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Electricity market impacts of low-carbon energy transition in the Nordic-Baltic region

Original scientific paper

Journal of Sustainable Development of Energy, Water and Environment Systems
ARTICLE IN PRESS (volume and issue assigned later), 1090407
DOI: http://dx.doi.org/10.13044/j.sdewes.d9.0407
Anahita Farsaei1,2 , Ville Olkkonen1,3, Xiaoming Kan4, Sanna Syri1,2
1 Aalto University, Espoo, Finland
2 Smart City Center of Excellence, TalTech, Estonia
3 Institute for Energy Technology (IFE),Kjeller, Norway
4 Chalmers University of Technology, Göteborg, Sweden

Abstract

The Baltic countries Estonia, Latvia and Lithuania are well connected to the Nordic countries Finland and Sweden on the electricity market, yet in a different position facing the transition to a low-carbon electricity system. While especially Sweden is a large electricity producer and net exporter, the Baltic countries suffer from a lack of capacity, which makes them highly dependent on trade. In addition, the present electricity mix of Estonia is very carbon intensive compared to the Nordic countries. There is a debate regarding nuclear power in Sweden. This paper explores four possible solutions for a Nordic-Baltic electricity system: with and without nuclear power in Sweden and with the current transmission network, as well as with a considerably expanded network. The impact on electricity mix, electricity prices, carbon dioxide intensity and import dependence in the Baltic countries from the EU transition to electricity systems with very low carbon dioxide emissions is investigated. The electricity and district heat market model Enerallt is used to quantify electricity prices, electricity trade and system costs. The results show that the development of the transmission network affects electricity prices and especially electricity trade in the Baltic countries. With transmission expansion, the demand weighted average prices in the Baltic countries increase from 62 €/MWh to 65 €/MWh and 70 €/MWh with and without nuclear power in Sweden, respectively. If transmission is expanded, phasing out nuclear power in Sweden can increase the revenue from electricity export by over 100% for the Baltic countries. However, significant new investment in wind power is required.

Keywords: Wind power; Electricity trade; Transmission; Power market model; Energy system model; Nuclear power; Energy policy

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