10 September 2002 – A report published Friday by Finnish Energy Industries Federation Finergy concludes that, despite a general slowing down of electricity demand, many European countries will rely increasingly on power imports in the future.

The report says that electricity consumption will continue to grow in the EU, Baltic countries, Poland and Russia during the next 20 years or so. However, the growth rate is slowing down. Electricity production decreases in relation to
consumption, and more and more countries will have to resort to increasing
electricity imports. The Nordic electricity market is open, but most other
European countries are coming behind slowly.

Fossil fuels will retain their important position in electricity production,
and the use of natural gas in particular will grow rapidly. There are two
different kinds of attitudes towards coal in Europe: some countries intend
to increase and others decrease its use. The use of renewable energy sources
will grow significantly from the current level, but the technological and
economic opportunities to produce more electricity through renewable energy
sources are limited, and these energy sources will have a supplementary role
in the electricity production mix.

A restriction in carbon dioxide emissions will have a major impact on future
electricity production. Despite this, some EU countries have a policy to
reduce nuclear power production while others intend to increase it.
These are among the main conclusions in report “European electricity market
outlook”, drawn up by a task force of the Finnish Energy Industries
Federation Finergy. The report is available in Finnish at Finergy’s home pages (English translation will be available in a couple months).

The report contains estimates of electricity demand, production and
transmission outlook in the Nordic countries and areas adjacent to these as
well as in some other main EU countries. The countries covered by the report
are Finland, Sweden, Norway, Denmark, Germany, France, Great Britain, Italy,
Benelux countries, Russia, Baltic countries and Poland. The report examines
energy-related decision-making within the EU, global fuel market, and the
outlook in electricity production technology. The report is a continuation
of Finergy’s still valid (Finnish) Electricity Market 2015 report which was
published in the spring of 2000 and which focused on Finland and the other
Nordic countries.

Electricity need continues to grow

Electricity need in the area examined will grow in the future but at a
slower pace than before. The Baltic countries and Russia will show the
fastest growth figures. Use of electricity in Russia decreased by one fifth,
more than 200 billion kilowatt hours (TWh) per year, in the
structural transition of economy in the 1990s. However, electricity
consumption in Russia is expected to grow by an average of more than 2 per
cent a year, and the consumption level of the year 1990 will likely be
exceeded by 2010.

The report suggests that the consumption of electricity in the Nordic
countries will grow from the 393bn kWh in 2001 to 418bn kWh by the year 2010.

Fossil fuels and nuclear power still important energy sources

The use of natural gas will grow rapidly in electricity production in
several countries, in Great Britain up to 80 per cent of all production by
2020. As gas consumption increases and as the gas production volumes in the
North Sea are gradually decreasing, there will be a growing need to import
gas from outside the EU. Russia, even with its massive gas resources, can
only provide part of the increasing gas consumption.

As far as coal and nuclear power are concerned, there are intentions on one
hand to reduce and on the other hand to increase their use. Germany
continues to rely on hard coal and brown coal, and Germany has also decided
to abandon nuclear power gradually. Russia, in turn, intends to produce more
electricity through nuclear power and coal to cover the growing consumption.
The use of renewable energy sources will grow with the exception of
hydropower, but these sources will mainly complement other forms of
production even over a perspective of 20 years.

Electricity production decreases in relation to consumption

During the next 10 years, 60,000 to 70,000 megawatts of additional
electricity production capacity will be needed within the area examined in
the report. Approximately half of this new capacity would be built in
Russia. Financing will be one of the crucial issues in the realisation of
the related investments.

According to analyses drawn up by the European Union, 200,000 to 300,000
megawatts of new electricity supply capacity will be required within the
area of the current EU in the next 20 years to cover the increasing
electricity consumption, and equally as much is needed to compensate
production capacity which becomes retired.

Consumption of electricity is expected to grow faster than production in
several countries reviewed, meaning that these countries would become
increasingly dependent on imports. For example it has been estimated that in
2010 the need for electricity in the Nordic countries exceeds by
approximately 17 thousand million-kilowatt hours electricity production in
average hydro-conditions.

Restriction in carbon dioxide emissions is a major factor influencing
electricity production

The EU member states have ratified the Kyoto Protocol and committed
themselves to restricting greenhouse gas emissions. If the directive
proposal concerning emission trading within the EU is implemented, it is
likely that the market price of electricity rises considerably. A reduction
in greenhouse gas emissions is also one of the foremost reasons why the EU
endeavours to promote the use of renewable energy sources and combined heat
and power production. The European Union is currently handling several
initiatives, which, if implemented, would have a fundamental impact on the
energy industry.