Inside the Nordic Power Markets with Riku Merikoski (Senior Power Analyst @ Axpo Group)

Hello, and welcome to another episode of transmission. Today, we're joined by Riku Murakovsky from Expo, and we're going to be talking about the Nordic power markets.

So the first thing we covered was on storage in those markets. So is storage a good idea considering there was a lot of hydro within those regions?

The second thing we covered was on the move from a national market in twenty eleven to a zonal market for Sweden.

And how has that been perceived by consumers, but also are the price signals working? The third thing we covered was on interconnection. So is interconnection a good idea for a region, and is it lowering bills for consumers? And finally, how do you get bills down for consumers?

Should you be subsidizing summer houses? Let's jump in.

Hello, and welcome to another episode of Transmission. Today, we're joined by Riku. Riku, welcome.

Thank you.

And, Riku, I'm actually gonna come straight to you, to ask you a couple of questions. So who are you, and what is your role within energy markets in the Nordics?

Yes. So my name is Rico Merikoski. I'm working as a senior power analyst at Expo, and my main responsibility is the fundamental analysis of Nordic and UK power markets in the headquarters of Expo. Before expo, I have a long experience in the Nordic power market as I was to lead analyst at Finnish National Utility Fortum. And before that, even I worked for various utility and and market analysis companies in the Nordics.

Okay. And and just as a it's just a fun question. Where about are you from, Ricu?

I'm, close from Tampere, Finland. So worked, like, in in home country before joining export in Switzerland.

Okay. Superb. And and just to give people a brief introduction to the Nordic markets, how how would you describe the Nordics to people?

Well, the Nordic power market is one of the really first international power markets which existed in the world because we we are relatively small countries all. So we built them together already years ago. And they are also one of the cleanest power markets in all of the world, mainly because we traditionally have very good part of hydro in the electrostimics, more than half still today.

Then also, we have a quite significant, portion of, nuclear power in Finland and Sweden. And then lately, wind power has been growing in its part quite a lot. So trees, but, like, conventional thermal power, there is not much left of that in in the Nordics anymore.

Okay. No. Interesting. And and in terms of running a system like that, so without much kind of thermal capacity left, how how do the how does the Nordic market deal with kind of that circumstance that we kinda come across in the UK where you don't have very much wind or you don't have very much solar? Is that something that you're able to deal with because of the hydro capabilities that you have?

Yes. I would say so that, traditionally, the Nordic system has not had much problems with, let's say, generation adequacy because the hydro fleet is very flexible, especially in Norway and Sweden, which have large reservoirs up in up in the mountains. And those you can then produce at at request and when you really need it. So it's mainly Finland and Denmark are the countries which have needed some thermal capacity, but now with the improved, let's say, improved transmission capacity and also increased wind power, then we have, let's say, shut down quite a lot of that thermal fleet as well. And now lately, actually, also Finland has been sometimes quite tight and likewise, Denmark. And, actually, even in even inside Sweden, there are regions which have problems sometimes.

Okay. And we'll we'll we'll come into that in a second. So the the the region's comment kinda leads us towards where the next question's going. But but just before we go off that topic, so hydro, you know, there are various types of hydro that you can have on the system. Is what what what is the mix like between, say, run of river hydro, which is perhaps less controllable, and something like pumped hydro within within the the Nordics?

The Nordic mix is quite heavily, let's say, biased to the to the, very flexible hydro side because the Norwegian and also northern Swedish, mountain areas are relatively high and also get quite a lot of precipitation.

So there is naturally quite a lot of water coming in and also then in the springtime, the snow melt is quite significant.

So, actually, we don't have in in relation to the total capacity, there's not that much pumped storage because there is just no needed for it because you just keep the water from the spring flow, and that's where that's how you pump it by just waiting for the snow melt.

In we have here some reservoirs which are, let's say, multi annual reservoirs, so they can hold water more than a year worth of inflow, which then makes you quite flexible in the short term.

Okay. And perhaps comparing just the size of that hydro the last question on the hydro. So the size of that hydro to the size of the demand in the country to give people a feel for kind of how big that fleet is.

