Vision for the baltic sea electricity market fingrid Presentation by Lotta Medelius-Bredhe, Director General, Svenska kraftnät In Fingrid Current, 10.3.2020.

1. Vision of the Baltic Sea Region´s Electricity
Market
Lotta Medelius-Bredhe, Director General, Svenska kraftnät
Fingrid Current Event, 2020-03-10

2. Why the Baltic Sea Electricity Market is important to us

3. Svenska kraftnät
> Governmental agency
> Owner of the national grid (400 and 220 kV)
> System responsible authority
> Sweden's Authority of Electricity Contingency
Planning

4. Some figures in short
> Swedish power grid has 17,000 km of management,
160 stations and 16 international connections.
> During the 2020s, we plan to build 4800 km of overhead
lines and 100 stations, new and retrofits
> In 2019, we input 121.8 TWh of energy, extracted energy
was 118.5 TWh.
> In the next 10 years, we plan to invest approximately
SEK 60 billion.

5. Over the next decades Svenska kraftnät will be engaged in
heavy investment programs
Programs to renew the grid and meet the need of a changing power system

6. Balancing
Green deal
Security
Market
development
Peak load & SoS
System stability
and resilience
Wind power
integration
Many issues that we as TSOs need to handle

7. The Nordic/Baltic region constitute one well-integrated
regional power market
> The Baltic Sea region has been the basis for the first
international power market
> Strong interconnector capacities between the countries in
the region
> Key focus going forward: Ensuring that the infrastructure is
used optimally.
> Focus on continued development of the market – EU
regulation

8. Exchange of energy has been the central value driver.
Ancillary services and reserves are growing in importance
> A changing power system requires a new way of operating it.
Deteriorating frequency quality in the Nordics.
> Cost or reserves are likely to increase – large increase in
Sweden over the last years
> With the Nordic Balancing programme annual net benefits of
>50 MEUR of exchanging aFRR capacity across borders
have been identified
> Optimal usage of grid infrastructure cannot only focus on
energy trading
0
500
1 000
1 500
2019
2016
MSEK
2017
2018
+85%
Benefits of a Nordic aFRR capacity market
Source:NBMprogramme
0
20
40
60
Net benefit of
capacity market 2018
Benefits of aFRR
capacity exchange
MEUR
Cost of allocating
CZC for aFRR
capacity exchange
Net reserve cost for Svk (MSEK)
Source:Svenskakraftnät

9. Developed cooperation around operation and markets
important. European platforms are key elements.
> European balancing platforms under
development
> Exchange of balancing energy will be
done on a European level through the
platforms. Key also for Nordic/Baltic
integration.
> Real-time balancing critical for the system.
Each TSO has the responsibility for its
own system. Fallback solutions will be
essential to ensure SoS.
Members in MARI (for mFRR) Members in Picasso (for aFRR)

10. Appropriate bidding zones key for efficient market and system operation
SE 1
SE 5SE 3
NO 3
NO 5NO 1
NO 2
NO 6
NO 4
FI
DK 1
DK 2
SE 1
SE 2
SE 3
SE 4
NO 3
NO 4
NO 5NO 1
NO 2
DK 1
DK 2
FI
Proposals
for further
analysis
Today
BZ review to enable correct pricing and efficient congestion management

11. Growing import dependency to cover peak load
> National and regional import dependency to cover peak load
is increasing
> Open and well-functioning power markets are crucial for
meeting this joint challenge
> But, if all are import dependent – where will the import come
from?

12. Enabling the green transition is a key task for TSOs
> The EU Green Deal envisages a power system
based largely on renewable sources.
> Wind power is growing fast. Forecasts indicate
more than a doubling of Swedish onshore wind
power in the next few years. Increasing from
about 20 TWh in 2019 to about 44 TWh in
2023*
> Svenska kraftnät has connection applications
for close to 25 GW offshore wind power.
5
10
15
20
25
30
35
40
45
50
2013
2016
Twh
2017
2015
2020
2011
2021
2012
2014
2018
2019
2022
2023
+125%
Development of on-shore wind in Sweden
* Swedish Wind Energy Association. Base case forecast Q4 2019.

13. > Large amount of off-shore wind possible to connect efficiently through
radial connections. We expect that this will be more efficient, bring larger
net benefits and go faster than more complex solutions.
> Hybrid solutions combing connections and interconnectors could be an
option in individual cases. Has to be assessed on a case-by-case basis.
> Complex solutions – from a technically, regulatory or market perspective –
implies a significant risk of delay.
> Important that the capacity of the internal grid is matched
> Permit process a challenge
Fast and efficient connection of off-shore wind power important

14. Offshore wind yet to take off in Sweden
~9.5 GW
~14.6 GW
> Currently very limited offshore wind in Sweden, but significant
potential
> Svenska kraftnät has connection applications of about 25GW of
offshore wind power. Not all projects can be expected to be
realized. Very large increase from summer 2019
> Current regulation:
> Obligation to connect
> Connecting party has to pay the costs of connection
> Energy policy agreement from 2016 included abolishment of
connection fee for offshore wind. No concrete proposal yet
> From TSO perspective the localization of offshore wind important –
wrong locations could be very costly

15. Stronger focus on security
> The electricity system is a critical infrastructure for any modern society
> Markets and systems are interconnected and increasingly depending on
IT solutions
> Commonly operated real time markets such as European balancing
market platforms need to uphold a strict security level, with robust fall-
back solutions.

16. Conclusion
> The Nordic-Baltic system is well interconnected. Key issue is to utilize the infrastructure optimally.
Ancillary services & reserves growing in importance and costs – optimal utilization of the
infrastructure cannot only focus on energy trading.
> Continue to develop the markets. European balancing platforms key also for Nordic-Baltic
integration.
> Long-term the Nordic region is becoming import dependent to cover the peak load. Increase in
interconnectors cannot solve the peak load problem if we jointly are import dependent.
> The TSOs need to be the enabler of the energy transition. Fast increase of wind introduces new
challenges. Large potential for off-shore wind in the Baltic Sea region – needs to be connected fast
and efficiently. From a Swedish perspective: radial connections may often be the best solution.
Internal grid must be matched.
> Increased focus on security

17. Thank you