Nordic Energy Security 2030

Transcription

1 Nordic Energy Security 2030 Pami Aalto & Iida Jaakkola 1. Introduction In this chapter, we assess the implications of global megatrends for Nordic energy security until While the megatrends discussed in the book Global Flow Security: A New Security Agenda for the Transatlantic Community in 2030 represent complex constellations, so does energy security. Because of its controversial nature, energy security must always be discussed in the relevant practical context where its various components can better be comprehended and analyzed. 1 The first component of energy security concerns availability. In the Nordic context this pertains to the major differences we find in their posture vis-à-vis the balance between supplies and demand in the energy markets. Norway stands apart from the rest of the Nordics in being a major fossil fuels producer and exporter for whom the security of demand, chiefly regarding its European markets, is paramount. Denmark is a smaller fossil fuels exporter attempting to convert to a fully renewable system by 2050, which would make it relatively independent from international supply-demand patterns. 2 Finland and Sweden depend on fossil fuel supplies from Russia, Norway and Denmark, which they combine with nuclear energy and domestic renewable sources. Iceland derives the bulk of its primary energy supplies from domestic renewable sources and only needs to tap into global markets to acquire petroleum products. On top of intra-nordic fossil fuels trade, further interdependencies are created by the Nordic group within the European Network of Transmission System Operators (ENTSO-E electricity network) and the Nordic electricity market Nord Pool. In this market, Norway and Sweden trade their seasonal excess hydropower alongside Denmark s coal-powered electricity. Finnish and Swedish electricity utilities are most often in a customer role. In this way, they can reduce their other external dependencies. The second component of energy security is affordability, which means prices that in turn depend on competition and regulation. Norwegian energy companies in particular need returns to the large investments in new export-oriented production in the Barents Sea where the extraction of fossil fuels costs more than in the maturing fields of the North Sea. Electricity prices in the Nord Pool and national Nordic markets are influenced by availability, competition and the 1 We apply here the conceptualization in Benjamin Sovacool (2011), Introduction: Defining, Measuring, and Exploring Energy Security, in Benjamin Sovacool (Ed.) The Routledge Handbook of Energy Security, pp Abingdon: Routledge; see also Ciută, Felix (2010) Conceptual Notes on Energy Security: Total or Banal Security?. Security Dialogue, Vol. 41, No. 2, p Energy Strategy 2050 from coal, oil and gas to green energy. The Danish Government 2011.

2 gradually converging regulation within the emerging internal EU energy market. 3 The equal treatment principle of the EU market is opening up the energy industry for greater competition especially in the natural gas and electricity segments. To promote competition prospects for energy trade must be enhanced between the Nordic and continental European markets. For this end, EU energy policy foresees large investments in new types of networks, larger transmission capacity across national borders, natural gas grid connections and terminals for liquefied natural gas (LNG). A joint LNG terminal is being planned for Finland and Estonia and the EU s partfinancing sought. Although Gazprom is involved through its subsidiaries, this project also reflects the increasing all-european pressure on a gradual diversification away from Russian pipelined natural gas, which today comprises 100% of the supply in these two countries, because of the latest Russian-Ukrainian crisis of The Norwegian actors are affected by the emerging EU energy market and its regulation by virtue of their sizable exports to several EU Member States and the country s membership in the European Economic Area (EEA), together with Iceland, which makes them part of the single market with no voting rights. Denmark, Finland and Sweden are as full EU members also tied to the EU s other emerging policies where globally and flexibly traded LNG fed to European grids through several hubs, and the generation of electricity from domestically available renewables sold into all-european networks have become priorities. In this way, Finland and Sweden may reduce their existing dependencies on Russian energy commodities and in the Finnish case imports of electricity from Russia. The development of the natural gas segment, which is approximately half less polluting than other fossil fuels, and renewables manifest the third component of energy security pertaining to various aspects of environmental stewardship. Of these climate issues are particularly important to the Nordic countries. 4 This issue is also key to EU energy policy where the member states were in 2014 negotiating over the Commission s proposal for a 40% cut in greenhouse gases (GHGs) compared to the 1990 levels. 5 Consequently, in spring 2014 Sweden was reconsidering the decision of phasing out nuclear power, made after a referendum in 1980 and which was further confirmed after the nuclear accident in Chernobyl in Fortum and a Finnish industrial coalition Teollisuuden Voima were building a fifth nuclear reactor and an underground nuclear waste repository, which the Government set as a precondition for developing this segment. Alongside climate action, the Government views nuclear energy as a means of diversifying away from Russian supplies. Yet in summer 2014 permission for the sixth nuclear reactor linking another coalition of industries and utilities with Rosatom Overseas as a major shareholder was considered. Fourth, the efficiency considerations in energy security pertain to the development and taking into use of less wasteful energy technologies together with smart infrastructures, and the use of energy overall, all of which in the broad sense eventually lead us to consider the social components of energy consumer behavior. In the final analysis, these also include the linkages of 3 See e.g. Pami Aalto and Dicle Korkmaz Temel (2013), European Energy Security: Natural Gas and the Integration Process, Journal of Common Market Studies 51: 1-25 (DOI: /jcms.12108). 4 Aalto, Pami and Tynkkynen, Nina (2007) The Nordic Countries: Engaging Russia, Trading in Energy or Taming Environmental Threats?, in P. Aalto (ed.) The EU Russia Energy Dialogue: Europe s Future Energy Security, pp Aldershot: Ashgate. 5 European Commission (2014) A policy framework for climate and energy in the period from 2020 to 2030, Brussels, 22 January, COM(2014) 15 final.

