The development of renewable power, combined with higher costs for coal- and gas-fired power, will drive a substantial structural change in the European power sector.  Cooperation and the trading of power across national borders will become increasingly important.  Two consequences of the EU’s plans could be that the Nordic region will have significantly lower average prices than Germany, the Netherlands and Great Britain and that the Nordic region will become a net exporter of power in normal years.

Aspires to increase renewable power share
The EU has set a target of 20% of energy consumption to come from renewable sources in 2020. It is cheaper/easier to increase the proportion of renewable energy within the power sector than within other areas of the energy sector. It is therefore estimated that renewable power must increase from its current level of 15% to around 34-35% in 2020 if the goal is to be achieved.  This represents a dramatic increase in renewable power over a short period of time and will require the substantial restructuring of power generation and substantial new transmission capacity.

The goals for renewable energy are distributed between the EU’s Member States, with the biggest increases for countries which have the highest GNP per inhabitant. This rule results in demanding requirements being imposed on the Nordic countries and countries such as Germany and the Netherlands.  Sweden, however, has a slightly lower requirement than that indicated by the general rules, because the country would otherwise have exceeded the level of 50% renewable energy.

As an EEA country, Norway negotiates the requirements that will apply with the EU. A high GNP per inhabitant suggests that demanding requirements will be imposed, while the fact that Norway already has an extremely high proportion of renewable energy could act in the opposite direction. Norway’s obligations are expected to be clarified in 2009.

Less use of fossil fuel
Most countries in Northern Europe have a substantial element of coal-based power and a number of gas-based power stations which generate electricity when market prices make it profitable. New renewable energy installations have low operating costs and the volumes that are supplied to the market will largely displace corresponding volumes of gas- and coal-based power. The direct effect of more new renewable power is therefore a reduction in power generation by fossil fuel-based power stations. Over time, new investments and reinvestment in fossil fuel-based power generation could decline considerably. A reduction in the use of fossil fuel-based power is an important goal in the aid schemes.

Norway and Sweden are different
Norway and Sweden differs from other countries in terms of a small percentage of flexible fossil fuel-fired power generation. In Norway, the gas-fired power station at Kårstø will account for around 3 per cent of the total Norwegian power generation, if in full production. The Norwegian power system is based on hydro power, while the Swedish system is dominated both by hydro and nuclear power. Nuclear power stations have low operating costs, and although Sweden has considered phasing out its nuclear power stations it appears likely that nuclear power will continue to be used for many years to come. Production per power station will also, most likely, increase. Norway and Sweden therefore have very little power generation that would cease or be shut down if more renewable power were to be phased in. An increase in renewable energy in Norway and Sweden must therefore largely go towards covering the increase in consumption in different areas, and towards increasing net exports. 
Export of renewable energy will however not count towards the EU's goals for 2020, as the goals concern renewable energy as a proportion of consumption.

How to replace fossil fuels in Norway?
If a greater proportion of Norwegian energy consumption is to be covered by renewable energy, one possible initiative is to replace heating based on fossil fuels with renewable power or biomass. There are also many opportunities within the industry to replace fossil fuel-based energy with renewable energy. Another interesting opportunity is to replace the use of petrol and diesel for vehicles with renewable electricity for electric cars and plug-in hybrids, or with bio-fuel in conventional engines. Such conversions would increase the proportion of renewable Norwegian energy consumption.

Finland and Denmark
Finland also has a significant number of hydroelectric power stations and an important element of nuclear power. A fifth nuclear power station is under construction and a sixth is under consideration.  Denmark has ambitious plans for more renewable energy, particularly wind power. The extensive investments in renewable energy in the Nordic region combined with the increase in the use of nuclear power that is under way could result in lower price levels than on continental Europe. Through lower prices, an increase in the supply of renewable energy and nuclear power could limit the use of coal-based power in Denmark and Finland and could also result in power being exported to the continent.

Sale of Guarantees of Origin
The EU’s goals for 2020 to some extent open up the possibility of countries which exceed their goals for renewable energy selling Guarantees of Origin (GO) to countries which do not achieve their goals. It is possible that countries that have little renewable resources available will pay for investments in renewable energy in the Nordic region. The rules have not been clarified, but such opportunities could over time result in a considerable change of the Nordic power system, leading to an increase in the export (and exchange) of power to the continent. The idea of an offshore power distribution network, which integrates offshore wind power and trade between countries around the North Sea, represents an interesting opportunity. And it must be viewed in the light of the EU’s ambitious goals for renewable energy.

Wind power
For countries such as Denmark, Germany, the Netherlands and Great Britain, wind power represents an important tool for achieving the goals for more renewable energy. The extensive development of wind power will increase the benefits obtained by these countries in exchanging power with the Norwegian hydro power system. Such an exchange of power could facilitate restructuring of the other countries and at the same time give added value for Norway.

Increasing need for cooperation and trade
The power system in Europe is undergoing change, and climate policy is an important driving force. Other driving forces are concerns over import-dependency, security of supply and the rising prices of fossil fuel. All these factors will contribute to the restructuring of the energy and power systems with emphasis on new solutions and an increasing need for cooperation and trade.