PA PERSPECTIVES ON NORDIC ENERGY MARKETS - Summer Edition 2021
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PA PERSPECTIVES ON NORDIC ENERGY MARKETS Summer Edition 2021
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CONTENTS
THE NEED FOR MULTIPLE PERSPECTIVES
WHEN ELECTRIFYING THE FUTURE 4
GOVERNMENT PROPOSAL COULD LEAD TO ENORMOUS
GROWTH OF OFFSHORE WIND POWER 11
INNOVATIVE TECHNOLOGY TO IMPROVE DECISION-MAKING 17
WINDS OF CHANGE AT PA: NEW HEAD OF PRACTICE
OFFERS FRESH PERSPECTIVE ON ENERGY TRANSITION 20
DEMAND SIDE RESPONSE FOR THE ELECTRICITY MARKET
IN SWEDEN HAS MUCH MORE POTENTIAL 24
THE NORDIC ENERGY MARKET 28
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THE NEED FOR MULTIPLE
PERSPECTIVES WHEN
ELECTRIFYING THE FUTURE
We met Annika Viklund, CEO of Vattenfall Electricity
Distribution, to talk about her role in the Swedish
Electrification Commission (Elektrifieringskommission)
and the importance of the grid perspective when
intensifying the electrification of the nation.
Interviewed by Torbjörn Severinsson and Beatrice Boström
ANNIKA VIKLUND
CEO OF VATTENFALL
ELECTRICITY DISTRIBUTION
In October 2020, the Swedish Government appointed discussing the importance of having a Commission
an Electrification Commission (Elektrifieringskommission) with the distinct purpose of promoting financing and
to identify measures that will increase the pace of investment in road electricity, as well as the importance
electrification in the country’s industry and transport of having an electrification strategy. I’m very happy that
sector to support a sustainable environment. our input paid off and that I get to be a part of this advisory
group to the Minister. It’s an important job for me to participate
The Commission will, among other things, shed light
in this group, and it’s important to gather all the different for sure what the right path is for heavy transport.
on financing issues, possible business models and how Were you surprised to see any of the other
stakeholders we represent to find the solutions we need
to secure the electricity supply for charging infrastructure. representatives included in the Commission? I want to emphasise the importance of the Commission’s
in response to this rapid development.
Led by the Minister of Infrastructure, Tomas Eneroth, the work in relation to the European system. Sweden is not
Annika: No, I’m rather happy about the group of members
Commission includes the Special Investigator for Electric an isolated island in this, and when it comes to transport
Do you think you were asked to participate I have the privilege of working with. I think the Government
Roads and 16 other expert members from businesses, in general, and heavy transport specifically, there must be
in the Commission partly due to your previous has taken a very good approach by having such a breadth
interested organisations, research institutes, universities and a smooth connection to the entire European network. We
of representatives. I’m also glad to see they’ve taken a holistic
colleges, municipalities and regions. Annika Viklund, CEO input in the area? know that there are other countries with different views on
approach and included flight transport and boat transport,
of Vattenfall Electricity Distribution (Vattenfall Eldistribution energy systems – but the function must be there. I think the
Annika: I believe they have received input from many and not only focused on road transport. I believe it all needs
AB) is one of them. We met with her to talk about her role in Commission is well-equipped, in breadth and competence,
different players in the energy and transport industries, to be included.
the Commission and the importance of the grid perspective to enable these important dialogues and solutions.
and they saw an advantage in gathering different types
when intensifying the electrification of the nation. of expertise in Sweden to reach consensus around this You were not surprised to see that hydrogen
question. I believe the reason why E.ON and Vattenfall Why is it important for Sweden, in particular,
was included?
The Government chose you to be part of the are involved is because the electricity grid and its capacity to have an Electrification Commission and
Electrification Commission – how does it feel? for this type of transport are crucial for the Government Annika: No, when starting with something new it’s Electrification Strategy?
to achieve its climate goals (including halving emissions dangerous to rule something out too early, only to notice
Annika: It feels important and an honour – and it’s great for heavy transport in 15 years’ time). The Government there are missing pieces later. This is a natural part of the Annika: I think Swedish companies, stakeholders, and
fun. Almost a year ago, an industry colleague and I wrote need this competence to see the whole picture and we development – you start wide and then narrow it down. decision-makers have a fantastic focus on how to use the
an article in the national business newspaper Dagens industri can provide real input from the electricity network side. In five years, or maybe even in two years, we will know country’s electricity system in the best way to tackle climate
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The transition means a societal change that will require
tough political decisions and extensive resources, and
it is therefore crucial that we all agree on the way
forward, for both production and distribution.
change. Almost every producing company in Sweden has and when working together you learn that things might
an electrification strategy, or similar, in place. To succeed not be as easy as you first thought, and that there are
in electrifying industry and the transport sector, we need several other perspectives to account for. We have the
a holistic approach and a joint roadmap for the whole of strength to make different contributions, and that’s what
Sweden. The transition means a societal change that will it takes to get the holistic view.
require tough political decisions and extensive resources,
At the same time, we must also make progress. We are
and it is therefore crucial that we all agree on the way
an advisory group, but we must still be very constructive,
forward, for both production and distribution. I think it’s
concrete and be clear on how we can contribute and when.
good that the Government have stated that “the time of
pilots is over”, it is now time to act. It adds pressure and
an expectation, which I believe is very beneficial for us. It’s a big challenge to decide how much responsibility
to put on the market to develop the necessary
Now you’ve had your start-up meeting in the solutions and how much governmental support
Commission, what would you say are the biggest there should be. A lot of renewable electricity
challenges in achieving the goal of 200km of is needed, but who will produce it?
electrified roads by 2030? Annika: We, and companies like PA, have a very important
Annika: From my perspective, the challenges can be job. I believe the discussion has stalled a little – we need
summarised as time, resources and regulation: to move away from choosing between the economy OR
the climate. The climate goals are a must and they will be
• Time – The permit process is long and needs to be achieved in an economic way. I think it is very important
quicker. For me, coming from the electricity grid side, that we leave behind the discussion about infrastructure
2025 is today and 2030 is tomorrow. This discussion is, being free. Instead, we must concentrate on having the
of course, not isolated to transport, this is a general issue. infrastructure that enables the climate goals to be achieved.
