Nena News

Nordlink delay to widen Nordic surplus, hit prices

(Montel) A two-year delay in the 1,400 MW Nordlink cable from Norway to Germany will feed a growing power surplus in the Nordic region and put further pressure on wholesale prices, analysts and market sources told Montel on Tuesday.

“Every day the cable is delayed is a bad day for us in the power market. That is evident with the power surplus we already have and which will grow in the coming years,” said Ole Gabrielsen, senior vice president at Lyse, Norway’s sixth largest power producer.

TSOs Statnett and Tennet and German bank KFW announced on Tuesday their decision to invest in the EUR 1.5-2bn cable that is expected to start transmitting power in 2020, two years later than previously planned.

The Nordlink cable is largely meant to help balance the German and Nordic power systems at times of surplus available capacity from wind and solar in Germany or hydropower in the Nordics.

A current surplus of available hydropower capacity in the Nordic region has driven year-ahead prices down by 11% since November.

2019 to drop EUR 1.50
The 2019 forward power contract could fall as much as EUR 1.5/MWh on the back of the delay, said analysts at Oslo-based Nena.

“The effect of the delay is not dramatic, but Norway’s potential to export surplus hydropower will be lower and this will pressure prices,” said Sigbjørn Seland.

The contract last traded at EUR 29.20/MWh, up EUR 0.10 on the day, on the Nasdaq Commodities exchange.

In the southern Norway price area (NO2), spot prices could drop as much as EUR 2/MWh, with the Nordic system price potentially settling EUR 1/MWh lower due to the delay, said Markedskraft analyst Tor Reier Lilleholt.

“There will also be additional downside risk if we see above-average rain and snowfall as it will not be possible to export the excess hydropower production,” he added.

UK cable
Statkraft, Norway’s largest power producer, and regional utility Agder Energi welcomed the Nordlink investment decision, playing down the importance of the delay.

“Now we’re just waiting for news on the UK cable,” Agder CEO Tom Nysted said.

Statnett is planning a 1,400 MW link to the UK, called NSN, which is currently estimated to be online in 2020. This target is unchanged by the Nordlink delay, said spokesman Christer Gilje.

The TSO aims to make an investment decision on the NSN link, which is a joint venture with its UK counterpart National Grid, in the first quarter of this year. 

Reporting by:
Gert Ove Mollestad
15:06, Tuesday, 10 February 2015