The Nordics--renewables steam ahead

The Nordics are characterised as a region well ahead in the development of renewable energy. The region is in many aspects considered a forerunner, as a large part of the Nordic energy supply already comes from renewable energy sources. This is evidenced by Sweden's position as the EU leader in terms of renewable energy consumption, with more than 40 percent, while Norway has positioned itself as a world leader with more than 43 percent renewable energy consumption.

The Nordics are building on this leadership position by committing to achieve new and even more ambitious goals through the EU's new Renewable Energy Directive.

Policy

Based on the 2009 EU Directive on promoting the use of renewable energy (2009/28/EC), the Nordic governments recently established new national targets for renewable energy, the main points of which comprise:

• Sweden: Increasing the share of renewable energy to at least 50 percent of total energy consumption in 2020, and increasing the share of renewable energy within the transportation sector to at least 10 percent in 2020.

• Finland: Increasing the share of renewable energy to 38 percent by 2020 based on a change in the current subsidy and wider incentive mechanisms.

• Denmark: Increasing the share of renewable energy to 30 percent of the total energy consumption in 2020, and establishing a new international electricity transmission network between Germany, Denmark and Sweden--a project that has been granted EU subsidies of 1.1 billion Danish krone (0.15 billion euros).

As the only non-EU country, Norway has been negotiating renewable electricity standard targets with the EU. These targets are expected to be even higher due to Norway's current high renewable energy share. Recently, the Norwegian Government proposed financing 13.2TWh of new renewable energy before 2020. However, nothing has yet been finalised.

Overall, long-term innovation and development in renewable energy sources is a major political focus area. This is especially evident from the ambitious country-specific goals that significantly exceed EU's demand for increasing the share of renewable energy consumption to 20 percent before 2020.

In December 2010, Sweden and Norway agreed on a joint and innovative green electricity certificate system to become effective as of January 2012. The aim is to increase the generation of renewable electricity by 25TWh by 2020 compared with 2002, and for the total annual trade in electricity certificates to be in the order of 4.5 billion Swedish krona (0.5 billion euros).

The system is designed so that producers of renewable electricity will receive a certificate for each MWh of electricity they produce. In order to create a demand for certificates, electricity suppliers must buy a certain amount of certificates in relation to their electricity supply, i.e. the quota obligation. Producers receive additional revenues based on the sale of certificates, which improve financial returns for renewable electricity generation. Only Norway and Sweden currently use this electricity certificate system.

Onshore wind

Growth in the Nordic onshore wind market is expected to be driven by new projects in Sweden and Finland, and to some extent in Norway, where current hydropower resources are near their maximum capacity.

Sweden has just completed its largest annual expansion to date with approximately 603MW of onshore wind power. There are currently 220 onshore turbines under construction, with an estimated capacity of 500MW.

The political climate supports the onshore growth expectations, as Sweden's 2020 aim is to increase its annual production of wind energy to 30TWh (20TWh onshore and 10TWh offshore). Furthermore, in December 2010 the Finnish parliament accepted a new feed-in tariff law supporting wind energy. The tariff became effective in March 2011 after EU approval and forms part of the Finnish Government's 2020 goal of reaching 6TWh of wind energy a year.

Finally, the largest Nordic wind producer, Denmark, has a history as a pioneering onshore wind farm nation. However, a near saturation of the market and a weak overall economic environment mean the market is not expected to grow more than 5 percent in the coming few years.

Offshore wind

Offshore wind is seen as the real growth sector in Denmark, and as such, it is the leader in the Nordic region, with a current installed capacity of 665MW. The largest offshore wind farm is currently Horns Rev II, with an installed capacity of 209MW. In February, the Danish Government announced that the offshore wind farm at KriegersFlak will be the next wind farm to be made available for a public tender. This will be the biggest offshore wind farm in the Nordics, with a capacity of 600MW.

In mid-2010, DONG Energy was awarded the public tender to build and operate the 400MW Anholtoffshore wind farm, which will be finished in 2012.

In Sweden, offshore activity is picking up, and there are currently 60 offshore wind turbines in operation with an installed capacity of 130MW. Sweden's existing 110MW Lillgrund wind farm is one of the world's largest offshore wind producers, and a further 339 offshore wind projects are currently planned, with a total installed capacity of 1,685MW.

In Finland and Norway, there are offshore projects in the planning phase, but progress is slow, predominantly due to an insufficient tariff structure. Despite this, they do recognize the potential and Norway is developing several test sites at six different locations.

Biomass

In parts of the Nordic region, bioenergy plays an important role in achieving 2020 targets, and is therefore a current market focus. In Denmark, the largest increase in energy consumption (between 2009 and 2010) of all renewable energy sources came from bioenergy. Currently, bioenergy accounts for around 30 percent of total renewable electricity consumption in Denmark.

In Sweden, bioenergy production has increased significantly due to the introduction of the electricity certificate system. Today, close to 60 percent of the renewable energy in Sweden comes from bioenergy, with an expected supply of 125TWh in 2011. Bioenergy will contribute significantly to reaching the 2020 national targets for renewable energy, and the Government has implemented a number of measures, including tax reductions, investment support and sustainability plans to increase the attractiveness of biomass.

In Norway, bioenergy does not have the same focus in terms of reaching the long-term political goals, but the Government has previously stated that its goal is to double the bioenergy production before 2020. Today, bioenergy accounts for a smaller percentage (around 11 percent) of total renewable energy consumption.

Hydro

Hydropower as an energy source accounts for a large part of the combined use of renewable energy, especially in Norway and Sweden.

Sweden currently has an estimated installed capacity of 16.2GW, distributed between 1,800 plants, while the Norwegian power system is also dominated by hydropower, producing more than 120TWh a year. Both countries are only expecting to expand small-scale, run of river, hydro projects.

In Finland, hydropower accounts for a smaller proportion (3-4 percent) of the combined energy consumption and 12-15 percent of the total renewable energy consumption. There is still potential for expanding hydropower in Finland but, as most resources are already being used, the potential lies in the expansion of existing plants.

This article is from the "Renewable energy country attractiveness indices" (CAI) report, first published in May 2011, and reproduced with permission from Ernst & Young.

By: Ernst & Young