The greatest threats to energy supply in the Nordic region

It is easy to blame high energy costs on President Vladimir Putin and his invasion of Ukraine. This has led to sanctions and it has throttled imports of Russian natural gas, oil and coal. But there are many other reasons for the “perfect storm” that is now hitting European and Nordic energy markets. And not everything would be resolved by an end to the war in Ukraine. 

“Today, the Nordic region faces an energy trilemma – three conflicting challenges to delivering a secure, affordable, and sustainable energy transition,” said Klaus Skytte, Director of Nordic Energy Research, as he presented the report during the Nordic Council’s special session on energy in Reykjavik on 14 March.

The report looks at Europe’s electricity and natural gas markets. Both power grids and natural gas pipelines run across national borders. Natural gas is also used to produce electricity. That is why high prices in one country impact other countries.

There are other energy sources, like oil and coal, but these are subject to global pricing structures. The difference can be seen clearly in the graph detailing the price of natural gas in Europe and the USA:

The yellow line above shows the costs of generating 1 MWh of electricity using natural gas in Europe, right back to 1960. The blue line is the US gas price which has not seen the same increase. Oil and coal prices are global, both in the USA and in Europe.

Natural gas makes up 20 per cent of EU energy consumption. 80 per cent of it is imported. Before the Ukraine invasion, Russia was the biggest exporter. Now it is Norway. There is also a global market for liquid natural gas – LNG. But Europe has a limited capacity for LNG use, even though it has increased a lot from 23 per cent to 40 per cent of total gas imports in 2022, according to the analysis firm GIS. 

At the same time, the lack of Russian natural gas would not have been as serious...:

• ...if French nuclear power plants were not so inefficient. At the time of the report’s publication, only 30 out of a total of 56 French nuclear power plants were operating. This is due to a combination of technical and environmental issues. The severe drought in France in 2022 meant nuclear power plants could not release hot water into rivers as usual, because this would have impacted negatively on biodiversity. At the same time, 51 per cent of French nuclear power production was closed for maintenance. 
• ...if Germany had not closed so many coal and nuclear power plants. The plan had been to phase out all coal power by 2038, but the government is now aiming to close all coal power plants as early as 2030. Nuclear power is due to be phased out by 15 April this year. Germany has extended the use of both coal and nuclear power because of the war in Ukraine. 
• ...if reservoir levels in Southern Norway were not so low, after the driest year in 26 years. In spring 2022, water levels were at their lowest in 20 years. France, Spain and Portugal have also experienced droughts with low reservoir levels as a result.
• ...if the Netherlands had not closed the country’s largest natural gas field Groningen in order to meet CO2 emission goals. Since October 2022, the field has been producing just enough to keep installations running – 2.8 billion cubic metres of gas a year. That is one-tenth of 2016 production, according to Upstream Online. Groningen started producing gas in 1963 and was for a long time Europe’s largest gas field with an annual production of 50 billion cubic meters of gas – nearly the same amount that was imported via the first North Stream pipeline from Russia.

Even if the energy crisis is hitting Europe worse than the rest of the world, the green transition means changes to the entire, global energy system. 

“The global energy system must be balanced, in summer as in winter, year after year, country by country and morning and night,” said Jarand Rystad, CEO of Rysland Energy, via a video link.

The Nordic Council's special session on energy security was held in Harpa, Iceland's opera house. Jarand Rystad on video link.

“We have to decide on a storage technology as we become more and more electrified. We will be going from 20 per cent of the world’s energy being transported as electricity to 60 per cent by 2050.” 

“The overarching development is that solar and wind outperform oil and gas. But you cannot achieve the green transition by simply stopping oil, gas and coal. You also have to outperform it by first constructing renewable energy,” said Jarand Rystad.

Investment is needed in power grids and energy, labour is needed to make this happen and you need popular support. Meanwhile, the amount of power that we can control ourselves is falling. One of the consequences is that the Nordic and European energy systems have become more weather dependent. 

The green transition needs skilled labour, it is dependent on rare earth metals – 90 per cent of which are produced in China – and it must make sure there are no bottlenecks when the energy is being distributed. 

“The inflexible demand and the decrease in baseload capacity from hydro and nuclear power has led to concerns about potential brownouts in the Nordic countries during hours of peak demand,” says the report on the Nordic energy markets.

A brownout is when parts of the power grid are decoupled, with major consequences for industry and households.

The Troll A platform in the North Sea. Norway's natural gas field makes up 11 per cent of Europe's annual natural gas consumption.

The report does not look at other risks facing the energy system like cyberattacks or the sabotage of pipelines. The day after the energy debate at the Nordic Council, EU President Ursula von der Leyen visited the Norwegian Troll gas platform, along with Nato Secretary General Jens Stoltenberg and Norwegian Prime Minister Jonas Gahr Støre. War ships flying Nato flags were patrolling the nearby waters.

Ursula von der Leyen (to the right) in the helicopter on the way to the Troll field.

Last year, the Troll field produced 11 per cent of the total EU consumption of natural gas and it contains 40 per cent of Norway’s total natural gas reserves. Nordic energy has become big politics, or as the Nato press release put it: 

“The joint visit with President von der Leyen and Prime Minister Gahr Støre demonstrates the unity between NATO and the EU at this critical time.”

From the left: Norway's Prime Minister Jonas Gahr Støre, EU President Ursula von der Leyen, Nato Secretary General Jens Stoltenberg and Equinor ECO Anders Opedal.

After riding the elevator inside one of the platform shafts to the lowest level – 303 metres below the sea – they wrote “We are secure together” on a gas pipeline in a symbolic gesture.

It is perhaps not so strange that the participants at the energy session voted down a proposal from the Centre Group, one of the five party groups in the Nordic Council, calling for joint action for the phasing out of the production of fossil fuels.

The Centre Group proposed that “the Nordic Council recommends for Nordic governments to become members of the Beyond Oil and Gas Alliance” (BOGA) and that “the Nordic Council recommend the Nordic Council of Ministers to adopt a Nordic declaration on the phasing out of further fossil fuel extraction.”

When the Social Democratic group changed their position, the proposal fell.