2. Reykjavik, February 26th 2013
Effects of Connecting thermal and hydro based power systems The Norwegian experience

5. Two concepts Market coupling with implicit auctioning
Flow based on spot price differences
Export to thermal based system when load is high
Import from thermal based system when load is low
Preferred system in Europe
Export based cable
Delivering base load energy to thermal system
Paid on long term contracts for delivering energy

7. Prices in a thermal based system varies with load
Illustrative
Low load
High load
Gas
Lignite
Different production technologies sets the price in different hours
Low load: Market cleared by lignite plant
High load: Cleared by gas fired power plant/oil in extreme situations
Fuel cost is the single most important power price driver

8. Cable income driven by hourly price differences
Cable income is driven by hourly price variations, not average price differences
Characteristic of Nordic system: flat prices
Due to flexibility of water
Characteristic of German prices: large price volatility
Due to wind and thermal generation

9. Prices in a hydro based system varies with inflow
Low inflow Nuclear outages SE Very low temperatures
Low inflow Nuclear outages SE
High coal prices High CO2 prices
Low inflow Nuclear outages SE Low temperatures
Low inflow
Low inflow Low thermal SE Low wind DK
Low inflow High fuel price
High CO2 prices Low temperatures
Mild weather Increased inflow
Record high inflow Low CO2 price Low demand
High inflow Low CO2 price Low fuel prices

11. «We don’t want European prices»
The Norwegian debate
«We don’t want European prices»
«Interconnectors increases the power price»

12. Effect of cables varies with power balance
Illustrative
Price
Prices without cables
Prices with cables
Dry/nuclear trouble
wet
Normal year
inflow
Cables take away some of the inflow risk
Moderate price increase in normal year
Insurance for wet/dry years

13. Interconnectors changes price level and structure
Weekly price structure Norway (€ per MWh)
Illustrative
We do not import German Prices
Not price level
Not price structure
Some increased volatility, but far from German market

14. effects of market coupling with implicit auctioning
Significant congestion revenues
Possible to increase revenue by offering balancing services
Positive effects for producers
Increased prices
Increased revenue due to flexible production
Negative effects for consumers
Increased security of supply
More stable prices
More efficient use of resources
Increased cost due to internal grid development

15. Effects of pure export cable a different story
 © Norsk Hydro 
Photo: Landsvirkjun
Existing power plant
New power plant
Less supply in market
No price effect
Higher prices
Export
Industrial development

16. Thank you for the attention!
Marius Holm Rennesund Senior Consultant THEMA Consulting Group Øvre Vollgate 6, 0158 Oslo / Norway House, Rue d´Archimede 17, 1000 Brussel