Market outlook – H2 and offshore wind play key role in energy transition

The European Green Deal’s net-zero emissions target requires a drastic transformation of the energy sector. Our new power market outlook investigates the implications for power prices, the generation mix and the need for flexibility. It also shows that hydrogen and hybrid offshore wind projects will be crucial.

Power market outlook

For the Spring 2021-edition of our power market outlook, we have revised and updated the energy and power market scenarios to account for the latest policy and climate ambitions announced by the EU and member states. The special topic in the Nordic market report addresses the implications of weather risk for hedging strategies, while, in the European report, we discuss market design options for hybrid projects.

The market outlooks are based on three scenarios.

In the Central scenario (“Best-Guess”), we assume that the EU achieves the 55% emissions reduction target for 2030 and net zero emissions by 2050. To reach these targets, electricity consumption increases and a well-functioning hydrogen market is developed. Investments in renewable energy technologies, particularly offshore wind, are significant and negative emissions technologies are needed in the long term. In the medium term, power prices are also affected by reforms to the EU ETS.

In the Low scenario (“Technotopia”) and High scenario (“Turbulent Transition”), we address the impact of technology costs and potential challenges to the energy transition respectively.

As always, our Nordic and European market reports each include a special topic. The special topic in the Nordic market report addresses the implications of weather risk for hedging strategies, focusing on hedging strategies for wind and hydro assets and portfolios. It builds upon the weather risk modelling developed by THEMA in recent years. The European report discusses market design options for offshore hybrid projects, which combine both generation and interconnection capacity. We cover the implications for wind assets, based on simulations from our Central scenario, and get into the ongoing regulatory discussion, based on our work for the EU Commission on market arrangements for offshore hybrid projects in the North Sea.

The market outlooks and price forecasts analyse power price developments and the implications for the generation mix, demand, plant capacities and trade. Our long-term market outlook and price forecasts help investors and developers make informed investment decisions based on solid, state-of-the-art simulation models, the latest available data and independent, unbiased and trustworthy advice.

Our market outlooks cover the Nordic Power Market, the Continental European Market, the Southern European Market, the Eastern European Market as well as the Baltics. We also issue a report on the EU-ETS, GOs and ElCertificates, as well as a Technology Outlook report.

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