Energy Year 2011 ELECTRICITY

FINNISH ENERGY INDUSTRIES
Press release
19.1.2012
For publication 10 a.m.

Energy Year 2011 ELECTRICITY:
Mild end to the year and slowing industrial production turned electricity consumption negative by 3.8 per cent

Net electricity imports up 32 per cent
- wind power generation 64 per cent

Industrial power consumption down 2 per cent
- other consumption over 5 per cent

The year 2011 was divided in terms of electricity consumption. In the first half of the year consumption grew, as we had a real winter and the trends in industry still looked favourable. However, in the second half of the year consumption went clearly downhill, since the autumn temperatures broke records for mildness, and the wheels of industry began to stutter along with the euro crisis and other bleak economic outlooks. A drop of 17 per cent in power consumption was recorded in December. Across the whole of last year, consumption fell by 3.8 per cent, having grown in the previous year by almost eight per cent. Adjusted for temperature, however, electricity consumption was only down by 1.3 per cent, as is shown by the Energy Year 2011 details from Finnish Energy Industries.

Last year, Finland consumed 84.4 billion kilowatt hours (terawatt hours, TWh) of electricity.
Of this consumption, 16.4 per cent was covered by net imports and 83.6 per cent by Finland’s domestic production. Combined heat and power generation (CHP) covered 31 per cent of the consumption, nuclear power 26 per cent, hydropower almost 15 per cent, and coal and other condensing power more than 11 per cent. The share of wind power was 0.6 per cent.

Wind power generation (483 GWh) grew by 64 percent with new wind power plants. Construction of wind power production has thus moved forward a notch, but much in the way of dismantling administrative permit and planning obstacles is still needed if we are to get on track to our target (6 TWh by 2010). “We do hope that the work of the enquiry led by Rapporteur Lauri Tarasti will bring added impetus for development”, says Juha Naukkarinen, Managing Director of Finnish Energy Industries.

Dependence on imports on the rise again

Net electricity imports (13.9 TWh) grew by 32 per cent. The growth of net imports was accelerated last year by the rise in the capacity utilisation rates of Swedish nuclear power plants to a clearly higher level than in 2010, and above all the improvement in the water situation in Norway and Sweden, started in the spring. At the beginning of 2012, reservoirs in the Nordic countries were about 75 per cent full of water, while the longer-term average is about 67 per cent. The surplus corresponds to about 10 TWh in electricity.

In addition to the economical hydropower imported from Sweden and Norway, electricity was imported in the traditional way from Russia – in fact more than twice as much as from the west. However, the imports from Russia were no longer as steady as in previous years, as along with opening up its electricity markets, Russia is intent on getting as high a price as possible for its power.
“All in all, our dependence on imports was once more clearly on the increase last year, which acts as a reminder that we need domestic investments in power production and above all in emission-free production”, Naukkarinen points out, and also refers to the consumption peak record broken in the last winter season.

Finland’s all-time consumption peak record, 14,998 megawatts, was reached on 18 February 2011 at 9-10 a.m., when almost the whole domestic power generation capacity was utilised, with the exception of a few power plant breakdowns. The highest recorded peak output of the current winter season to date – 12,858 megawatts – was reached on Monday of this week on 16 January 2012 at 8-9 a.m.

Last few years’ industrial power consumption like a rollercoaster

The weakening of Finland’s economic situation towards the end of the year is shown by the reduced electricity requirement in industry; the drop last year was 2 per cent. Most of the drop was attributable to forest industry, where the power requirement fell by 4 per cent. The changes were very small in other energy-intensive industries.

A year before, the power requirement of all industries had grown by 11 per cent, but during the recession caused by the 2009 financial crisis, a drop of 16 per cent was recorded. The share of industry of the whole country’s power consumption was 48 per cent last year.