• Resources – We should not underestimate this part.
Today, we lack skills and competence in the electricity Representatives from the energy industry in
network area, such as for planning and expansion.
Sweden wrote earlier this year that Sweden might
This is an industry of the future and we need to work
hard to increase interest in the industry. need to plan for 500TWh by 2050 – what are
• Regulation – The electricity grid regulation needs to be your comments on that?
modernised for the needs of the future. This connects to Annika: This is exactly why we need the entire picture – how
the investments and ‘who is paying for what’ discussions. do we build an infrastructure that enables the electrification?
And how can we best use our existing infrastructure to the
Are there divided opinions regarding the conditions maximum while avoiding peak loads at the wrong time?
or challenges? Or do you all generally agree within We need to make sure the solutions are affordable for the
the Commission? customer, and that involves finding solutions and functions
such as flexibility.
Annika: I wouldn’t say divided opinions, but definitely
different perspectives. I believe we have a good dialogue Again, here we can benefit from the holistic view that
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the Electrification Commission can provide. As far as the What are your thoughts about electricity
Commission is concerned, an important part is to make grid companies needing to submit grid
sure we understand the patterns and behaviours, and not
development plans?
just the transport pattern. People will not make plans or
change their behaviours based on where the capacity in the Annika: This is according to the Clean Energy Package
electricity grid is. Therefore, we need to be very familiar with and the legislation around it. I think it’s incredibly important
where behaviours come from – how will the industries and to be aware that there will be a great focus from Europe
companies plan, how will the transport companies plan on these directives and packages. But at the same time,
and how will they think when optimising their operations? you must remember that the development is going so fast
right now. If you identify a problem today and work on
A part of the mission for the Electrification it for a couple of years, the problem might no longer be
there when you’ve reached a solution. It’s important that
Commission is to shed light on how electricity
you really focus on solving the right problems here and now.
should be delivered to the electrified road and I think it’s important to see that for everything that comes
charging infrastructure, and estimating the cost from the legislator, regardless of whether it’s from a Swedish
for this at different levels of ambition. What are or European perspective, you have to make sure you solve
the problem that’s relevant. The system is changing so
the important considerations regarding this?
fast, so we need to move with agility here – to prevent
Annika: The permit part is important here. A proposition will the legislation from regulating the wrong things.
most likely be handed to the Government this spring. But
one must not forget that the requirements for permits are The example of Cementa on Gotland is interesting – Our needs will not change, people and goods have been moving
growing continuously, such as in relation to biodiversity. This
can be a challenge when looking to shorten these processes.
they want to install carbon capture and storage across the globe for thousands of years and will continue to do so.
We must, of course, safeguard these requirements but at the (CCS) by 2030. But they need 200MW instead of It is our job to make sure we can do this in a climate-friendly way.
same time we must find effective processes. It’s a very difficult the 30MW that’s currently available on the island …
question but climate change must have a strong priority.
Annika: Cementa is one example, but it can also be other
players who require up to 10 times the available capacity.
Would a solution be to simply increase the I think the important discussion to have here is how to development and, for example, look at countries such Investors want to invest in companies which are going
number of administrators that handle the cases? finance this type of change. Is it the individual customer as France and Germany where they are working very hard fossil-free. We talk about a fossil-free future at Vattenfall,
Do you believe that to be a bottleneck today? alone that should finance this – or can the state take on some on it already. and that needs electrification. Anna Borg, our CEO, said:
of these investments to enable the transition? If we are to “We are climate workers and our job is to find solutions to
Annika: Yes, it’s definitely a bottleneck today. As an example, reduce our emissions by 2030, things needs to happen fast. this.” We need to find solutions to the needs of companies
Thank you so much for your time Annika.
a local authority said to us at Vattenfall that the number of and society. Our needs will not change, people and goods
requests to build/expand the electricity grid have in some Are there any final words you would like to add
Regarding electric road systems (ERS) have been moving across the globe for thousands of years
cases increased from two per year to 25 per week. So yes, before we round off? and will continue to do so. It is our job to make sure we can
I think more administrators are needed, but at the same time technologies, such as dynamic charging
Annika: I want to circle back to what we discussed earlier, do this in a climate-friendly way.
we need to utilise digitalisation and smart systems, so things while driving, fast charging, hydrogen - have
the importance of talking about transport in general, I think we, and players like PA, have a very important
can be handled more effectively than is done today. you thought about what the difference would including electrification of harbours, airports, regional flights job here – we have to provide the vision and explain how
Another aspect that I return to is the fact that the electricity be from an electricity grid point of view? etc. During this pandemic, we haven’t travelled as much, we work towards it. We need to explain what the big plan
grid is not a defined national interest, such as rail or road, but I’m sure there is a large pent-up desire for travel among is, what it is that we want to do and how we can achieve
Annika: This is partly what the Swedish Transport
where you have a limit on how long a process can go on many. Humanity has evolved through movement across it – in terms of climate development and climate work.
Administration and the special investigator are looking at,
for. It is extremely important to safeguard democracy, but the globe, and people and goods will need to move. Even At Vattenfall, we have a clear strategy of being fossil free
so I will not pre-empt their work. But it is important to
it’s not viable to have to wait for 10 years to get a transmission if we are not moving so much right now, goods and food within one generation, but we need help and support from
consider it from the user perspective as I mentioned earlier.
grid in place. I believe that will prevent the industry from still need to be transported to shops or to homes – and players like PA and other companies in the market to describe
As the Transport Administration are also emphasising, we
investing, at least in Sweden, and it will start to look elsewhere. this will not change. At the same time, I believe it should the facts and find the right technical solutions.
need to align the development in Sweden with European
be a certainty to be able to travel in a climate-smart way.
