Over the past few years, we have seen a sluggish demand development both in the Nordics and in key European countries. Growth in traditional industries is slower than expected. Competition in battery manufacturing remains stiff and EV-demand growth has been slower than previously anticipated. Hydrogen projects costs have proven to be higher than the industry’s previous expectations, which is reflected in several postponements and cancellations of hydrogen projects. Due to this development both demand levels and demand growth are now expected to be lower than previously anticipated. This also applies to power-to-gas volumes, reflecting the challenges in the hydrogen sector. The lower demand puts a downward pressure on power prices in the short to medium term.
In the long-term prices are however affected by rising cost levels affecting the power sector. Increased hydrogen electrolysis costs have made electrolysis investments less attractive, leading to higher costs for operating hydrogen-fired turbines in the long term and reducing flexibility to support future renewable energy investments. Additionally, grid costs have risen significantly, partially impacting offshore wind investments. This puts upward pressure on long-term power prices.
In the Power Market Outlooks, we look at developments in the European power market towards 2055 in three different scenarios. The Base scenario relies on a continuation of energy policies towards carbon reduction, the Turbulent Transition scenario involve a more expensive and challenging energy transition, while in the Technotopia scenario technological advances reduce the costs of renewables and CO2 abatement at a faster rate than today. The outlooks are updated quarterly.