“In recent years, the development of industrial power consumption has been up and down. This is normal in economic fluctuations, but the structural change in forest industry has also affected overall industrial power consumption so that its share has not exceeded half of total consumption for several years.”

On the other hand, Naukkarinen believes that it is evident that power needs will increase in industries such as extraction, as new mines have opened in recent years in Finland, and more are planned.  

Although industrial power consumption fell considerably in the second half of 2011, a bigger drop was seen in households and agriculture, as well as services and construction. These sectors consumed 5.4 per cent less electricity than last year. The reason was above all else the mild end of the year, as the figure adjusted for temperature is only 1.2 per cent.

Carbon emissions from power generation reduced by a quarter

The emissions from power generation from coal, natural gas and peat were 13 million tonnes of carbon dioxide last year, 26 per cent less than the year before. The decrease is due to the marked growth of net electricity imports and the subsequent decline in separate power generation, as well as the decline of the district heat cogeneration requirement resulted from the clement weather.

Last year, electricity generated in Finland was 64 per cent greenhouse gas emissions-free. The share of renewable energy sources was 33 per cent of all power production.

Fair drop in market prices

In the early part of 2011, electricity market prices were still very high, with Finland’s area price on the Nord Pool Spot power exchange almost 7 c/kWh, but towards the end of the year the price fell by half, when the water situation continued to improve. As well as by the water situation, the price was pushed down by the lower prices of emission rights. The average market electricity price in Finland last year was 4.9 c/kWh, 13 per cent lower than the average for 2010.

At the end of the year, questions were raised in the media as to why the market price in Finland is not as low as in Norway, since we are in a common power market area. The reason for the price differentials was that the transmission links were not strong enough to even them out. However, progress in this respect took place when the Fenno Skan 2 link between Sweden and Finland was deployed by the power markets in December, increasing the transmission capacity between our countries by about 40 per cent. This had an immediate effect of evening out the price differences.

Due to the drop in market price, some energy companies announced reductions in their end-customer prices towards the year end. In the early part of 2012, this group has grown, as the upcoming market price development does not show a rising trend either. 

At the start of last year, marked increases in energy taxes came into force, one of them an increase in electricity tax. The electricity tax is paid in connection with the distribution fee, so the impression left from last year may have been that the distribution prices rose a great deal.
However, this was not the case, but the increases in distribution fees were moderate. And it pays to remember that the distribution charges help to fund construction of new networks, repairing the old network, and installation of new remote-readable meters. There are also the repairs following recent storm damage and the standard compensation payments for power cuts. 

Energy sector investments remained and will remain high

The energy industry has been the biggest investor of all industries in Finland for years. According to the investment survey published last week by the Confederation of Finnish Industries EK, the situation will remain unchanged. Whereas the level of investments by manufacturing industry will remain, at most, moderate in 2011 and 2012, the energy sector investments are, by contrast, at a high level. According to the survey, they total about 2 billion euros in both years, 2011 and 2012.

The sector’s investments were already substantial in the last decade. The Pöyry report cited 57 new cogeneration plants completed or still under construction in 2000-2009, which considerably increased the use of domestic fuels, peat and forest energy. Hydropower capacity was also much increased. New hydropower output of about 300 MW was obtained.

Over the next 15 years, estimated investments in power and district heating will reach about EUR 25–30 billion in total.

The vision of the future up to 2050, published by Finnish Energy Industries towards the end of 2009, estimates that electricity will replace fossil fuels in applications such as transport, heating and industrial processes. This will significantly reduce carbon emissions, improve energy efficiency, and at the same time increase electricity consumption. It is estimated that by 2030, 7,000-8,000 megawatts of new power generation capacity will be needed, rising by 2050 to 19,000-27,000 MW, in other words more than all our current production capacity. 

Open Energy Year 2011 - ELECTRICITY ppt slides

Additional information:
Juha Naukkarinen, Managing Director, Tel. 050 607 72
Jukka Leskelä, Director, Tel. 050 593 7233