Impact of Energy Transition in Germany on the Nordic Power Market – A Blessing or Curse?

The European energy policy emphasizes the establishment of EU-wide internal energy markets as a reliable solution in increasing the security of supply, optimal use of internal energy resources, and improved economic competitiveness. With respect to the power sector, the EU’s strategy is to further integrate and harmonize regional markets towards a pan-European power market with a single pricing algorithm. The impacts of such power market couplings on the interconnected countries are complex, which concerns market participants in different levels, from consumers and producers to grid operators, for example. The Nordic power market together with three other cross-border power exchanges launched the North-Western Europe (NWE) dayahead price coupling project in 2014, which further bundles electricity prices in the Nordics with continental Europe, including Germany. The recent dramatic growth in the installed capacity of variable renewable energy (VRE) in Germany (Energiewende), has offered new opportunities and challenges that may affect the connected power markets, including the Nordic. The highlevel hydro storage capacity in the Nordics is deemed a solution for balancing the electricity from VRE, leading to various plans for expanding the interconnectors to continental Europe. For example, a new transmission line (NordLink) between Norway and Germany is to be built by 2018 which increases the trade possibilities by 1400 MWh/h. The detailed analysis of the impacts of energy transitions in such interconnected countries calls for a market-based multiregion energy system model. In this respect, this contribution analyses the impact of further VRE in Germany on the Nordic countries by proposing a new integrated energy system, power market
model of the region. The results reveal the market-economic impact of such market couplings on the Nordic consumers, power producers, and the grid owners.