In the Nordic market, that's more than half of all the power production comes from hydro.

Something fifty five, sixty percent depending a bit on the year end how how high the demand is. So, like, very significant part.

Great. Okay. That's I think it's really useful context. And and and you mentioned this in one of your earlier questions. You mentioned, pricing for regions, and this is because the Nordics operate a zonal system for their pricing. So how would you describe what zonal pricing is to listeners?

I would say that the origins of Nordic zonal pricing is lies in the Norwegian experience mainly where the, let's say, geography is quite challenging. Norway is a long but narrow country with quite challenging geography. So it it they practically realized quite early already that it's very challenging to build a good national grid. So they they practically I did decided to that it's less costly to just accept that they have different grids in the different parts of the country.

So then later, they built them together so that they have they are connected, but they are still so weakly connected that one cannot call Norway copper plate. So it's still it's and also because the hydropower dependency, it's very possible that it rains very differently northern Norway than in southern Norway. So it might be that the hydro situation is very different in each part of the country, and then you can't run the market with the same market signals if others have, reservoirs empty and others have it full.

Mhmm. And when you mentioned copper plate, what does that mean?

Yeah. To copper plate means that very often, the market is based on a either a national zonal idea where you treat one area in the grid as as if there was no transmission restrictions inside that area. And that's actually how the principle runs in quite many markets. That inside the country, you don't make a locational difference in the power exchange.

Okay. And so that's so that covers Norway. Does the same principle to zone or pricing apply across other regions?

Yes. In Denmark, there are two areas, and that's also partially due to geography because the one part of Denmark is trade, is connected by land to Germany. So it was always part of the central European grid. And then actually the other part around the area of the capital Copenhagen that was already from quite far past that was connected to the Swedish grid.

So the actual Nordic grid. So they had this division by by nature, I could say, or it was just easier to be that way. However, Sweden is there an exception because their market was transitioned from a national to zonal market back in two thousand eleven. And that's actually one of the only markets where we have seen this division in Europe during the open market time.

Okay. Okay. So we will definitely come back to that because I think for for listeners within the UK, this is a very sort of hot topic, the difference between national markets and zonal markets. And so that'll be really interesting to kinda talk through and see what the pros and cons are of the approach.

But this is first and foremost a, podcast about battery storage, and so let's go to battery storage first. And so my real question is that with with so much sort of hydro on the system, does it make does it make sense to build battery storage in in the Nordics?

I think for maybe ten years ago, many people, said that it would take a very, very long time until batteries could compete.

However, I would say that in the latest years, also here, the attitude has changed.

There is still challenges to batteries in that way that wherever you have the flexible hydro, it's quite competitive in providing, for example, let's say, much power at at night or at in the late evening or early morning.

But and also it has been very good in, delivering ancillary services.

However, recently as it has been found that actually batteries might be especially in this fast ancillary services, those, like, which require very fast response.

Batteries can actually do it possibly even cheaper and also with less wear and tear. Because if you run very aggressively your hydro plan, like, up and down, it might over time, let's say, increase the maintenance costs. And batteries may be actually better in that respect, and their batteries have already taken some market share also in the Nordics, which was for a long time thought to be very hard market to penetrate into.

Okay. So I think I was I would have guessed that the ancillary service portion, batteries would be quite good at because of the speed of response, and so there's a natural kind of tendency for them to do that. But you're saying that actually beyond the ancillary services, the cost of storage is getting to a point where in some cases, it can compete with pumped hydro where it is essentially saving pumped hydro from sort of certain cycles of moving water. Is that is that right?

Yes. I would say so. And, clearly, I I think we are seeing already now that especially on the now like, when we first started with that kind of development where the batteries were pro providing quite a lot of the capacity where you do second or, like, minute type of responses, I think we are every year, we are getting closer to that period where batteries also take some part from the, say, fifteen minute variation, then maybe hourly variation. And that's kind of I see the progress from the, let's say, fast products to even slower products.

Yes. Yeah.