3 energy and food security. On top of large EU and national programs, Nordic Energy Research supports work for such objectives by some 9 million euros annually. 6 Together these four components of energy security display both differentiation and integration among the Nordic states. On this basis, we propose that energy security in the Nordic context concerns striking a balance between the security of supplies and demand, leading to mutually acceptable prices whilst also paying attention to the associated environmental consequences and social dimensions. 7 With this definition, we will ask: 1) how will global megatrends impact Nordic energy security until 2030? 2) To what extent should the Nordic countries work together to address the problems ahead and manage their energy security effectively? To respond to our questions, we apply the six global megatrends discussed in Global Flow Security: A New Security Agenda for the Transatlantic Community in 2030 into the context of Nordic energy security. Of the reports from which the six megatrends are derived, we chiefly consult the National Intelligence Council and EU Institute for Security Studies 2030 reports, which are most relevant for energy security. 8 To assess more specific global level drivers in the energy sector until 2030, we use the International Energy Agency s (IEA) New Policies scenario as our baseline. 9 In addition, we survey further studies, reports and policy documents on energy security produced by the EU and the Nordic countries including their energy policy commitments and targets for 2030 and Our contribution vis-à-vis existing studies, which comprise mostly country-specific analyses, 10 will be to offer a comparative analysis of the likely impact of global megatrends on the Nordic countries against their own energy policy targets. Owing to major differences in available statistics among the Nordic states, our comparison is indicative only in the absence of directly comparable figures for each country. In the next section, we address our first research question by discussing the implications of the six global megatrends as applied to Nordic energy security. In the third section, we return to our 6 In 2011 the sum of the common pot spent for R&D in the energy sector, in addition to national funding, was 8.9 million euros (The IEA and Nordic Energy Research (2013) Nordic Energy Technology Perspectives: Pathways to a Carbon-Neutral Energy Future, p. 43). 7 See Sovacool (2011), ibid.; also Bilgin, Mert (2011) Scenarios on European Energy Security. Futures, Vol. 43, No. 10, p National Intelligence Council [NIC] (2012) Global Trends 2030: Alternative Worlds (Washington, DC: NIC); European Union Institute for Security Studies [EUISS] (2011) Global Trends 2030: Citizens in an Interconnected World (Paris: EUISS). 9 IEA (2013) World Energy Outlook E.g. Heinonen, Sirkka and Ruotsalainen, Juho (2013) ENERGY FUTURES 2030: Toward the Neo-Growth paradigm of the Sixth-Wave Era, FINLAND FUTURES RESEARCH CENTRE FFRC ebook 1/2013; Kwon, Pil Seok, Ostergaard, Poul Alberg (2012) Comparison of future energy scenarios for Denmark: IDA 2050, CEESA (Coherent Energy and Environmental System Analysis), and Climate Commission 2050, Energy 46(1): ; Luukkanen, Jyrki (2009) FINNISH ENERGY INDUSTRIES ENERGY SCENARIOS AND VISIONS FOR THE FUTURE Background Report, FFRC ebook 10/2009; Nilsson, Måns (2011) CHANGING THE DECISION SPACE: EUROPEAN POLICY INFLUENCES ON ENERGY POLICY AND SYSTEMS CHANGE IN SWEDEN, Public Administration 89(4): ; Ruostetsaari, Ilkka (2010) Energiavalta: eliitti ja kansalaiset muuttuvilla energiamarkkinoilla. Tampere: Tampere University Press; Sperling, K. et al. (2011) Centralisation and decentralisation in Strategic Municipal Energy Planning in Denmark, Energy Policy 39(3): ; Valkila, N. and Saari, A. (2013) Experts' view on Finland's energy policy, Renewable & Sustainable Energy Reviews 17:

4 second research question on the extent to which the outlook is country-specific for each Nordic state and to what extent they could benefit from further regional integration. 2. Global megatrends and Nordic energy security Of the six global megatrends discussed in the introduction to this book, the first one, G-Zero World Changing distribution of global power refers to the rise of Asian and other emerging powers. Their rapid economic growth influences directly the global balance between the security of energy supplies and demand, in particular of fossil fuels, which we discussed above as the first component of Nordic energy security. The second megatrend, Liquid World Diffusion of state power to transnational actors refers to the strengthened role of large multinational companies and their tightening links with the state and society, a trend to which the traditionally strongly corporatist Nordic societies and their energy sectors should be well prepared. In addition this megatrend implies reinvigorated activism and prospects of terrorism which may pose challenges to the Arctic and global operations of Nordic energy companies. Because both of these trends in the broad sense implicate a global power shift in turn affecting energy trade we discuss their impact on Nordic energy security in combination. The third megatrend More human power Global technological diffusion: creating a level playfield? and the fifth megatrend on Global awakening Empowerment of individuals and social vulnerabilities pertain to enhanced access to information and new prospects as well as vulnerabilities regarding the new infrastructures on which an expanding number of middle class consumers depend. With regard to Nordic energy security, these two trends facilitate the empowerment of individuals and new patterns of consumption and production. We expect people to become more knowledgeable and market-aware energy consumers and producers enabled by the development of smarter, decentralized energy networks. The fourth megatrend Shrinking World Growing population and resource scarcity concerns in our context the water, energy and food nexus. This indicates increasing demand for biomass and water, both of which are needed to create less carbon intensive energy extraction and production systems in the Nordic context. Elsewhere in Europe, water is needed for larger scale production of unconventional gas from the 2020s onwards. For Norway, the development of Arctic oil and gas resources, which are proximate to rich fish-catch waters where oil spills are difficult to combat, will create new risks. Overall, this trend may amplify volatility in the energy markets. The sixth megatrend Extreme World Climate Change and Environmental Degradation calls for a switch to natural gas as a transition fuel until around 2030 and ultimately de-carbonized energy policies, and impacts the glaciers and snow cover as expressions of climate change and adaptation. As such, it potentially threatens Norwegian, Swedish, Finnish and Icelandic hydropower resources, as well as biomass and biofuel production in the Nordic states in general. With this discussion, we foresee four types of impacts of global megatrends on Nordic energy security until 2030 (Figure 1). When responding to the thus adapted megatrends we assume that Nordic energy policy actors the governments, energy companies and the IFIs funding their

5 activities, as well as lobby groups operate on the basis of their own assumptions of the causal powers of the trends. In other words, in energy policy choices and future scenario work the assumptions held by the actors underpin any energy political facts. 11 This means that knowledge on energy policy and its future development is socially constituted and framed. 12 We can only attempt to preconceive the likeliest developments based on what we assume of the impact of global megatrends on Nordic energy security, understood through the four components we have discussed; and what we expect in terms of Nordic policy responses, in light of what we know of the future targets set by the relevant actors. Figure 1: Global megatrends and Nordic energy security Trend I: global power shift This geopolitical trend portrays the EU, which is the major political and economic framework conditioning the Nordic states energy sectors, as part of a more multipolar or polycentric world where the previous balance between the security of supplies and demand will be affected. The Union is becoming 80-90% dependent on oil and gas imports by 2035 with the gradual depletion of the North Sea s reserves. 13 Fossil fuels will constitute some three quarters of the energy mix 11 Foley, Gerard and Lönnroth, Måns (1981) The European Transition from Oil: Mapping the Landscape, in Gordon T. Goodman, Lars A. Kristoferson and Jack M. Hollander (eds) The European Transition from Oil: Societal Impacts and Constraints. London: Academic Press. 12 Aalto, Pami, Dusseault, David, Kennedy, Michael D. and Kivinen, Markku (2014) Russia s Energy Relations in the East and West: Towards a Social Structurationist Approach to Energy Policy Formation, Journal of International Relations and Development 17(1): 1-29, here 4-12 (doi: /jird ). 13 European Commission (2014), p. 15.

