Impact of Germany's energy transition on the Nordic power market – A market-based multi-region energy system model

• Published in: Energy (Oxford) 2016-11, Vol.115, p.1640-1662
• Main Authors: Zakeri, Behnam, Virasjoki, Vilma, Syri, Sanna, Connolly, David, Mathiesen, Brian V., Welsch, Manuel
• Format: Article
• Language: English
• Subjects: Energy policy; Energy systems model; Power market coupling; Power market model; Renewable energy
• ISSN: 0360-5442; 1873-6785
• DOI: 10.1016/j.energy.2016.07.083

The EU energy policy aims at creating a single European electricity market through market couplings and grid expansions. To analyse the implications of such power market couplings, we propose a market-based multi-region energy system model. The model simulates a multi-region power market (by applying market optimization and network theory), with detailed representation of each region as an energy system (by simulation of both heat and power sectors). We examine the impact of further integration of variable renewable energy (VRE) in Germany on the Nordic power market. The results indicate that the average electricity price slightly grows in the Nordic power market after Germany's Energy Transition (Energiewende). Hence, the economic surplus of Nordic consumers diminishes while Nordic producers improve their gain under new market conditions. Considering the gird congestion income, the overall system-level benefits (social welfare) will improve in the Nordic region after Germany's Energiewende. However, this gain is not equally distributed among different Nordic countries and across different stakeholders. Furthermore, the Energiewende slightly increases carbon emissions from power and district heating (DH) sectors, and reduces the flexibility in integration of VRE in some Nordic countries like Denmark. The direct interconnection of Norway and Germany through NordLink will contribute to the flexibility in wind integration in other Nordic countries, such as Denmark and Finland. •By an integrated hourly analysis, we model the energy systems of several networked countries and their common electricity market.•The proposed model can inform energy policy on implications of renewable energy integration in an international power market.•Among Nordic countries, Norway gains the highest economic benefits from Germany's energy transition.•Germany's energy transition constrains the flexibility of the Nordic countries in wind integration.•NordLink between DE and NO will make a congestion income of 80–120 million euro/yr.