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GOVERNMENT PROPOSAL COULD
LEAD TO ENORMOUS GROWTH
OF OFFSHORE WIND POWER
Author: Torbjörn Severinsson
The dormant market for offshore wind power in Sweden can now finally
be revived. As part of the Swedish Energy Agreement of 2016, the Government
has now presented a proposal to reduce the grid costs for offshore wind power.
Once the proposal is adopted and the regulation is in place, very high activity
in offshore wind power will commence and this will last for a long time to come.
“More offshore wind power will contribute to the balancing The Government proposal in short
of the power system and be an important addition to the
electricity market,” says the Swedish Minister for Energy, The Government is proposing that the Swedish Transmission
Anders Ygeman. System Operator (TSO), Svenska kraftnät (Svk), constructs
the transmission network to areas within Swedish territorial
We’ve assessed the offshore wind projects currently under waters. All customers connected to the Swedish grid
development and see great potential. The installed capacity will share the financing, so the connection costs to the
of operating offshore wind farms in Swedish territorial transmission network will fall for offshore wind developers,
waters is only about 160MW, but the development portfolio enabling profitability for more projects. The Government
is around 100 times that. To accelerate the delivery of the wants the change to come into force on 1 August 2021,
development portfolio, it’s vital to clarify the conditions for and a period of consultation ended on 3 May 2021.
the construction of such wind farms now. “It can take 10
to 15 years to get offshore wind farms in place. However, The growth of the transmission network should take place
projects already given the necessary permits might be in areas where there are good conditions for connecting
commissioned earlier,” says Henrik Sjöström, Manager for several electricity production facilities and where such an
Offshore Wind at OX2. expansion would promote the fulfilment of Sweden’s goal
of 100 per cent renewable electricity production. The model
is judged to be compatible with EU state aid rules.
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Even though the cost Svk will be responsible for the planning, design, construction total investment, there are other factors with greater Sjöström emphasises the importance of collaboration
and operation of cables. It will be up to them to assess how impact on the final profitability. Future electricity prices, between the offshore wind power developers and the TSO
of the grid connection far out to sea and in which places it is appropriate to build technology development and capital costs are some key to reach the goals of co-creation. “The connection can’t take
is a substantial part of the stations for connecting to electricity production at sea. The factors. But Henrik Sjöström at OX2 is very positive. He too long because the technology development then makes
fact that Svk will decide where to build transmission lines believes the proposal will close the gap, allowing profitable the permits outdated. The time to secure a connection needs
total investment, there provides an effective measure for counteracting less projects. He thinks the future output will be secured by to be short,” says Sjöström.
are other factors with cost-effective locations for wind farms. a combination of long- and short-term contracts, leading
One consequence for society will be an increase in
to lower financing costs. In addition, the construction risks
greater impact on the of installing offshore wind farms are of a controllable level.
transmission network tariffs. The increase will have an impact
Consequences for stakeholders on customers in the regional grid as well as in the local grid.
final profitability This, in combination with lower capital expenditure (CAPEX)
The Government has provided an example, saying that
The Government thinks the proposal is a reasonable and technology development, will lead to sustainable profits.
balance between the interests of electricity producers an increase in transmission network tariffs of 20 per cent,
and customers. However, it’s hard to predict the exact For Svk, the proposal means broader responsibilities than or SEK 5 billion, during a regulation period (four years) would
impact of the reform in terms of growth in offshore wind before. The state-owned TSO is already under pressure hardly be noticeable for a normal household customer as their
power. We’ve talked to some of the offshore wind power and working with large investment plans, even before the network fee would only increase by about half a per cent.
developers and they’re cautiously positive. Even though new instructions to build transmission networks to the sea.
the cost of the grid connection is a substantial part of the They will certainly require additional resources.
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CHAPTER 15
TITLE15
1
2
3
8 5
9 6 4
10
7
No. Site Owner No. of Turbines Development Status
11
1 Storgrund – phase 2 Rewind Offshore AB 10–12 Early Planning
2 Storgrund – phase 1 Rewind Offshore AB 10–12 Early Planning
12
14
3 Eystrasalt wpd AG 150–200 Early Planning
15 13
33 Oskarshamn 4 Fyrskeppet wpd AG 75-100 Early Planning
connection 16
Ringhals
connection 5 Gretas Klackar SVEA Vind Offshore 62 Early Planning
17
31
18
30 Karlshamn
6 Gretas Klackar II n/a 50 Consent Application Submitted
32 19
connection
22 7 Utknallen SVEA Vind Offshore 55 Early Planning
Arrie 20
connection 23
21
8 Storgrundet WPD offshore GmbH 50–83 Consented
29 27 24
28 26 25 9 Utposten II SVEA Vind Offshore 50 Consent Application Submitted
10 Utposten SVEA Vind Offshore 25–40 Consent Application Submitted
11 Svenska Björn Offshore Solid Vind AB 66 Consent Application Submitted
12 Långgrund SVEA Vind Offshore n/a Early Planning
13 Långgrund II SVEA Vind Offshore n/a Early Planning
14 Södra Klasgrunden Cloudberry Develop AS n/a Early Planning
15 Fällbådan Rewind Offshore AB n/a Early Planning
16 Oskarshamn Rewind Offshore AB 40–45 Early Planning
Current offshore wind power projects under decommissioning at each site. Ringhals 1 and 2 had 17 Kårehamn RWE Renewables 16 Commissioned
development an installed capacity of about 1.8GW and Oskarshamn
18 Gotland Ørsted n/a Early Planning
1 and 2 had an installed capacity of about 1.1GW.