So, I mean, just if if you if your batteries are competitive over a ten minute period in the in the first year, if by the time they make it to the second year and their cost is, let's say, halved, then you'd expect the kind of duration for them to be competitive over would be would would be longer.

Exactly.

So yeah.

Interesting. Okay. And and now let's maybe try and tie in a little bit of this to the the the the zone of discussion.

So if I'm a battery looking to connect in, say, Sweden or Norway, are there particular regions that are more appealing than others?

Definitely. Because if you are in an area where there is a lot of this, like, a huge overload of flexible hydro already, like this this the case, especially in Northern Scandinavia, there the normally, the variation, for example, in intraday markets and balancing markets is much smaller than in the south.

Because the south has quite a lot of consumption, and in relation to that, not as much production.

So what we are seeing is more investment in batteries in the consumption rich areas because those are the areas where you might have problems with, let's say, ac adequacy in in cold winter moments or very calm sudden days or whatever you you can think of. So in a way, it's clearly that the batteries are coming to where where the hydro overload is not so big.

Okay. So so the kind of the the theory there is that you have lots of hydro in the north of Sweden, just to take Sweden as an example. And then you've got lots of demand around Stockholm, which is in the south of Sweden. And because there isn't enough transmission capacity between the two, then if you're a battery, it might make sense to be located down towards the demand. And so when the the transmission line is congested and there are two different prices between the regions, it sort of makes sense from a business case perspective to be down closer to demand.

Yes. At least this far, that has been most of the idea that in a way, it would, let's say, alleviate the problems in in those consumption rich areas where the market situation and also actually the grid situation might sometimes be quite tight. Because Sweden is a country which is very reliant on getting quite a lot of power from the like, transmitted from the north to the south. So if there is any, for example, maintenance work on those lines, then then those intracountry price spreads might go quite significant.

Okay. And and and in terms of adding storage to a system like this, does it does it kinda help to better plan transmission capacities by knowing that you could add storage to particular zones?

Or, like, has that has that not sort of proven to be an outcome?

I do think that it helps because it at least gives you some idea. I mean, there is some very clear and very open locational signal where you could count a bit on that which kind of revenues you could have access to. So, and in a way, what I have described so far is mostly the development we have seen thus far. But also in the future when we grow with wind power quite a lot in some areas, it might also start to make sense to build batteries close to wind plants to store power from those moments when you have an overload of wind because that's also something which is becoming more common in the Nordics as well that some areas of the grid have way too much wind power at times.

And this is almost starting to say that there are kind of different types of days. So you might get a day where you got a huge wind overproduction, and that creates zero pound or negative pound prices. And that's a great great thing for storage to to support on and to to kinda to make sure that that access is captured to to whatever degree is commercially possible. And then you're also saying there are other types of days where there might be very high demand, but you just can't you haven't got enough transmission capacity between the north and the south to meet that demand. And so, therefore, you might want to have storage assets, in the south as well.

Exactly. So in a way, both kind of events do happen, but let's say, thus far, these high demand moments have been maybe more the driver for a battery investment side. Although, in a way, I would say that the ancillary services have, of course, been the easy first step, but that's what you already know from Britain anyway.

I was I was yeah. We we we do. I was gonna ask the question. On the ancillary service side, is that is is that all procured nationally, or is that procured by by zone?

That's procured nationally as far as I know, but different TSOs might have quotas on how much they need to procure on different areas. So I I it's hard to say a bit like on generally, but there might it's not optimal to have all those resources in one location.

So they probably want to avoid that anyway.

Yes. Yeah. And we see the same thing in the UK. Right? So when you're trying to provide, like, a stability service or a short circuit level, then there's a kind of a need to be in a particular part of the the the grid.

So we definitely see some being procured nationally and some procured, by by region as well. So so Sweden and for the your your sort of history lesson on this, it was a twenty eleven? Yes. Twenty eleven.

Process going.

Swedish price division. Yes.

Okay. So we're we're now quite a long way down that process, more or less fifteen years. Has it been considered a popular move?

I would say, generally, no. If one asks the, let's say, especially the beep the people in southern Sweden.

