Climate change, geopolitical issues, the global economic crisis and rising oil prices all have an impact on the Nordic politicians’ proceedings at the national, Nordic and European level. Analys Norden takes a look at the energy issues in the Nordic region.

The Nordic countries successfully opened their electricity markets to each other in the mid-1990s. The Nordic move became a model for regional co-operation in the European Union.

Despite this harmonisation, the state and the future plans of the energy markets in the Nordic countries are very diverse.

Nordic approaches

In Denmark, the country’s no-nuclear power plant policy, and its diminishing oil and gas reserves, are seen as a golden opportunity to boost its renewable energy sources. Green energy seems to be the only alternative for Danish energy needs and there is wide political agreement on such a move.

Copenhagen has for years focused on wind power, biomass energy and on improving energy efficiency to stem the country’s growing energy demand.

Denmark has also set its sights on “breaking the green code” and to be a global leader in renewable energy. Such a goal is seen to be perfectly feasible and lucrative, but costly to obtain. And that is a problem when the world economic crisis has been a setback also for the Danish economy.

For Iceland – rich in natural resources of energy – the 2008 economic crash has dramatically changed the way Iceland wants to exploit its energy reserves. Experts argue that greed, impatience and short-sightedness dominated decisions on the country’s energy planning before 2008.

Now, a recent report, commissioned by the country’s Department of Industry, argues that a new energy policy for Iceland should prioritise profitability, sustainability and national gain. Energy is seen as the key to Iceland’s welfare.

The Atlantic island’s natural energy reserves include hydro and geothermal power. However, a large amount of the energy produced is sold cheaply to heavy industry – mainly aluminium plants – much to the discontent of the Icelandic population who are still struggling to recover economically after 2008. Even aluminium plants in Africa pay more for the energy they use, than the plants on Iceland.

Similar discontent among the Icelandic people recently pushed the Icelandic government to expropriate a power plant from a Canadian company. In the immediate aftermath of the economic crash, the rights to exploit the geothermal reserves on a peninsula in south-western Iceland for the next 65 years were sold at a giveaway price to the Canadian company.

One-sixth of the nation – led by the singer/songwriter Björk – called on Reykjavík to take back the rights for the economic benefit of the nation as a whole.

Norway, despite being rich in oil and gas, feeds much of its electricity demands with hydropower. One of the main energy discussions at the moment, however, is still whether or not to give the go-ahead for new oil and gas exploitation at sea in northern Norway.

The area is an important spawning ground for cod and therefore crucial for Norway’s large fishing industry. So far, the current three-party government coalition has been unable to find a balance between two of the country’s main industries – fishing and petroleum.

Finland and Sweden, on the other hand, are looking at building new nuclear power plants. In Finland, for example, Helsinki recently took two major decisions on shaping the country’s energy for the future: Firstly, to increase the country’s domestic renewable energy sources; and secondly, to construct new nuclear power plants.

The motivation behind those two political decisions was the increasing global warming and the wish for self-sufficiency in energy and employment. For Finland, energy independence is an all-important factor when Helsinki makes new energy policies.

Despite the open Nordic electricity market, Finland aims to keep the production of most of the energy used within the country. If not, the Finnish fear it could become dependent on energy from Finland’s eastern neighbour, Russia.

Across the border in Sweden, a thirty-year-old ban on the building of new nuclear reactors was recently reversed – a move that divided the Swedish population. Building new nuclear power plants will increase Swedish production of domestic energy. Fifty per cent of Sweden’s energy comes from 10 nuclear power plants which are around 30-40 years old and which, at the moment, only work at 63 per cent of their capacity.

Furthermore, Swedish hydropower is also one of the country’s big energy sources. But the amount of hydroelectricity depends on the rainfall. Hence, when rainfall is scarce, coupled with a high energy demand, Sweden must buy energy at higher prices – sometimes from abroad – leaving consumers and energy intensive industries with soaring energy bills.

But Stockholm is also looking at introducing more renewable energy into the Swedish electricity grid – mainly in the form of wind power. More than 1000 wind power plants will be built in Sweden over the next few years at the price of 70 billion Swedish kronor.

Energy security and Europe

European Union members, Denmark, Finland and Sweden, have agreed to diverse EU energy initiatives which involve increasing the share of renewable energy, cutting greenhouse gas emissions and creating a free market of energy in the EU. Such policies aim to mitigate climate change and increase Europe’s energy security by limiting the bloc’s dependence on energy from Europe’s neighbours.

Swedish electricity consumers, however, are slightly wary about the fact that Sweden has to adjust to the EU’s open electricity market this autumn. By then Sweden will no longer be able to decide when to hold on to its energy or when to sell. Neither will Swedish electricity consumers know if their energy comes from Finnish nuclear power or Dutch coal fired electricity plants.

The Norwegian government sees Europe’s liberalised energy market as an opportunity. The country’s hydroelectricity is easily adjustable and can adapt to variation in demand – which is good for exporting to the European Union.

Moreover, if Norway finally decides to exploit its northern shores, such a move could be of interest to the EU energy market. Buying oil and gas from Norway could result in a decrease of the bloc’s energy dependence on countries to the east and south of the union affected by political instability or undemocratic rulers.

Iceland has also mentioned the possibility of entering the competitive European energy market, despite the country’s geographical distance from the continent. Iceland’s new director for public hydropower plants, Hörður Arnarson, has even mentioned the idea of laying an undersea cable to take some of Iceland’s renewable energy to Europe.

Finland, though, may face a challenge with European plans of increasing the share of renewable energy in Europe’s energy network. Finland’s share of the EU renewable goal is currently 38 per cent by 2020. However, nuclear energy does not count towards renewable energy in EU statistics and neither do some of Finland’s other energy sources, such as peat.

Helsinki still has to make large investments in developing different types of renewable energy, such as wind power and bio-energy. So far, new wind power parks have been planned for offshore and near the mountains. But the plans are still only on paper as there are problems with the profitability of the projects.

Saving by pooling resources

Nordic energy experts advocate that the Nordic region could save over one billion euros annually by 2020, if the Nordic capitals harmonise the way they fund their renewable energy production.

Denmark, Finland, Iceland, Norway and Sweden have each their different strengths within the production of renewable energy. But there are also differences between each nation’s funding systems for green energy, which makes it harder to co-operate across the borders.

In an attempt to make renewable energy more economically effective, the Nordic governments are now considering carrying out a thorough analysis of the possibilities to integrate the funding schemes for sustainable energy in the Nordic countries.

However, despite regional collaboration on the Nordic electricity market since the 1990s, the political decisions being taken in the Nordic capitals are still very different from each other – both in their motivations and in their goals for their future energy resources.

Written by Helena Spongenberg for Analys Norden.

Indholdet i artikkelen er udtryk for skribentens egne holdninger