The proposal means Svk will expand the transmission
The third connection point to highlight is Karlshamn, 19 Aurora OX2 220–370 Early Planning
network at sea in places where several electricity producers
where Karlshamnsverket is part of the Swedish capacity
will be able to connect. As with the reinforcements made 20 Öland Ørsted n/a Early Planning
reserve. In the longer term, the oil-fired power plant will
on land, the TSO will make assessments of where and when
be decommissioned and the substations could provide 21 Södra Midsjöbanken RWE Renewables 120 Consent Application Submitted
to build lines from a system perspective. This means some
spare transformer capacity of about 1GW. The total spare
areas will be more attractive than others. Offshore wind 22 Anemone OX2 n/a Early Planning
transformer capacity would be sufficient to connect up to 4GW.
farms located in areas requiring major investments in the 23 Njord OX2 60–85 Early Planning
transmission grid will most probably not be successful. In addition, Kriegers Flak II has plans for a connection
24 Skåne North Ørsted n/a Early Planning
that would lead to an increased transformer capacity
We’ve examined the available information about offshore
in Arrie. So, offshore wind farms close to Kriegers Flak II 25 Skåne Ørsted n/a Early Planning
wind power development in Swedish waters and summarised
could be considered as cost-efficient connections.
it in the map above. The projects we’ve chosen to present 26 Triton OX2 n/a Early Planning
are in different stages and the developers include everything It’s possible, then, that considerable wind power in price
27 Sydkustens Vind Kustvind AB, Magnora AS 50 Early Planning
from the world’s dominating offshore wind actor, Ørsted, areas three and four might be possible to connect without
to very small companies such as SVEA Vind Offshore. the TSO installing new transformers on land. This also 28 Kriegers Flak II Vattenfall AB 32–80 Consented
We estimate the total pipeline to be around 2,000 turbines. means that the capacity in the transmission network 29 Lillgrund Vattenfall AB 48 Commissioned
However, given that technology development constantly is sufficient and there’s no need for reinforcements.
30 Kattegatt Offshore Agrivind AB 28-47 Consented
increases the size of wind turbines, the total number of
5GW of installed offshore wind power capacity would
turbines will be less at time of construction. Our analysis 31 Galatea-Galene OX2 50–83 Early Planning
add about 15 per cent of yearly electricity production
suggests 300 turbines (3–4GW in 2030) are in the zones
to the Swedish system compared to today – a realistic 32 Stora Middelgrund Vattenfall AB 47–75 Early Planning
where cost-effective connections are most likely. Svk will
target in 10 to 15 years’ time.
most probably prioritise these projects due to available 33 Sotenäs Offshore Park Flowocean AB 1 Consented
transformer capacity (400kV). The substations in Ringhals “What we are seeing now is the starting point
on the west coast and in Oskarshamn on the east coast for a bright future of offshore wind development Figure 1:
have spare capacity because two reactors are undergoing in Sweden,” says Henrik Sjöström. Source: PA Consulting
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INNOVATIVE
TECHNOLOGY
TO IMPROVE
DECISION-MAKING
Author: Julianne Antrobus and Ashwin Rao
Technologies such as digital twins provide a great
opportunity for organisations to create a line of
sight between asset performance and business
outcomes, empowering staff at all levels to take
decisions that benefit the enterprise and not just
their local asset or system.
Line of sight in decision-making
The nuclear industry is well known for developing innovative
technologies, less so for adopting new technologies at scale.
A key reason for this is lower-than-expected improvements
to the business outcomes. This isn’t a problem specific to the
nuclear sector; our recent survey of CEOs found that almost
two-thirds had a clear strategy for digital investment in their
operations but only 30 per cent had any confidence of value
delivery in the short term.
One major issue facing the nuclear industry is the
inability to articulate how any technology would help
day-to-day decisions of staff at organisational levels.
This prevents staff from endorsing the technology and
inhibits wider-scale adoption, resulting in lower-than-
The nuclear industry is well expected value from the technology.
known for developing innovative We recently deployed digital twins at a UK nuclear site, using
an approach that made improved decision-making the main
technologies, less so for adopting aim. The facility’s leadership wanted help planning a multi-
new technologies at scale. generation project as efficiently as possible,
18 PA PERSPECTIVES ON NORDIC ENERGY MARKETS CHAPTER TITLE19
“Prior to engaging with PA, I had spent over £2 million on
digital twins without getting any tangible benefits on my
business targets. PA is the only company that has shown
me how to extract value out of digital twins.”
while maintaining the site’s exceptional safety record. They for and the rationale for making those decisions. We then
had previously made decisions regarding both long-term built a digital twin of a part of the utility network using
strategic investments and day-to-day operational issues computational fluid dynamics and physics-based modelling,
using experience and time-based rules. This resulted in letting users evaluate the consequences of their actions
a situation where: on performance metrics such as safety, cost and delivery.
• assets were under-maintained, resulting in failures The digital twins we implemented provided a line of sight
that cost more to repair between the maintenance teams and the boardroom. With
• assets were over-maintained, resulting in higher this visibility, the asset maintenance managers were able
maintenance costs and personal safety risks to simulate the impact of operational decisions on the
overall performance of the site and understand specific
• there was little optimisation of asset investment
maintenance requirements. This let senior managers optimise
prioritisation.
decisions, benefitting the whole site as they could prioritise
The first objective we wanted to achieve was determining maintenance across the utility network, not just their process
where the responsibility lay for various parts of the utility or systems. By optimising decision-making across organisational
network. While going through this process, we found there levels in this way, the digital twin helped identify operational
was no ‘line of sight’ between the performance of the asset savings of £8 million per year, as well as the potential
and the overall performance of the enterprise. This meant to reduce carbon emissions by 100,000 tonnes annually.
