In this blog, we dive into the fundamental power balance numbers in the NP-North area, explaining the current surplus situation, grid flows between price zones and future outlooks for the summer.
Please note, we use the terminology "NP-North" to refer to the SE1, SE2, NO3 & NO4 price areas.
Power balance in the NP-North area
We’re currently seeing strong price differences across the Nordpool market as a result of strong export surplus from SE1 and SE2. This is also the case in NO3 and NO4 too, albeit at a lower level.
In order to explain why this is happening, we’ve displayed the following long term normal power balance for the NP-North area below (all numbers are displayed in TWh/year):
Looking back at the year-on-year figures, we see the following numbers for both net export and net powerflow towards FI (Finnish price area) and SE 3.
When comparing normals for 2021 against the actuals for 2020, notice that the hydropower production for 2020 was about 6 TWh higher than normal (54.2 - 6 = 48.2, close to the 2021 normal of 49.4).
Historical price-differences, windpower expansion and grid-flows
The price differences between the SE2 & SE3 price areas really began to diverge from January 2020 due to high wind and hydropower production levels. The chart below shows how wind power capacity has more than doubled from 4000MW up to 8500 MW since Q1-2019.
From that, we can conclude that the average price difference between SE3 & SE2 price areas since Q1-2020 has been about 6€/MWh. For 2021 the difference between NP System price and SE2 has remained around the same level on average, but we can also clearly observe strong variations as the wind power varies significantly from week to week.
For 2021 we have also made an overview of MW flows from the SE1 & SE2 price areas. Due to some imbalance problems in the SE3 grid, the border capacity between SE2 and SE3 has been somewhat reduced compared to 2020. Below, we have charted the grid-capacities from SE1 & SE2 towards SE3+FI (show in maximum MW) compared to the actual weekly average flow 2020, what we’ve seen so far this year and the expected weekly flow the rest of 2021.
From the chart we see that the maximum weekly average flow towards FI & SE3 is projected to increase from around 5500MW during July, up to 6500MW during Q4 - slightly higher than the 2020 levels when production from hydro power was very strong.
Estimated flows and hydropower production Q3 and Q4 2021
In the chart below we have included the long-term average weekly flow towards SE3 & FI as a power flow reference. We can see that the long-term average flow is significantly lower than the maximum weekly average, which means that (provided we see normal production conditions) most likely we will not see any price-differences between SE2 & SE3 during most of Q3. For Q4 however, it seems difficult to avoid price-differences and congestion on the border, even in a normal situation.
To go further into the data, we have forecasted the hydropower production in SE1 & SE2 for Q3/Q4 2021 in order to get a view on power flows for the rest of this year. Our projections assume normal consumption levels and normal wind levels, with hydropower production adjusted to today's actual situation, which is characterized by very high reservoir filling for SE1, while SE2 is currently normal.
Our estimates expect there to be about 300 MW more hydropower production than normal from SE1 during Q3 and Q4, while SE2 will be close to normal due to normal precipitation conditions. If we then add around 400MW of imports from NO3 & NO4, we estimate a modified power flow from SE1 &SE2 towards SE3 & FI as shown in the chart.
The curve shows that during Q3, we will likely see less of a price difference than we have observed so far this year, as the calculated net exports do not reach the border capacities, though this conclusion is based on a weekly view as opposed to an hourly view.
This means that the water values for the NP-North area are likely to come closer to the NP System price during Q3. Again, this conclusion is based on normalised precipitation and wind. Below, you can also see the estimated reservoir curves for SE1 & SE2 throughout the year.
To conclude, we can see that the NP-north region has become an established low-price zone as wind power capacity has grown in the area over time, but when you consider that hydropower production has been stronger than normal for 2020 and 2021, it’s clear to see why the surplus is occurring.
This analysis uses data from Energy Quantified's large time series database. If you would like to know more about the power balance calculations or our database, please get touch at contact@energyquantified.com