6 although the share of oil will decrease towards the 2030s while coal use will halve. 14 Security of supplies will be sought from neighboring regions such as the Nordic area, the Middle East, Northern Africa and beyond. As a result of Russia s annexation of the Crimea in winter 2014 and Gazprom s warnings on possible disruptions to its natural gas supplies through Ukraine, previously seen in 2006 and 2009, less dependence will be sought on Russia, the single most important fossil fuels supplier of the EU. Any such moves will, however, be very slow to implement in the presence of existing pipeline infrastructure with many stakeholders on both sides, and absence of alternative suppliers with high enough volumes. In this situation, the EU will partly compete with the rising Asian and other powers to clinch a new balance between the security of supplies and demand while several northern Member States will look to Norway as an important balancer. The new balance between the security of supplies and demand will not have any clear-cut effects on prices although the IEA expects price links between regional gas markets to strengthen and a stronger link to form between gas and coal markets. 15 Yet natural gas prices can vary markedly across regions, with lowest prices in the US, then Europe and Japan. In Denmark and Norway s main markets in Europe, downward pricing pressures emerged since the late 2000s. They originated in the move away from pipeline-based long-term contracts for natural gas towards hub-based pricing with new LNG supplies from the Gulf, Africa and possibly towards the 2020s, from North America with its boom of unconventional natural gas. Nevertheless, these discounts may be offset by the increasing dependence on imports involving long transport routes and the depletion of North Sea reserves in particular in the case of the United Kingdom. The supply of domestically produced unconventional gas can at best merely amend the depletion of Europe s conventional gas production by the 2030s. 16 In that emerging segment, exploration is underway only in Denmark and Sweden. In Norway, the existing conventional gas reserves make unconventional production not economically viable. In Europe s electricity generation, 10-15% increases in prices by 2035 are expected owing to the shift away from coal, subsidies for renewables, investment in new infrastructure to accommodate new suppliers, and the setting of carbon prices. 17 This trend singles out Norway and Denmark from the rest of the Nordics. Norway is set to continue as an oil and gas exporter until 2030 but at least three different drivers constrain it. First, Norway s oil exports presuppose high oil prices as in the IEA s New Policies scenario with a price of 125USD per barrel foreseen in With declining prices, some of the planned Norwegian Arctic oil production would become non-competitive in the export markets. 18 Second, by 2035 Norway s oil production may have dipped to some 1.3 mb/d from 2 mb/d in Competition in its main markets is likely to increase owing to the projected increase in 14 IEA (2013), World Energy Outlook,p IEA (2012), World Energy Outlook, p Ibid., pp 42-44; IEA (2012b) Golden Rules for a Golden Age of Gas: World Energy Outlook Special Report on Unconventional Gas, pp Available at « 17 IEA (2012), pp. 179, , Most oil exporters barring Saudi Arabia have balanced their budgets at prices of around USD/b, including Russia, Iran and Venezuela, instead of the around 30USD/b in the early 2000s; see Hulbert, Matthew (2012) The political perils of low oil prices, European Energy Review, 9 July 2012 <