operators would only focus on reaching their daily targets
without due consideration to equipment health, leading to In our experience, it’s crucial to consider a holistic approach
a detrimental impact on the asset condition that resulted in when trialling any digital technology. The nuclear industry
significant maintenance costs. At the other end of the scale, has been accused of doing technology for the sake of it,
senior executives were planning large investments without without giving much consideration to the ecosystem the
understanding which parts of the utility network were technology will operate in. For example, what are the business
underperforming. process or cultural changes that need to accompany the
technology to fully exploit it? In the case of the nuclear
To build the line of sight between asset and enterprise operator we worked with, by making decision-making
performance, we engaged with staff at all levels, including the core purpose of the digital twins, we were able to
maintenance staff, systems engineers, the chief engineer and get employee buy-in from the outset, thereby delivering
the CEO, to understand the decisions they were responsible sustainable value.20 PA PERSPECTIVES ON NORDIC ENERGY MARKETS PA PERSPECTIVES ON NORDIC ENERGY MARKETS 21
WINDS OF CHANGE AT PA:
NEW HEAD OF PRACTICE
OFFERS FRESH PERSPECTIVE
ON ENERGY TRANSITION
Offshore wind is regarded as a game changer in the energy
system as a way to deliver clean bulk power generation.
We sat down with Aris Karcanias, PA’s new Global Head
of Energy and Utilities, to discuss how offshore wind power
has a huge role to play in transitioning our global energy
system into a more sustainable one.
ARIS KARCANIAS
Interviewed by Lars Erik Maurud
GLOBAL HEAD OF ENERGY
AND UTILITIES PRACTICE
You’ve had incredible experience across the What project would you say characterises you and continuing to redefine its position in UK waters. It was really As a Norwegian taxpayer, should I be proud
energy sector in your career, what made you how you strive to build a positive human future? an inflection point where the technology was evolving into of Equinor, based on the Dogger Bank case?
the super-giant next-generation turbines with talk of 14MW
choose to join PA now? I’ve worked on offshore wind projects from very early on Is it a viable strategic option for Big Oil,
units and beyond.
Fundamentally, the problems we face in the energy in my career. I started as an analyst looking at technology or mainly greenwashing?
roadmaps that would deliver a cost of energy 20 years out, When you bring all that together and add the topography
market today and in the future are multidisciplinary It is a monumental step change and a marker in the
at the regulation that would enable the industry to grow of the UK seabed as you’re moving further and further out
in nature and require deep expertise and a systems world of offshore wind power. For Equinor, it’s a proven
and mature, and at the cost to deliver an effective scaled to sea – there are challenges around the seabed condition,
way of thinking. My passion is breaking new ground platform for growth and essential to the transition from oil
solution. I’ve always been convinced that offshore wind obtaining the right consents, and issues to consider around
and I was seeking a new challenge and to expand the and gas to a cleaner, and more sustainable energy future.
power would provide an important contribution to solving the grid. And on top of that, there’s the competition. With
type of problems that I solve for clients. That’s the definition of long-term success for their business,
our bulk energy needs, especially given the challenges everyone trying to enter the offshore wind sector, it is no
It was important to me to find a business that applies longer a battle between the traditional established players – especially considering the fact that the global commitment
of getting the power by land to the load centres.
both a technical and innovative lens to solving the most it’s an open playing field. to achieving net zero has already started reshaping the
challenging problems our societies face. Consulting can The accumulation of these factors was when I represented traditional energy system.
the Dogger Bank Consortium (Equinor and SSE) to bid Ultimately, the consortium managed and mitigated risk
often be theoretical in nature, with solutions ultimately falling Also, more than 80 per cent of the best wind sites in
for the world’s largest offshore wind project for the Contract better than anyone else, and they took an innovative
down in the implementation phase. PA offers a rare blend of the world are inaccessible unless you have sophisticated
for Difference Allocation Round 3 before I joined PA. It has approach to procurement and explored the boundaries
deep industry expertise combined with strategy, technology, advancements, such as floating wind platforms, which
been an ongoing debate how quickly the cost of energy of different financial structures, using their economies
innovation and, importantly, knowledge of regulation and is an area the Nordic community, and specifically Equinor,
for these multi-billion euro projects in complex operating of scale. And there was the challenge of bid strategy
other real-world implementation considerations. This allows has been trying to pioneer. The Hywind demo projects,
environments could become cost competitive to our in a highly contested market – we did a lot of game
us to deliver end-to-end customer-facing solutions that for example, have started to pave the way for what a
wholesale market prices. At the time, Equinor was seeking theory analysis and ran war games.
ensure problems are not simply solved in theory but also commercial floating solution can manifest in our deep waters.
can be executed by our clients in practice. a major milestone in its clean energy transition and SSE was22 PA PERSPECTIVES ON NORDIC ENERGY MARKETS PA PERSPECTIVES ON NORDIC ENERGY MARKETS 23
ARIS KARCANIAS
Previously a Senior Managing Director and
Co-lead of the Global Clean Energy Practice
at FTI Consulting, as well as a founding
member of the data science business, Aris
has extensive experience working with some
of the world’s leading energy companies,
including Vestas, ABB and Equinor. His
work has involved developing transition
strategies for his clients to support portfolio
decarbonisation and to enable them to
capture the growing opportunities in the clean
energy market. Aris is currently a member of
the Investment Committee at SUSI Partners,
a Zurich-based clean energy transition
infrastructure fund, and a member of the
Board of NextWind, a newly established green
independent power producer (IPP) focused
on mid to end-of-life assets.
