Analysts question impact of electric cars on Nordic power

05 September 2016 13:29 Source:ICIS

Nordic power consumption is expected to grow due to the electrification of the transport sector and the phase-out of fossil-fuelled vehicles, but analysts are mixed over how disruptive the impact will be on Nordic wholesale power prices.

Norwegian state utility Statkraft expects momentum to build behind electric cars in the mid-2020’s, based on predictions that battery costs are set to fall. The country already boasts the world’s largest share of electric cars in its total at 22%.

If fossil-fuelled vehicles are replaced by electric ones, this could increase annual Norwegian power consumption by 9TWh, figures from the utility showed. This would be an additional 7% on top of last year’s consumption of 129TWh – a significant increase.

A combination of rapidly falling technology costs and active climate policies could accelerate the transition from fossil-fuelled cars to electric cars earlier than previously expected, Statkraft concluded in a low-carbon scenario towards 2035 that was published recently.

“If you take into account that similar measures to move away from fossil-fuelled cars could take place in Sweden and Denmark, we could reach up to 25-30TWh [of additional demand] for the Nordic region.

“This will reduce the Nordic oversupply of electricity and lift power prices,” said senior analyst Olav Botnen at Norwegian energy analysis firm Markedskraft.

As a result, the Nordics’ net exports to the rest of Europe could shrink towards zero, unless the region tried to offset the increase in consumption by investing heavily in renewable production, he added.

Estimated Nordic consumption is expected to be just above 400TWh a year in 2025 including the impact of cars, up from 378TWh in 2015, figures from the Nordic transmission system operators showed. This however includes a less bullish assumption over demand from electric vehicles than the top end of the Markedskraft projection.

No game changer

However Michel Martin, long-term Nordic power analyst at consultancy Poyry, doubted electric cars would bring up Nordic power prices significantly. In fact, he even foresaw a growing power supply surplus:

“Electric vehicles do not represent a major shift for the electricity industry for the simple reason that there is not enough people in the Nordic region,” he said.

“We expect the energy surplus to increase in the region due the development of renewable energy.”

Martin added that increasing demand from electric cars could also be offset by factors such as energy efficiency.

“There is much uncertainty about demand. Energy efficiency has the potential to cut demand, so you need reasonable growth to reduce the energy surplus. It would take large disruptions for the Nordics to become a region with a deficit of supply, such as the early decommissioning of a large share of Sweden’s nuclear plants,” he said.

Without this, we could expect the energy surplus to stay positive for the next two decades, he added.

Technology such as smart meters, which will have matured further going into the next decade, could also help car owners charge their electric cars during off-peak hours and not at the point when the charger is plugged into the car.

In 2015, electric cars held a large 22% market share in Norway, according to the Norwegian Electric Vehicle Association, driven by a generous government support scheme including tax breaks. This is comfortably the highest share of any country in the world. Next comes the Netherlands with around 10%.

In a report published in 2015, Norwegian energy regulator NVE estimated annual consumption of 12TWh if cars and trucks were electrified in 2030, a figure that would enable the country to achieve the EU’s renewable targets by 2030. But the regulator added that 2050 was a more realistic scenario to reach full electrification.

By Herman Moestue