Is the nuclear and renewables tag team enough? Finland’s winter power price spike and lessons for CEE

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As we welcome the first sun-filled days of 2024, marking the end of the 2023-2024 heating season, it is the perfect opportunity to reflect on some key energy events from the past few months.

In January, Europe briefly faced record-low temperatures, with some thermometers across Europe showing temperatures as low as -40 degrees Celsius. Europe’s frostbite in January led to new single-day power consumption records in Central and Eastern Europe (CEE), including in Poland and Lithuania. Indeed, the spike in consumption pushed up power prices to record levels across the continent.

Interestingly, among the countries with the highest spot electricity throughout this period (early January) was Finland. The country, with over half of its energy mix consisting of nuclear energy and renewables (including hydropower and biofuels), could be considered by many as a “model” country for governments in CEE today that are transitioning from coal-powered electricity towards a tag team of nuclear energy and renewables.

Can we point the finger to the Finnish energy mix for the country’s sky-high electricity prices in early/mid-January, in comparison to the rest of Europe? Not quite, says Tim Talus, Professor of European Economic and Energy Law at the University of Eastern Finland (UEF). “This [record spot power prices] was largely due to record cold weather. January was one of the coldest months in decades. This resulted in a steady increase in power demand for heating (structures get colder and colder over time). In addition, the absolute highest price spikes were also connected (in addition to weather which was the key factor) to problems in some CHP plants as well as miscalculations on the part of the retailers (overestimating the demand).”

Nonetheless, what lessons can be learned from Finland’s experience this past winter, especially when considering that many countries in the CEE region today are trying to emulate Finland’s energy landscape? “The main thing that can be generally learned from Finland is that you need a mix of all kinds of technologies: nuclear and hydro bring stability and on top of that you can have relatively large volumes of wind and solar. Biofuels complement these other sources,” Mr Talus tells CEENERGYNEWS.

Perhaps the need for technology diversity should also be accompanied by a greater reliance on energy sources providing a stable supply, such as geothermal and nuclear energy. The latter plays a highly limited in Finland – the country’s first geothermal heating power plant was opened in 2023 – while the former makes up around 22 per cent of the country’s energy mix (21.7 per cent in 2022).

“I don’t think you can draw conclusions of the January power prices, except of course that when it’s cold, it’s cold and when it’s record cold, you need a lot of additional capacity,” Mr Talus continues.

Whilst natural gas generally plays a limited role in Finland’s energy mix (3.5 per cent in 2022), the country’s gas system operator, aiming to ensure a market balance, placed an order for rapid extra delivery of liquified natural gas (LNG) amid the record-low temperatures in early January.

However, perhaps a greater role in stabilising the situation during this period was played by the energy consumers themselves who were encouraged to lower power consumption by the Finnish government. On this point, Mr Talus notes that January highlighted the importance of demand-side management. “The downward adjustment of demand was impressive. People took steps to reduce their demand (and power bill). All in all, the Finnish system performed quite well in an unusual situation.”

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