Nordics-Baltics 2050

Nordics-Baltics 2050


Client: Multi-client

Type of project: Market Analysis, Market Design

Project period: 2014-2016

Services: Decarbonisation, Nordic markets, Baltic markets, Nordic surplus, Interconnection, Nuclear profitability, Renewable development

The European power sector will make efforts to drastically reduce its CO2 emissions over the coming decades. By 2020 the European Union has legislated to reduce its emissions by 2020 to 20% below 1990 levels, and to deliver an overall deployment of 20% of primary energy from renewables. Targets for 2030 include an emissions reduction of 40% from 1990 levels, generating 27% of primary energy from renewables, and (indicatively) a 27% increase in energy efficiency. Furthermore, the EU Commission’s Energy Roadmap 2050 envisages greenhouse gas emissions dropping 80-95% compared with 1990 levels by 2050.

Since deregulation of the Nordic power sector in the early 1990s, the Nordics have been at the forefront of new market design development in Europe. The Nordic system of day-ahead price coupling, intraday and balancing arrangements has formed the basis for the EU’s Target Model. However, as European energy markets become more coordinated, and the impact of decarbonisation policy extends, the Nordics are destined to be increasingly influenced by Continental policy decisions: thus becoming market design takers rather than makers. 

Building on the insights of previous Pöyry work, the Nordics-Baltics 2050 study investigates how different policy-led pathways for decarbonisation will affect the Nordic and Baltic power markets up to 2050, using a suite of market models for power, gas, and carbon to build detailed and internally consistent views of future outcomes.

To simulate the outcome of this ongoing policy debate, we have chosen to model two very different policy approaches to decarbonisation: 

  • the Market Europe case is based on Europe-wide coordinated and market-led decarbonisation with the carbon price as the main driver; and
  • the National Focus case is based on uncoordinated national government-led decarbonisation with national renewable targets and out-of-market support as the main drivers. 

The two policy approaches to decarbonisation investigated here are extremes – the path chosen in the end is likely to lie somewhere in between the two. Recent agreements at the EU level suggest that Europe will continue using a mixture of policy instruments to decarbonise, at least until 2030. One thing is clear: these decisions will drive radically different outcomes in the Nordic and Baltic markets.