In the beginning, the change was actually relatively small because at that time, the price differences were so small between areas that mostly people didn't take much notice.

But especially with the there has been some, new cables built from southern Norway and southern Sweden to Central Europe.

And then also, we have shut down quite much of the thermal capacity, which also was located in the south. So practically, the, local power balance in southern parts of Sweden, especially, has has become quite much weaker than it was for ten or twenty years ago. And that has now caused quite often moments when southern Sweden can have quite tight power balance, high prices simultaneously as there is low prices in the north. And that has created quite a lot of criticism in Sweden and also in Norway.

Okay. That that's that's really interesting. And and perhaps part of the the the reason to have this prices by region is to give people an incentive to do something different. So you mentioned transmission capacity.

So have people seen the kind of the the price difference between, say, South Sweden and North Sweden and said, oh, that's a that highlights that it there is a lot of congestion there and that there's a good reason to build transmission capacity between these two regions.

Yes. That signal has worked very well because very, very obviously, now politicians and everyone else understands much better due to this open price signal that we need to build much more grids from the north to the south, and that is what is happening. Practically, all the Nordic TSOs have quite extensive grid building, grid investment pro programs. And I'm not sure if we would have gotten here if the signal wasn't out there in the open.

Yes. Yeah. I mean, to draw parallels with the with the UK, I think we we definitely have the ambition to put these transmission lines in place, but we're perhaps behind where we should be. And so we're seeing very large constraints in the in the GB market today.

And and perhaps just to ask another question about about Sweden. So so, yeah, another part that gets talked about quite often in a move from, say, national market to a zonal is this concept that demand might move. So, you might have demand that wants to be in a different location. So have you seen demand looking to take advantage of those low power prices?

Let's start from the existing demand side. We really haven't seen much of the existing demand relocating. That's clearly not very easy to do. Your factory is where this and it's quite challenging to rebuild. I mean, the cost of moving a whole factory somewhere else is clearly not worth it. We haven't seen that happening.

However, when we talk of the new consumption, we have had some industries and some investments clearly locating somewhere where the power price is lower. We have two very concrete examples of this. There is a big Facebook data center in very northern Sweden, which probably was clearly, let's say, attracted by the low power prices there. And then we also have this battery factory Northvolt, which part of where the investment reasons and locations for their location was the low power price in the north.

And that those are probably two really interesting examples. Right? So on one hand, you have a data center which is not unmanned, but but has not got a huge need for the number of qualified staff in comparison to its energy consumption. And you have a a site like North Fault, which requires many, many very skilled workers to be taking sort of part in taking part in that manufacturing.

And so do you see kind of a a lesson in there around the types of demand that might respond to this pricing?

Well, at least in Northern Sweden, there has been challenges on attracting enough people to work in a large factory there. And we see this pretty much in quite many other places as well because it's not only thing that, what the companies are looking for is low power prices, but it's also let's say, it might be, for example, access to if it's a data center, might be access to key data cables or access to capable staff and enough staff and all that. So in a way, clearly, power price is not the only thing what companies are looking for. So it's it's not as easy as one might imagine it's on the drawing table.

Okay. So for so, yeah, for some businesses where power price is a bigger chunk of the overall cost, very attractive. But for others where it's a smaller portion and there's, as you say, this kind of skilled workforce that needs to come alongside, then the kind of lure of those low prices won't be so effective to to bring industry up to those regions.

Yes. It remains to be seen how we are, for example, with hydrogen that can we locate the hydrogen industry in those, let's say, power rich areas with lot not so many people, or do we actually have to locate it close to the existing industries due to the, let's say, easier transmission of the hydrogen.

And and and perhaps the like, it would be helpful to put a number on this. So top of Sweden is is SE one. Is that right?

SE one is north of north Sweden, and SE two is also still very north of Sweden in in the terms of power market. SE one and SE two are the north areas where where it's low prices normally.

And then Stockholm is in SE four. Is that right?

