Annual Report 2013 | Suomeksi |

Market conditions

Nordic countries 

In 2013, according to preliminary statistics, electricity consumption in the Nordic countries was 386 TWh (2012: 391).

At the beginning of the year, the Nordic water reservoirs were at 85 TWh, i.e. 2 TWh above the long-term average. At the end of the year, the reservoirs were at 82 TWh, which is 1 TWh below the long-term average and 3 TWh below the corresponding level in 2012. Heavy precipitation, mild

weather and moderate consumption led to rapid normalisation of reservoirs.  

In 2013, the average system spot price was EUR 38.1 per MWh (2012: 31.2). In Finland, the average area price was EUR 41.2 per MWh (2012: 36.6)  and in Sweden (SE3) EUR 39.4 per MWh (2012: 32.3). 

In Germany, the average spot price during 2013 was EUR 37.8 per MWh (2012: 42.6).

The market price of CO2 emission allowances (EUA) dropped from approximately EUR 6.6 per tonne at the beginning of the year to approximately EUR 5.0 per tonne at the beginning of the fourth quarter, to which it also returned by the year-end. During 2013, EUA traded between EUR 2.8 and EUR 6.7 per tonne. 

Russia

Fortum operates in the Urals and Western Siberia. Both in the Tyumen and Khanty-Mansiysk area, where industrial production is dominated by the oil and gas industries, and in the Chelyabinsk area, which is dominated by the metal industry, electricity demand declined somewhat for the full year 2013 compared to previous year. 

In 2013, Russia consumed 1,026 TWh (2012: 1,037) of electricity. The corresponding figure in Fortum’s operating area in the First price zone (European and Urals part of Russia) was 767 TWh (2012: 769). 

In 2013, the average electricity spot price, excluding capacity price, increased by 10% to RUB 1,104 per MWh (2012: 1,001) in the First price zone. 

Power consumption
TWh 2013 2012 2011
Nordic countries 386 391 384
Russia 1,026 1,037 1,020
Tyumen 87 83 83
Chelyabinsk 36 36 36
Russia Urals area 253 252 250
Average prices
2013 2012 2011
Spot price for power in Nord Pool power exchange, EUR/MWh 38.1 31.2 47.1
Spot price for power in Finland, EUR/MWh 41.2 36.6 49.3
Spot price for power in Sweden, SE3, Stockholm, EUR/MWh 1) 39.4 32.3 47.9
Spot price for power in Sweden, SE2, Sundsvall, EUR/MWh 1) 39.2 31.8 N/A
Spot price for power in European and Urals part of Russia, RUB/MWh 2) 1,104 1,001 990
Average capacity price, tRUB/MW/month 276 227 209
Spot price for power in Germany, EUR/MWh 37.8 42.6 51.1
Average regulated gas price in Urals region, RUB/1,000 m3 3,131 2,736 2,548
Average capacity price for old capacity, tRUB/MW/month 3) 163 152 160
Average capacity price for new capacity, tRUB/MW/month 3) 576 539 560
Spot price for power (market price), Urals hub, RUB/MWh 2) 1,021 956 925
CO2, (ETS EUA), EUR/tonne CO2 5 7 13
Coal (ICE Rotterdam), USD/tonne 82 93 122
Oil (Brent Crude), USD/bbl 109 112 111
1) Until 1st November 2011 there was only one price area in Sweden.
2) Excluding capacity tariff.
3) Capacity prices paid only for the capacity available at the time.
Water reservoirs
TWh   31 Dec 2013 31 Dec 2012 31 Dec 2011
Nordic water reservoirs level 82 85 95
Nordic water reservoirs level, long-term average 83 83 83
Export/import between Nordic Area and Continental Europe+Baltics
TWh (+ = import to, - = export from Nordic area) 2013 2012 2011
Export/import between Nordic area and Continental Europe+Baltics -3 -19 -6
Export/import between Nordic area and Russia 5 5 11
Export/import Nordic area, total -2 -14 5

European business environment and carbon market

In January, the European Commission published its proposal for the EU’s climate and energy policy for 2020-2030. As a part of the proposal the Commission put forward an emissions reduction target of 40% by 2030, which is in line with the political target to reduce emissions by 80.95% by 2050. It is positive that in the 2030 framework the main focus is now more clearly on reducing greenhouse gases. In addition, a new stability mechanism for emissions trading was proposed.

Contrary to the current policy, only an EU-level target is proposed for renewable energy. This is a step in the right direction, although this EU-level target is binding and therefore creates some overlapping with the greenhouse gas emissions reduction target.

Fortum's view is that an energy and climate framework based on one single binding target for CO2 and a non-binding target for renewables in 2030 would be a more cost-efficient solution to tackle climate change without compromising Europe's industrial competitiveness.

Fortum supports a technology-neutral approach both regarding climate policy and renewable energy, and the target for renewable energy (RES) should concentrate on promotion of research & development, innovations and demonstration, not on production. It is also important to integrate renewable electricity fully into the electricity market, as its amount and share will grow in the future. Increasing the share of renewable energy in the EU energy mix is a positive and desired development.

The EU carbon market was characterised by a significant surplus of allowances and therefore a low market price in

2013. The revision of the European emissions trading scheme (EU ETS) was actively debated throughout the year. After a lengthy process, in late 2013 and early 2014, the amendment of the emissions trading directive and changes to the auctioning regulation enabling the backloading of allowances from 2014-2016 to 2019-2020 were approved. The backloading concerns a total of 900 million allowances and is not expected to substantially increase the price. Backloading is expected to be implemented during the first half of 2014 and is the first step in the revision of the ETS. This revision aims at restoring confidence in the system and giving a price signal that encourages investments in low-carbon production methods.

The Commission released a proposal on the structural reform of the European Trading system (ETS) in January 2014. The proposal includes a market stability reserve, where the supply-demand balance is automatically managed by

pre-defined rules from 2021 onwards. The proposal will be processed further by the new Commission and the Parliament.

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