Operating environment in Q3 2024
European power markets
During the third quarter, the performance of the energy commodities was mixed. The natural gas TTF front-month contract strengthened by 12% on multiple supply risks despite persistently weak demand. Carbon (EUA) price softened by 8%, as supply exceeds demand due to lower use of fossil fuels and higher emissions allowance supply as a consequence of frontloaded REPowerEU auction volumes.
Nordic electricity prices were pressured by high precipitation during July and August, which resulted in lower spot prices in the main hydro areas. Additionally, good nuclear availability during the summer months and increasing wind and solar output contributed to declining Nordic spot prices. In September, transmission line constraints and nuclear outages led to a tight Finnish power balance during days with low wind power output. After a long break, the Estlink 2 transmission line returned to operation in early September, which led to price coupling between Finland and Estonia.
According to preliminary statistics, power consumption in the Nordic countries was 82 (79) TWh during the third quarter of 2024. Following a continued recovery, Nordic power demand is now at the level prior to the energy crisis. During January–September 2024, power consumption in the Nordic countries was 289 (274) TWh.
In Central Western Europe (Germany, France, Austria, Switzerland, Belgium and the Netherlands), power consumption in the third quarter of 2024 was 295 (290) TWh, according to preliminary statistics. Power demand in Continental Europe continued to be clearly below the five-year average, affected by weaker industrial production. During January–September 2024 the power consumption in Central Western Europe was 941 (931) TWh.
At the beginning of the third quarter of 2024, the Nordic hydro reservoirs were at 86 TWh, which was 2 TWh above the long-term average and 4 TWh above the level of the previous year. The Nordic inflow was slightly below the normal level while hydro generation was close to normal. At the end of the quarter, the reservoir levels were at 102 TWh, which is 1 TWh above the long-term average and 4 TWh lower than in the previous year.
During the third quarter, Nordic spot prices were lower than a year ago due to lower Continental European power prices and increased renewable power output. The average system spot price at Nord Pool was 19.9 (27.8) EUR/MWh. The average area price in Finland was 28.1 (44.2) EUR/MWh. In Sweden, the average area price in the SE3 area (Stockholm) was 13.3 (28.0) EUR/MWh, and the price in the SE2 area (Sundsvall) was 11.6 (20.5) EUR/MWh. In Germany, the average spot price in the third quarter was 76.0 (90.8) EUR/MWh.
In January–September 2024, the average system spot price at Nord Pool was 37.8 (56.0) EUR/MWh. The average area price in Finland was 46.9 (54.9) EUR/MWh. In Sweden, the average area price in the SE3 area (Stockholm) was 33.5 (50.1) EUR/MWh, and the price in the SE2 area (Sundsvall) was 28.8 (38.6) EUR/MWh. In Germany, the average spot price in January–September was 71.8 (99.5) EUR/MWh.
In late October, the Nordic system electricity forward price on Nasdaq Commodities for the remainder of 2024 was around 48 EUR/MWh and for 2025 around 40 EUR/MWh. The Nordic water reservoirs were at 102 TWh, which is about 1 TWh above the long-term average and 5 TWh below the level one year earlier. The German electricity forward price for the remainder of 2024 was around 94 EUR/MWh and for 2025 around 91 EUR/MWh.
European commodity markets
Gas demand in Central Western Europe was 245 (249) TWh in the third quarter and 1,165 (1,205) TWh in January–September 2024. The Central Western European gas storage levels increased from 479 TWh at the beginning of the quarter to 601 TWh at the end of the quarter, which is 6 TWh lower than one year ago and 44 TWh higher than the five-year average (2019–2023).
The average gas front-month price (TTF) in the third quarter was 35.6 (33.8) EUR/MWh and 31.7 (40.8) EUR/MWh in January–September 2024. The 2025 forward price increased from 33.5 EUR/MWh at the beginning of the quarter to 39.0 EUR/MWh at the end of the quarter, which is 2.9 EUR/MWh lower than one year earlier.