No. Stockholm is in SE three. So that's still like middle Sweden because then we have one further area in the south, SE four, which is where Malmo is located. But, note also that Sweden is a very long country about two thousand kilometers from north to south.

I think the where I'd like to go to this is just to just to give listeners a bit of context in terms of what the price difference looks like between, say, s e one and s e four.

How how big is that difference? Is is it a sort of are we talking a a couple of pounds per megawatt hour, or is it sort of or is it bigger than that?

Well, now on annual level, if we look, to the future, we would say that the difference is around, well, twenty euros per megawatt hour, between the northern areas and the southern areas.

But in the, let's say, extremes of single days and also during the energy crisis, it has been also much much more. And those were the most critical moments which were maybe, let's say, most criticized because we have had days with more than hundred euro difference between the areas.

Okay. And and and really my that's my kind of final question around the the zone versus national. So if I was to say, Rika, you have the power to kinda choose which way you go. So to either kind of to have Sweden as a as a national power market and or to have Sweden as a as a zonal market. Given everything you know, now fifteen years beyond that decision being being made, which which way would you have gone back in twenty eleven and and and and and why?

Well, in some ways, this is an impossible question because Sweden didn't really have a a choice here because the European Commission said that the earlier behavior where they practically moved the internal bottlenecks to the national borders was pretty much illegal and against the EU rules. So it was more like force upon Sweden, this price division.

But when I when I look at it now, in in the beginning, it felt for maybe many that it was maybe not so influential. But now when I see how how clearly it has drawn light to this, let's say, big, like, lack of infrastructure, I think it has been a very good thing now to show that that in a way now now we know that this is crucially needed, this more transmission capacity. I think it has been very positive. And, also, if we would have built all that wind power, which we have done in in northern Sweden and not have any locational signal like that, the situation would have been much, much worse still. Because then we would still play a game where we pretend as if there is no internal grid bottleneck as white while the grid bottlenecks have just become worse in the last ten years. So I think had to be it has been really useful.

However, the main, let's say, main problem I see is that it has, were weakened at the financial markets in in Sweden. It's harder to hedge, both in the short and long term, and that might make some investments harder. And I think that's also one thing to think about in in GB as as the investments like, many might see the investments more risky after a zonal introduction, and this needs to be, let's say, covered somehow, especially if one wants to have a very, very high renewable target as is in GB.

Yeah. And and and how does Sweden deal with that today? So let's say you're based in SE one, so at the north of the country. How do you hedge your output?

So in the in the Nordic market, there is this kind of Nordic system price, which is used as the financial market reference. So there is, let's say, it's totally artificial price, but that's used used as a main final as a reference for Nordic markets. And then on top of it, you buy buy, let's say, locational product, which is then in relation to that system price. So, practically, you have two products to buy from the financial market instead of just one.

So but the problem is that the liquidity in the Nordic mark power market is not that good. So that has made it quite challenging to hedge, especially in the north where there is not a lot of natural buyers of those products.

Great. So, I think I think loads of lessons in there, and it's just super fascinating. The the the debate about national and zonal NGB has been running now for what seems like, a very long time. But it is fascinating to get the take of someone who is active within a market that was national and is now zonal alongside other zonal markets, which have always been zonal.

And just to hear kind of what are the challenges, but also what are some of the benefits and and, you know, kind of the things like the emergence of, like, strong price signals being a kind of really clear driver for investment being yeah. It's just a a a fascinating insight for us in GB. So thank you for running us through that and, those questions. So to move on from Sweden, because it feels like for an episode on the Nordics, we have spent a lot of time talking about Sweden.

I I'd like to go to some some recent news that we've had around Norway. So there's been a lot of press recently on an announcement around interconnection renewal with Denmark, so between Norway and Denmark.

What what has been going on?

So there we have a situation where we have during the last ten years, we have added quite much transmission capacity from South Norway to to Central Europe and also one cable to Great Britain.

And this has increased the price differences inside Norway.

Despite Norway is actually making quite much money with electricity exports and also, these cables have been, like, fabulous investments, like, really paying themselves off for really, like, reasonable time frame.

