Capacity adequacy in the Nordic electricity market

image of Capacity adequacy in the Nordic electricity market

An increasing share of intermittent renewable generation and reduced profitability of conventional power generation has led to a growing concern for capacity adequacy in the Nordic electricity market (Nord Pool market area). It does not make sense to assess capacity adequacy for each country separately in the Nord Pool market area as it is highly integrated in terms of both interconnector capacity and market integration. Capacity challenges are rarely isolated to one country or bidding zone. This report analyses what market solutions may be used to manage capacity adequacy in the Nord Pool market area, and how an efficient transition to adequate market solutions could be achieved. The main analysis reveals several measures that would strengthen price formation and cost recovery in the Nord Pool market area, although in general, the market is already highly liquid and well-functioning.



Summary and Conclusions

The electricity system in Europe is going through a profound transition both in terms of the composition of the generation capacity and in terms of increased integration. The transition is both technical and economical, as conventional thermal capacity is replaced by subsidized renewable generation, and as cross-border trade increases due to increased capacity and increased market and regulatory efficiency.


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