The EUA (EU Allowance) price decreased from 68.1 EUR/tonne at the beginning of the third quarter to 65.6 EUR/tonne at the end of the quarter, which is 16.1 EUR/tonne lower than one year earlier.
The forward quotation for coal (ICE Rotterdam) for 2025 increased from 113.1 USD/tonne at the beginning of the third quarter to 124.4 USD/tonne at the end of the quarter, which is 5.9 USD/tonne lower than one year earlier.
In late October, the TTF forward price for gas for the remainder of 2024 was 43 EUR/MWh. The forward quotation for EUAs for 2024 was at the level of 66 EUR/tonne. The forward price for coal (ICE Rotterdam) for the remainder of 2024 was 120 USD/tonne.
Regulatory environment
New EU College of Commissioners
Following the European elections in June 2024, the new college of Commissioners has been nominated by the EU Member States and their portfolios have been provisionally allocated. The European Parliament will still assess the Commissioner candidates and the new Commission is expected to start in November–December.
Energy and climate topics will be under the mandates of several Commissioners. The most relevant high-level priorities for Fortum include the 2040 climate ambition, the Action Plan for affordable energy prices and the Clean Industrial Deal. We welcome that the political guidelines and mission letters guiding the work of the Commissioners recognise technology-neutrality, clean energy and small modular reactors (SMR) for nuclear. However, the stance of the new Commission on nuclear and funding of nuclear projects in the context of the next EU budget negotiations are still open.
Mario Draghi’s report on EU competitiveness
The report by the former President of the European Central Bank and former Italian Prime Minister Mario Draghi on the future of the EU’s competitiveness was published on 9 September. The non-legally binding report includes a number of proposals to boost European competitiveness, especially in the industrial and energy sectors. Positively for Fortum, the identified key priorities in the report are investments in clean energy transition, including all net-zero technologies. Draghi proposes to lower the energy costs of the European industry via EU-level solutions that do not lead to further single-market fragmentation as well as through long-term contracts such as power purchase agreements (PPA) and contracts for difference (CfD).
The report calls for annual investments of EUR 800 billion to counter economic threats and enhance the EU’s global competitiveness against the US and China. To achieve this, Draghi advocates for strengthened EU-level coordination and joint EU debt that will be one of the most contested topics in the upcoming negotiations for the next EU Multiannual Financial Framework (2028-2034).
Nuclear financing framework proposal in Sweden
On 12 August, the Swedish government’s investigator Mats Dillén presented his proposal for a nuclear financing mechanism to meet the government’s target for new nuclear. Inspired by the Czech nuclear support scheme, Dillén proposes low-interest-rate state loans initially covering 75 percent of the total investment cost estimated at EUR 36 billion, indexed contracts for difference (CfD) to guarantee the level of revenues for a 40-year period and a risk sharing mechanism to guarantee return on investment for investors. Fortum considers the proposal as a first important step to establishing a nuclear financing framework.
Real estate tax incentive in Sweden
In the state budget proposal for 2025, the Swedish government aims to incentivise municipalities to give consent for onshore wind farms through economic compensation based on the wind power real-estate tax. This establishes a new principle whereby the government will share tax revenues from power production with the municipalities. The final details for compensation are still pending, but this could be an important step towards increasing local acceptance of new renewable power production.
Finnish non-fossil flexibility support scheme under investigation
The Finnish Ministry of Economic Affairs and Employment has appointed a working group and commissioned a study to evaluate the need for flexibility in the energy market during the next ten years. The objective is to consider whether the supply of flexible capacity should be increased by governmental measures. A proposal for creating a non-fossil flexibility support scheme (NFFSS) under the EU Regulation is expected by the end of February 2025. Political decisions will follow thereafter.
Fortum welcomes the government’s initiative. However, the impact of a possible NFFSS mechanism on Fortum depends on the working group’s recommendations.