But there's quite a lot of criticism in in inside Norway, especially during the energy crisis when southern Norwegian prices were often coupled with even Germany, which was then pretty high price.

So then some Norwegian politicians are now using this as a reason to start actually reducing the transmission capacity to Central Europe in order to, let's say, hopefully lower prices for Norwegian consumers.

I would say that this is a very short sighted policy in that way because Norway has been one of the worst countries in Europe in building new renewables in latest years, and its hydropower is actually benefiting quite a lot of of this great opportunity to export at good prices.

So but this is so much from the consumer centric perspective that the as if the power market was only made to serve con consumers, but, well, no one would sell power to a market which is only for consumers.

Yeah. I suppose it it is it is true, right, that that power markets are for consumers at the at the end of the day.

But are you making a kind of a a broader point that you says that you're saying so effectively even though you can see the sort of the wholesale power prices are going up, There are revenues that are being generated by those interconnection cables that then feeds back into Norway. Is that is is that how you'd see it?

That is true. But because the as as I said, the cables are creating quite a lot of income to the NorwegianTSO, stat net, and that income, so called bottleneck income, is used then yes. It's also partially used for grid investments, which is supposed to be done. But also in addition to that, it's used to lower grid costs for the consumers.

So if you would cut the capacity in those cables, then you would also lose some of that bottleneck income. So cutting those cables would actually increase than your grid costs because you would have less income from that source.

And why we are specifically talking about this Danish cables here is that, there are some quite old cables between Norway and Denmark, which are up for a renewable in the next years.

And now they need a reinvestment decision.

And practically, normally, you are not allowed to cut capacity, but you are, of course, allowed to it's at least not illegal to not reinvest, which is the case now. So this this is the discussion about this reinvestment of some of the cables between Norway and Denmark, which is political in Norway.

And and maybe just to wrap up on this. So so what like, how do you think that will it's because it feels like the the EU and Norway are on a kind of a march to much more interconnection across all regions. It feels like the projections for interconnection in nearly every single market are maybe not doubling, but certainly going up by something like fifty percent over the next five to ten years.

How do you see this ending? Do you see those cables perhaps not getting that reinvestment, or do you think that this kind of perhaps sense will kind of prevail and and and it will be built or at least, sorry, renewed?

I would believe that eventually, there will be the capacity will be.

They will try quite a lot of things to keep the capacity at least to a present level.

Maybe if you just stop the reinvestment, you might just somehow keep on running the existing stuff for a bit longer, and then you buy yourself time to reinvest in something. But I do think that this is maybe some kind of a turning point maybe in this whole discussion of transmission infrastructure because I see in many countries that the attitudes are getting less positive to this international transmission, although it has been a great success for Europe in general. But people are not maybe realizing the benefits we are already now getting from it.

And that's that's something which is quite hard to communicate because people don't It's not so easy to calculate what happens with a new interconnector.

Yeah. It feels like someone needs to kind of draw up a piece of paper that says, by the way, you paid ten pounds more for this interconnection through through wholesale power prices, but you received fifteen pounds back, through lower grid costs. And therefore, you're five pounds richer. And me being based in the UK, I've just used pounds, and I should definitely have not used pads.

But you I I understand the the point.

Yeah. Yes. I understand the point. But the problem is, of course, that it's not that simple in a way. Very likely, not every consumer wins.

Like, every single consumer cannot win when you make make investments.

The but the idea should be that on a rich people are better and also on a rich we get closer to the energy transition goals. Because in what we should really remember here is that the Nordic very flexible hydropower is a great tool in also reducing the emissions in Central Europe if we just can transmit it. And also if we look a bit forward, in, let's say, five years, I'm quite certain that, for example, Britain will have so much wind power that there's quite a lot of need for you to get rid of all of it. And then we will actually get also, the Nordics will get something back.

So it's also partially this that some people in the Nordics are not seeing a bit into the future. Why? Because the very recent past has been so strong on export from the Nordics. But in the not so distant future, I I think we will also get some quite relatively often imports from both Central Europe and also GB.