Offshore wind has a huge role to play in transitioning our companies building their own solutions in this market, from How will the offshore wind power industry become frustrated as the capability, manufacturing,
global energy system into a sustainable one – I’d say it’s BW Ideol to Stiesdal Technologies – the pioneer in wind capitalise on digital to advance operational and thus jobs to service the industry are being outsourced
as important to our future as coal was to the industrial both on and offshore with its heritage deep in industrial from the UK, the world’s largest offshore wind power
and maintenance processes?
revolution. But that means there needs to be more work engineering as the heart of the Tetra Foundation concept. market (over 10 gigawatts of operating assets). Much
to scale floating solutions. I think it’s fair to say that the The offshore wind power industry generates one of the of the technical know-how and delivery of infrastructure
In the offshore wind industry, there’s a smaller number
supply chain is still evolving, and the technology is still most complex and advanced data feeds in the market. If you is coming from abroad – mainly from the Nordics, but
of original equipment manufacturers (OEMs) compared
relatively nascent, but some of the solutions around look at the data coming through the Supervisory Control and also from Germany, the Netherlands, China and Korea.
to the onshore industry. While these OEMs dominate,
floaters aren’t new and have huge potential. Data Acquisition (SCADA) system today, there’s information
in the form of Siemens Gamesa, Vestas, and GE, the The Nordic players are finding solutions to the biggest
from the blades to the hub, and then right through the
The challenge for these existing technologies is how balance of the plant, service and installation portion of challenges around capturing value in this market and paving
drivetrain, including data such as the vibration, temperatures,
to commercially scale, with modular structures that are the market is more open. The installations to date have the way for building and scaling the industry, and showing
pressures, and sound at the gearboxes. This means you’re
industrially manufactured and delivered. You need to move been dominated by Siemens Gamesa, and Vestas, however, how long-term investment will lead to positive long-term
able to forecast the wind direction, adjust production
the cost trajectory downwards by making offshore wind GE has made significant strides in the last four years to bring results. The Nordic markets, and Germany, bet on offshore
management and anticipate maintenance demands. You can
power easily deliverable, from manufacturing through next-generation turbine solutions to market, which have wind power early, and created a whole industry around the
picture your misalignment corrections and model controlled
installation to servicing. This is a big challenge that requires been dominating many of the large offshore wind power space. Now they’re reaping the benefits of that from a job
system imbalances. All this lets you add to the yield of the
ingenious solutions, and it’s what we’re trying to solve here. tenders in recent years. creation and technology IP perspective around the world.
turbine significantly in offshore, and getting these operation
The key thing we need to take away is that no one party and maintenance (O&M) schedules correct, and keeping the
So, who will lead the way going forward? has the perfect solution. But there’s a lot of experience uptime high involves sophisticated technology, planning, Where do consultants fit into this vibrant and
The jury is still out. Today, the oil and gas giants are doing and capability that comes from the oil and gas world that and data-driven solutions. thriving industry?
a lot of the leading work because of their experience with can help solve the challenges facing offshore wind power
I think we’ve reached a point where generalists can’t solve
floating platforms. But then you’ve got companies like EDPR, today. For this industry to realise its potential and to become How are the Nordic industrial players performing the complexity and scale of the challenge. The day of just
a global developer now tied in a joint venture with ENGIEin one of the cornerstones of green global energy transition,
in the global offshore wind market? doing blue sky strategy consulting is gone. There is a need
offshore, that was one of the first to invest in floating offshore we need to continue to bring together our learnings from
to combine very deep, insightful technical expertise with
wind power with Principal Power. They have five projects a multitude of sectors. I would say they’re doing so well that it is getting noticed
strategy, market design and operational experience. That’s
across Spain, Portugal, France and Japan, either in operation by the taxpayers in the world’s largest offshore wind market,
the sweet spot we own and that will support the next phase
or being built. However, you have a host of high-quality the UK. It is clear there is a sense of frustration, given the
of growth for PA in the energy transition.
market scale and dominance, that the Government has24 PA PERSPECTIVES ON NORDIC ENERGY MARKETS PA PERSPECTIVES ON NORDIC ENERGY MARKETS25
DEMAND SIDE energy-intensive processes for an hour or two when
demand is at its highest.
Reactive markets for demand side response
RESPONSE FOR
Svk is responsible for keeping the power system
We’re not talking about rationing electricity – the total in balance. To do this, it procures ancillary services
consumption would be the same as before. We’re talking
THE ELECTRICITY
on several balancing markets. The size of the market
about applying smarter electricity consumption that, by for ancillary services was approximately SEK 1.5 billion
bringing forward or postponing some demand for electricity,
MARKET IN SWEDEN
in 2019 and is expected to grow in the coming years.
can avoid negative effects on the economy and consumers.
There are plenty of examples of electricity-intensive businesses For energy producers and energy-intensive organisations
HAS MUCH MORE where data centres, greenhouses and aggregated heat
pumps could simply power up and down if market conditions
providing ancillary services to the Svk, there is an opportunity
to expand business while contributing to a secure and
POTENTIAL were there, such as sufficient prices and/or regulation. sustainable energy transition. However, hydropower plants
provide 98 per cent of ancillary services today, proving
With sustainability as the overarching goal, financial demand side response isn’t used even to a fraction of its
incentives wouldn’t need to be extensive. An important full potential, even if some data centres are participating.
Author: Oskar Almén aspect of demand side response is that it offers a win-win
for everyone as wholesale electricity prices fall and generation The graph below illustrates Svk’s projections for how the
is more stable. In the long run, it also means we can reduce ancillary services market will grow between now and 2025.
Further development of electricity markets for the production of expensive fossil electricity, letting imports
focus on fossil-free electricity.
demand side response would be a win-win for
both those providing flexibility and all other
consumers as electricity prices fall in the long run.
Yet the potential for this market isn’t used, partly +103+%
because the prices today are in competition with 3,500
the temporary subscriptions of the Swedish 3,175
Transmission System Operator (TSO), Svenska
49
kraftnät (Svk). The short-term solution of low-priced 2,879
3,000
temporary subscriptions hinder the long-term
48
development of flexible resources. 621
2,500 2,331 607
Future expected costs for ancillary services (million SEK/Year)
404 761
1,906
2,000 507
Sweden had a particularly cold winter, making the need
73
for investment in the north-to-south transmission grid obvious
315
as electricity price differences between the northern and 1,567
399
southern price areas escalated. Smarter use of electricity 17
during the day could contribute to lower and more stable 1,500
602 607
prices while reducing the risk of acute electricity shortages 382 529
534
for industry in more geographically vulnerable areas.
