Statnett has today presented its Long-term Market Analysis for the Nordic region and Europe until 2050. The analysis states that the power sector will be central in the transition to an energy system with increasingly lower CO2 emissions, and that a target of zero emissions in 2050 is within reach.
The long-term development of the power system and the prices of power are of great importance to Statnett's operations. Statnett therefore prepares a comprehensive long-term market analysis every two years. The analysis discusses main trends and key uncertainties in the development of the power system, documents Statnett's assumptions and provides a forecast for expected power prices and possible price outcomes under different circumstances.
Zero emissions in 2050
- This year's analysis reinforces the main picture we have seen in the last years. The European power system is on its way to becoming emission-free, mainly based on wind and solar power. Unlike the previous analysis in 2018, this year we assume that the entire European energy sector will be emission-free by 2050. This means that power consumption will be twice as large, wind and solar power will double ten times in volume from today, and that fossil power plants will be phased out completely by 2050, says Julie Larsen Gunnerød, Statnett's project manager for Long-term Market Analysis 2020.
Increased electrification results in significantly higher consumption, and in the analysis's basic scenario for the Nordic region, consumption will increase by 40% by 2040. Consumption is mainly covered by increased wind power production. Offshore wind will also play an important role in the long run. For Norway, consumption will increase from the current level of about 140 TWh, to between 180 and 190 TWh in 2040/2050. This creates a need for new production in Norway for the years to come. We see that the development of onshore wind power is likely to decline after what is under construction today has been put into operation. Development of hydropower and solar power, combined with offshore wind from 2030 onwards, nevertheless provides a weak positive power balance in Norway over the analysis period in our baseline scenario.
Hydrogen and other flexibility are becoming more important
Europe is moving from a power system where production adapts to consumption to a system where consumption adapts to production. There will be an increasing variable power production in the power system. Flexibility through batteries, hydrogen and adaptation of consumption make the system cohesive. Flexible hydrogen production during periods of high renewable production will be key. Hydrogen becomes important for cutting emissions where direct use of electricity does not work, and electrolysis can utilize periodic overproduction of wind and solar power in a good way.
- It is realistic that much of the other consumption that results from electrification disconnects during periods of low renewable production and high prices, and thus dampens consumption. Given this, it seems feasible that batteries, hydrogen and biogas power plants can cover the rest of the consumption when there is no significant power production from solar and wind, says project manager Julie Larsen Gunnerød.
Norwegian prices on a par with historical prices, but larger fluctuations
In the base scenario, the average price in southern Norway is in the range of 35-40 € / MWh after 2030. In northern and central Norway, prices are much lower in 2030, but will move closer to prices in southern Norway towards 2040. The price variation between some years due to the weather remains at today's level, but the difference between winter and summer is amplified. Prices will be lower in the summer than in the winter. The price differences between areas in Norway hour by hour increase in our analyzes. For example, prices in northern and central Norway will to a greater extent follow wind power production in the two northernmost price areas in Sweden. In southern Norway, prices will vary to a greater extent with the contribution from wind power in and around the North Sea. In addition, prices are more affected by solar power. This means that which areas have the highest and lowest price will interchange more than today. This also applies with regards to price differences abroad. In Europe, we see a similar development, where prices remain moderate, but volatility increases.
- An important point is that a development with higher prices in Europe over the next 10-20 years can contribute to lower prices further on in time - for example from 2040 and on to 2050. The background is that higher CO2 prices provide a basis for faster adjustment and technology development that in the long run reduces power prices, says Gunnerød.
There is considerable uncertainty related to a number of factors in Europe, the Nordic countries and Norway, and thus also significant uncertainty related to the level at which average prices will remain over the next 15-20 years. In our analysis, we operate with an output range from about 30 to just over 50 € / MWh for Norway.