I have to I have to agree. So, I mean, just to kinda say from the GB side, like, it's very possible that we might have a power price of, say, one pound or or sort of two pounds. GB consumers will pay a subsidy to top up that wind generation, so it receives a a price that is suitable for its investment. But then we could export that at one or two pounds to Norway, and that is absolutely a very low cost generator for Norway to be able to import, which piggybacks on some of the investment and subsidy cost that's borne by UK consumers. So Exactly. It's actually it's it's a real challenge for our system to how we think about that. But, yeah, as you say for Norway, it's a great opportunity.

Yes. And the same will definitely happen with solar power as well because Central Europe is building very aggressively solar power, and we will have more and more moments when practically subsidized solar power from the south flows north. And we don't have to subsidize our own solar that like, we don't have to build so much subsidized stuff in the Nordics if we get part of it's paid by someone else.

Understood. Okay. I'm gonna come on to one more topic before going on to the final two questions. And this one, I can't even believe I'm having to read it out. So what is low cost bills to summer houses? What does what does all of that mean?

So in Norwegian, there was a government crisis in Norway recently. And then, let's say, then the new minority one party government came out with the promise of saying that we will provide, cheap fixed price power for for all households and also all summer houses of people, which is a very this is one of the largest state interventions in the energy market we have seen in the western world for quite some time, I would say.

And what and and just and just for people listening, like, it may seem second nature to you, but what is, like, what is this what is a summerhouse?

In the Nordics where there is not so many people and quite a lot of empty space, so it's quite common for people to have second homes or something like that on the either on the mountains or by lakes, somewhere in the nature normally where you can go especially in the summer and spend your time in the countryside in or peace.

Okay. And and the policy is that those houses would get, like, lower cost energy.

Is is is there more to open now?

Yes. So that that's the policy that, the Norwegian government is planning to subsidize the consumption of households and the summer houses so that they can heat up them nicely.

It feels a bit strange policy, but that's how it is.

Does it create a problem? Does it create a problem in terms of, like, lots of lots of houses, like, running their heating for much longer than they should?

Yes. Very likely because it this proposed price is politically set, so it can practically then be eventually whatever how low like and also Norwegian government doesn't have much of problem of spending money because it has loads of it.

So they can practically push the price as low as they want.

But the problem is, of course, that if you give something at a heavily subsidized price, then even should people start consuming quite much more. For example, they don't turn heating off because they stayed based for it anyway.

However, they will now they actually just recently published some details on this, and they will probably limit the volumes on this that you can't use more than x amount of power per month, which, of course, is a sensible addition because, otherwise, you would practically hit palaces with electricity.

Exactly. Okay.

And this this there's actually a really good point within this, which is that in in as part of the energy transition, people will want to feel like their bills are lower, and it's really critical if you've got large wind farms or lots of solar or lots of interconnection that people feel like their bills are lower.

And I think there are lots of policy intervention choices that you can make, but I think lower cost bills for second homes feels feels a little bit like it might create unintended consequences. So, yeah, fascinating to hear.

Yes. And and definitely for, let's say, ninety five percent of the world population, let's say, giving a subsidy for hitting your second hole feels a bit extraordinary, I would say.

Yes. Yeah. I think so too. I think so too. Okay. Right. So we're just gonna move on to the final two questions.

So the first one is, is there anything that you'd like to plug?

Yes. I'm actually coming from Finland. I could plug one interesting thing which I see in Finland. We have quite as we haven't also spoken that much about Finland yet. So Finland is a country with quite a lot of district heating networks.

And we have a problem now recently when we have, reduced quite a lot of the gas and coal use, which we used to have in district heating networks. But now we are using high amounts of biomass.

And we actually that's a bit when one looks at the biodiversity side, that's becoming a problem. We are cutting the forests down too much.

And there is an Finnish nuclear power startup called Steady Energy, which plans to build heat only nuclear reactors. And they have recently come up with quite significant investments from outside as well.

I'm I would say that I'm not certain that this this will work eventually.