The electricity market in the Nordics is no exception to other 382
1,000 226 210
free markets – supply and demand set the price. But the 534 385
sharp fluctuations in the price per kilowatt hour of electricity 331
are, to some extent, unique. As an example, the market FFR
price in Sweden’s two southern price areas (SE3 and SE4) mFRR
on 12 February 2021 at 8am was approximately €250 for one 500
889 927 aFRR
megawatt hour, yet the average price for the entire day was 698
672 658 FCR-N
€80. By utilising the potential in the electricity market for
so-called demand flexibility, or demand side response (DSR), FCR-D Down
which aims to reduce demand during stressed hours, the 0 FCR-D Up
market can minimise the risk of electricity shortages and
2020 2021 2022 2023 2024
stabilise the price per kilowatt hour at a much lower level.
It’s not a matter of household customers avoiding vacuuming,
Figure 2: Source: Svenska kraftnät (Swedish TSO)
rather that certain businesses could control their most https://www.svk.se/press-och-nyheter/press/marknaden-for-stodtjanster-till-kraftsystemet-vaxer-kraftigt---3292104/
1
https://www.svk.se/en/stakeholder-portal/Electricity-market/information-about-ancillary-services/26 PA PERSPECTIVES ON NORDIC ENERGY MARKETS PA PERSPECTIVES ON NORDIC ENERGY MARKETS27
+103+%
3,500
3,175
49
2,879
3,000 2,779
48
621
50
2,500 2,331 607
521
Future expected costs for ancillary services (million SEK/Year)
404 761
1,906
2,000 507
576
73
315
1,567
399
17
1,500
602 607
382 529 550
534
382
1,000 226 210
208
534 385
331
FFR
mFRR
500
889 927 874 aFRR
672 658 698
FCR-N
FCR-D Down
0 FCR-D Up
2020 2021 2022 2023 2024 2025
In the long run, flexibility resources will be needed
Figure 3: Source: Svenska kraftnät (Swedish TSO)
https://www.svk.se/press-och-nyheter/press/marknaden-for-stodtjanster-till-kraftsystemet-vaxer-kraftigt---3292104/ and the temporary subscriptions will be removed.
Proactive markets for demand side response flexibility, and thereby reduce the need for electricity
for specific hours, is for Svk to raise prices within the
Proactive markets for demand flexibility are in their infancy framework of what the electricity network regulation
ANCILLARY SERVICE PURPOSE
but Sthlmflex, a research project initiated by Svk, Vattenfall allows. This would encourage regional network companies
FFR (Fast Frequency Reserve) Automatically activated services that handle and Ellevio, is a concrete example of how such a model can to build in demand flexibility rather than increase the power
the initial rapid and deep (transient) frequency counteract capacity shortages in the electricity grid. The they purchase (offtake) from the transmission grid. In the
deviations that can occur in the case of low-level NODES marketplace offers a trading platform for players future, when the transmission grid is even more constrained,
rotational energy errors in the Nordic power system. that provide demand flexibility. Since the beginning of the it won’t be possible for the regional network companies
FCR-N (Frequency Containment Automatically activated services that stabilise the year, the prices announced have varied from 20 öre to to increase their offtake, so it’s vital to develop the markets
Reserve - Normal) frequency in case of small changes in consumption 5 kronor per kilowatt hour (around €20 to €500 per MWh). for demand side response now.
or production.
FCR-D (Frequency Containment Automatically activated services that stabilise the Trade is currently relatively limited as Svk set a very With high wholesale electricity prices at certain hours and
Reserve - Disturbance) frequency in the event of a disturbance. low price for its so-called temporary subscriptions to the the need for importing fossil-based electricity, there’s an
aFRR (automatic Frequency Automatically activated services that restore the regional network companies. The temporary subscriptions excellent opportunity for Svk to act. They can take the lead
Restoration Reserve) frequency to 50Hz. are in direct price competition with the flexibility providers. in ensuring there’s a profitable market for demand flexibility
It’s a good thing to make use of the electricity grid as (both reactively and proactively) with the aim of creating
mFRR (manual Frequency Manual service that relieves the automatic services
efficiently as possible, but the temporary subscriptions are a sustainable society.
Restoration Reserve) and restores the frequency to 50Hz.
