efficiency is seen as one of the cornerstones of a sustainable and secure energy system, promoting greater environmental sustainability, competitiveness and supply reliability.
A climate-neutral Nordic region
The Nordic region is a climate front-runner compared to other major economies. The carbon intensity of the Nordic electricity mix in 2015 is where the rest of the world needs to be in 2040, according to the two-degree scenario projected by the IEA’s Energy Technology Perspectives 2014.
Individually and collectively, the five Nordic countries have some of the most ambitious energy and climate policy agendas in the world, having set challenging targets and milestones along the road to creating a truly sustainable energy system.
However, this involves great challenges. Nordic co-operation, particularly in terms of infrastructure, research, development and demonstration, is vital if the objective is to be attained at the lowest possible cost. The ways in which the Nordic countries can fulfil their national climate objectives are analysed in the report Nordic Energy Technology Perspectives from the IEA, which indicates that a carbon dioxide-neutral energy system in the Nordic region by 2050 is within reach.
Energy research is important in order to achieve this aim. The Nordic countries have been collaborating on energy research since 1985, and, since 1999, the collaboration has been organised by the Nordic Council of Ministers’ institution, Nordic Energy Research. The current main programme under NER, Sustainable Energy Systems 2050, is focusing on renewable energy, markets, grids, and low-emission transports. Key findings from the programme will be presented at the Sustainable Energy Systems 2050 final seminar in Oslo on 21-22 October 2015.
The Nordic countries’ aim is to continue leading the way when it comes to developing a carbon-neutral economy. Nordic energy co-operation is an important part of this and remains a central feature of energy policies in the Nordic region.
The Nordic electricity market is becoming increasingly integrated with neighbouring countries and other nearby electricity markets.
Share of renewable energy in gross energy supply
Proportion of environmental taxes in total tax revenues
Decoupling of environmental pressures, gross energy consumption, ressource use and generation of non-mineral waste from economic growth
The Nordic countries’ aim is to continue leading the way when it comes to developing a carbon-neutral economy.