However, I think it's a great idea because nuclear power industry has had quite a lot of problems with this very complex designs, very large projects. While now someone is trying to build something on nuclear, which would have very simple design and very, let's say, easy setup with probably much lower construction time risks and all that. So I wish them all the best, I would say.

Yes. And good to get Finland in. I think we I think we we have skipped over Finland too much. And and certainly that question on nuclear is is like one of the really big ones, which is the the SMRs. So the the the small modular reactors, how much kind of cost can they keep out of the nuclear process whilst keeping the safety standards high. And that really does define quite a lot of what the future system looks like.

Because if someone does come along there and deliver something that really works, it does change things quite a lot, particularly during winter period for for for Europe.

Especially and in a way here, I think we are very easy to say that, yeah, in somewhere in the very south, it's very easy to do everything with solar and batteries. But in the Nordics, we will have a very long winter for quite some time, and then it doesn't feel very comfortable to rely very strongly on solar in in the summer in the wintertime.

Yeah. Yeah. I'm actually you must get some really interesting dynamics in in sort of when you get to close to twenty four hours of of sunlight though because your solar profile will be will be crazy. You will have a full day of solar generation.

Yeah. Although the, let's say, nighttime solar production is quite weak because normally the angle is very nonadvertent, like, not good for you, I would say, unless you have some very special tracker which also follows the angle. But, as far as I see, I don't think midnight sun will be will be a major producer anytime soon.

Okay. Okay. If someone wants to send in, a a a generation profile of, solar in the Nordics showing that twenty four seven, solar production is possible, from the midnight sun, then please do. I would love to see it.

Yeah. It would be interesting. True.

It it it definitely would. It definitely would. Okay. So coming on to the final question. So, Rigu, is there a contrarian view that you hold which the majority of the market doesn't agree with?

Yeah. I have been thinking of such a question that I think Europe has now lost two large fossil fuel providers in a row.

First, we lost Russia because Russia started blackmailing Europe with the gas supplies, and then, of course, we also wanted to get rid of that those deliveries. But now we are actually also in the process of losing the US as a reliable provider of fossil fuels Because, the current administration of US is clearly showing us that it's not willing to hold old contracts, and it's very much, willing to use threats, also including energy related threats to get to its goals, whatever they are.

And, therefore, my conclusion from this situation is actually that Europe is doing a geostrategic mistake by cutting its own oil and gas production.

Because in this situation where all the providers or many of the providers are not so friendly anymore, we should actually be increasing our own oil and gas production instead of cutting it.

This shouldn't mean that we should end up our end our energy transition policies because those are still helping Europe a lot. But to try to start stop our own production before stopping imports of fossil fuels is not a very safe policy in this situation. And I think that's something which we haven't really we are not awake with this yet, I would say.

Yes. Okay. So there there is a if you go back fifteen years, there was a kind of a overall trend for globalization where any sort of supplier anywhere in the world could be matched with any demand anywhere in the world, and that was kind of how things were going to work. And now you're saying that, actually, some of the largest suppliers are no longer as reliable as as kind of as we as we want thought for various reason.

And so we'll still continue with the decarbonization trend, but there is a sort of there is a security element that will be looked at for homegrown extraction of oil and gas for the energy system of Europe as well as Norway, UK, etcetera.

Yeah. I would really so see it that way that well, as I think everyone agrees now that the Norwegian production has been crucially important for Europe as a whole, like, in this latest couple of years. But, also, anywhere else, we can can develop some production. It's still worthwhile because it's not feasible that we would be totally out of oil and gas in the next ten, fifteen years. That's we cannot be that fast that we know already.

Mhmm. Mhmm. Okay. But it's it's certainly a concern of you, and and and it's it's also kind of a sober note. And what I think has been a really interesting episode just to cover all of all of those regions, all of the dynamics within those regions, and also give the UK that kind of glimpse into the future of what might be with our sort of pricing structures. And also, above all else, to to get a view on on how battery storage can be impactful in the Nordic.

So, Ricky, a massive thank you for coming on and for all of our listeners. And, yeah, if you have any extra comments around, what myself and Ricky have run through today, please do, let us know in the comments below.