a short-term solution that’s slowing down the development
of demand side response. In the long run, flexibility
resources will be needed and the temporary subscriptions
will be removed. One way to get more support for demand28 PA PERSPECTIVES ON NORDIC ENERGY MARKETS 29
PA PERSPECTIVES ON NORDIC ENERGY MARKETS29
THE NORDIC ENERGY MARKET
Revenue in EURm Ebitda margin
Revenue in EURm 2019–2020 EBITDA margin 2019–2020
2020 2019 2020 2019 2020 2019 2020 2019
15,885 16,636 No data* 5,447 29.28% 25.51% No data* 30.93%
Vattenfall Fortum Vattenfall Fortum
EURm EURm
2020 2019 2020 2019 2020 2019 2020 2019
3,286 4,215 6,838 8,819 31.69% 47.34% 34.46% 25.77%
Statkraft Ørsted Statkraft Ørsted
EURm EURm
*the report for this year has not yet been published *the report for this year has not yet been published
Figure 4: Figure 5:
Source: Ørsted https://orstedcdn.azureedge.net/-/media/annual2020/annual-summary-2021 Source: Ørsted https://orstedcdn.azureedge.net/-/media/annual2020/annual-summary-2021
Source: Fortum https://www.fortum.com/sites/default/files/investor-documents/fortum_financials2019_3_0.pdf Source: Fortum https://www.fortum.com/sites/default/files/investor-documents/fortum_financials2019_3_0.pdf
Source: Vattenfall https://group.vattenfall.com/siteassets/corporate/investors/interim_reports/2019/q4_report_2019.pdf Source: Vattenfall https://group.vattenfall.com/siteassets/corporate/investors/interim_reports/2019/q4_report_2019.pdf
https://group.vattenfall.com/siteassets/corporate/investors/interim_reports/2020/q4_report_2020.pdf https://group.vattenfall.com/siteassets/corporate/investors/interim_reports/2020/q4_report_2020.pdf
Source: Statkraft https://www.statkraft.com/globalassets/1-statkraft-public/05-investor-relations/4-reports-and-presentations/2020/q4/statkraft-as-annual-report-2020.pdf Source: Statkraft https://www.statkraft.com/globalassets/1-statkraft-public/05-investor-relations/4-reports-and-presentations/2020/q4/statkraft-as-annual-report-2020.pdf
https://www.statkraft.com/globalassets/1-statkraft-public/05-investor-relations/4-reports-and-presentations/2019/q4-2019/statkraft-as-annual-report-2019.pdf https://www.statkraft.com/globalassets/1-statkraft-public/05-investor-relations/4-reports-and-presentations/2019/q4-2019/statkraft-as-annual-report-2019.pdf30 PA PERSPECTIVES ON NORDIC ENERGY MARKETS PA PERSPECTIVES ON NORDIC ENERGY MARKETS31
Return on capital employed Production
Return on capital employed
Production(TWh)
2020 2019 2020 2019 405
5.8% 8.5% No data* 10%
Total
380
Vattenfall Fortum Sweden 162
157
153
Norway
133
2020 2019 2020 2019
5.7% 15.1% 10% 11% Finland 63
63
Statkraft Ørsted
Denmark 27
27
*the report for this year has not yet been published 0 50 100 150 200 250 300 350 400 450
Figure 6:
Source: Ørsted https://orstedcdn.azureedge.net/-/media/annual2020/annual-summary-2021 2020 2019
Source: Fortum https://www.fortum.com/sites/default/files/investor-documents/fortum_financials2019_3_0.pdf
Source: Vattenfall https://group.vattenfall.com/siteassets/corporate/investors/interim_reports/2019/q4_report_2019.pdf Figure 7:
https://group.vattenfall.com/siteassets/corporate/investors/interim_reports/2020/q4_report_2020.pdf Source: Nodepole https://www.nordpoolgroup.com/Market-data1/Power-system-data/Production1/Production1/Nordic/Hourly/?view=table
Source: Statkraft https://www.statkraft.com/globalassets/1-statkraft-public/05-investor-relations/4-reports-and-presentations/2020/q4/statkraft-as-annual-report-2020.pdf
https://www.statkraft.com/globalassets/1-statkraft-public/05-investor-relations/4-reports-and-presentations/2019/q4-2019/statkraft-as-annual-report-2019.pdf
Consumption
Consumption(TWh)
Total 376
385
Sweden 132
136
132
Norway
133
Finland 78
83
Denmark 34
33
0 50 100 150 200 250 300 350 400 450
2020 2019
Figure 8:
Source: Nodepole https://www.nordpoolgroup.com/Market-data1/Power-system-data/Production1/Production1/Nordic/Hourly/?view=table32 PA PERSPECTIVES ON NORDIC ENERGY MARKETS PA PERSPECTIVES ON NORDIC ENERGY MARKETS33
Electric vehicles
Number of public charging points
14,000
12,000
10,000
8,000
6,000
Electricity production 4,000
by source Q1-Q3 2020 2,000
0
Electricity production by source Q1-Q3 2019 2020 2019 2020 2019 2020 2019 2020
Norway Sweden Finland Denmark
350
Number of normal (22kW) public recharging points
300 44
Wind power Figure 10:
Source: https://www.eafo.eu/alternative-fuels/electricity/charging-infra-stats#
166
250 Hydropower
Number of electric vehicels
350,000
200
300,000
250,000
150
200,000
150,000
100
52
Nuclear power
100,000
50,000
50
1 42
Solar power Thermal and Other* 0
2019 2020 2019 2020 2019 2020 2019 2020
Norway Sweden Finland Denmark
0
Number of PHEVs (plug-in hybrid electric vehicles)
Number of BEVs (battery electric vehicles)
Figure 9: Figure 11:
Sources: Energidataservice.dk, Svk.se, Pxnet2.stat.fi, Ssb.no Source: https://www.elbilsstatistik.se/elbilsstatistik
https://elbil.no/elbilstatistikk/
*Other = waste + unspecified production + biomass + other renewables +combined heat and power (CHP) + fossil fuels https://www.eafo.eu/vehicles-and-fleet/m1#34 PUBLICATION
PA PERSPECTIVES
TITLEON NORDIC ENERGY MARKETS PA PERSPECTIVES ON NORDIC ENERGY
CHAPTER
MARKETS35
TITLE35
CONTACT US
Get in touch with our energy experts
Lars Erik Maurud Oskar Almén
lars-erik.maurud@paconsulting.com oskar.almen@paconsulting.com
+47 90 13 95 01 +46 70 379 4249
Share of plug-in electric vehicles in new passenger car sales 2020* (%)
Sweden 32.2
Torbjörn Severinsson Espen Odderbo
torbjorn.severinsson@paconsulting.com espen.odderbo@paconsulting.com
Norway 74.8
+46 70 853 4098 +47 92 81 06 67
Finland 18.1
Denmark 16.4 CONTRIBUTORS
0 10 20 30 40 50 60 70 80
Figure 12:
Source: https://www.statista.com/chart/amp/17344/electric-vehicle-share/
*including plug-in hybrids and light vehicles
Beatrice Boström Julianne Antrobus
Energy expert Global head of nuclear
beatrice.bostrom@paconsulting.com julianne.antrobus@paconsulting.com
Ashwin Rao
Nuclear expert
ashwin.rao@paconsulting.comCORPORATE HEADQUARTERS
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