Baltic states integrate in cooperative competition

The close cooperation between the Nordic countries in the field of electricity exchange is expanding. Last summer, the energy ministers of Sweden, Norway, Denmark and Finland agreed in principle to create a joint electricity market. The Swedish-Norwegian electricity exchange, which began operations this year, is a first step in that direction. Finland`s power exchange is following the same path.

As the European market moves further toward liberalization, electricity futures, derivatives, brokers and short-term power trading will become more commonplace as customers press for lower energy prices. Already, Norway`s experience shows benefits to retail wheeling and industry restructuring. Norway`s electricity prices have fallen approximately 20 percent for all customer classes since the introduction of competition two years ago.

“Norway is the most advanced at the moment, but Finland and Sweden are running quite fast. Their hydropower base has made it easier for them to meet electrical demands,” said Kari Sinivouri of Imatran Voima Oy Group`s energy business strategy planning and business development unit in Helsinki, Finland. “The combination of the Norwegian and Swedish exchanges has gone quite well. It is functioning on a day-to-day basis, the volumes are growing on track and are where we would expect them to be. The coming Nordic energy exchange will further consolidate the mix of market players.”

Eleven of the states on the Baltic Rim have a large electricity surplus that would be available for trade. But according to a recent market analysis released by NUTEK, Sweden`s National Board for Industrial and Technical Development and the country`s central public authority for matters concerning the long-term development of energy, it is uncertain whether any of the region`s excess capacity can be exported effectively until political and other market conditions become more transparent. NUTEK`s report, The Electricity Markets Around the Baltic, is issued annually by the agency to review current and future electricity trends in the region.

NUTEK predicts: trade increases between the Nordic countries in general; increasing trade between Sweden and Germany in the next few years; increasing demand in Poland and Russia, which will be associated with a more attractive economic environment; and electricity imports to Sweden to replace some of its nuclear power production capacity.

The markets in this region differ widely, but all share a common feature: domestic energy markets that are being transformed by new laws and fundamental regulatory policies which are still developing. Priorities lie in the sculpting of a price structure, which would enable utilities to achieve cost coverage. But there are regulations and structures which are impeding progress in some nations.