7 interregional oil trade. 19 Iraqi oil, for example, is set to become available in higher quantities alongside new exports from the Americas and Africa. Third, demand in the EU is in the short term hit by sluggish economic growth and by the 2030s, it will drop by some 10% with the progress of renewables. 20 The reinforced pressures for diversification away from Russian oil supplies may affect some of these constraints. However, diversification will be slow to realize. We expect drivers related to supply and demand, prices and environmental issues make Norway struggle to maintain its levels of oil exports. Regarding natural gas Norway can maintain its bcm a year production levels until the 2030s owing to new production in the Norwegian and Barents Seas while North Sea production will slowly deplete. Norway is set to remain a pipeline dependent supplier. It is not foreseen as a major player in the rapidly expanding global LNG trade until 2035 even though it first shipped LNG to Asia in Norway will mostly supply France, Germany, and the UK where the existing pipeline network will help to guarantee steady demand. Norway can simultaneously benefit from the ongoing integration of European gas markets where better interconnections, including a possible Baltic pipe from Denmark to Poland, and gas hubs potentially widen its customer base beyond existing pipelines to continental Europe. The building of LNG terminals to the Baltic Sea shores may also create some niche demand given the objectives of the Baltic States, Poland and recently Finland to reduce the dependence on Russia. Norway will nevertheless be competing in an only slowly expanding European market set to evolve from some 514bcm n 2012 to 584bcm by 2030; or from 24% to 26% of the energy mix. 22 The main drivers of the maturing market include the expected relatively high prices, ongoing decarbonization policies and low carbon prices. 23 Only after 2030 is the EU expecting gas-fired power generation to utilize carbon capture and storage (CCS) technologies so that gas would continue be part of the energy mix and to help the Union to reach its ambitious de-carbonization targets of 55-97% less GHGs by To adapt to the ongoing and foreseeable upheavals of the European and global gas markets Norway has largely given up oil price indexation. With its more flexible approach to contracts than Gazprom, in 2012 it became the Union s largest gas supplier ahead of Russia which was more hesitant to fully open up its pricing model; 25 yet in Norway s supply problems looked to offset those gains on the demand side. In sum, while global gas trade is facing a major shift to meet Asia s growing demand, Norway is expected to remain a major gas supplier to Europe until 2030 supported by four drivers: its robust supply, potentially increasing demand for non-russian gas, pricing and promotion of environmental stewardship. Denmark expects to be able to maintain its oil and gas exports only until around 2020 (see Table 1). Successful exploration and new technologies may prolong these dates until 2035 for oil and 19 IEA (2012) World Energy Outlook, pp. 33, 111, Depending on estimates, from 12.6mbd in 2011 to 10.4mbd in 2030; or, from 30 to 20 BTU from 2011 to 2040, or from 38% to 33% in the energy mix; see Exxon (2013) The Outlook for Energy: a View onto 2040, p IEA (2012), World Energy Outlook, p IEA (2013) World Energy Outlook p. 103; Exxon (2013) The Outlook, p IEA (2013), p European Commission (2011), p Euractiv (2013) Norway overtakes Russia as EU's biggest gas supplier, 25 June,

8 2030 for gas. 26 Denmark s fossil fuel exports as of today yield some 4 billion euros to the state budget annually but are small in volume compared to Norway. 27 In 2010, crude oil and refined products totaled 82 kb/d in bcm of natural gas was delivered to Sweden, Germany and the Netherlands however, the gently declining trend of domestic gas demand may help to sustain the gas exports. 28 Denmark s target is to meet 30% of total primary energy demand by renewables by 2020; phase out all coal, and all oil in heating by 2030; and have 100% renewable electricity and heating in The supply side and climate policy drivers mean that Denmark s exposure to the changing supply and demand situation in the oil and gas markets may temporarily increase during the 2020s, depending on exploration and technology development, which, for their part, depend on prices and policies. If Denmark s planned full conversion to renewables succeeds by 2050, any exposure to global oil markets may prove short and mostly limited to transport fuels. Table 1: DENMARK: Total net imports (Mtoe) TOTAL NET 19,00 7,12-9,53-6,35-5,02 0,05 1,97 IMPORTS Coal Exports 0,04 0,03 0,07 0,09 0, Imports 1,91 6,25 3,86 4,44 3,97 2,58 1,88 Net 1,87 6,22 3,78 4,35 3,93 2,58 1,88 Imports Oil Exports 2,85 5,82 18,40 14,14 13,59 2,02 1,41 Imports 21,43 8,57 9,91 9,59 8,98 1,90 2,58 Int l -1,42-1,53-2,06-1,79-1,29-1,59-1,55 Marine and Aviation Bunkers Net 17,15 1,22-10,55-6,34-5,90-1,71-0,38 Imports Natural Gas Exports - 0,93 2,88 4,93 3,58 1,68 0,74 Imports Net Imports - -0,93-2,88-4,93-3,58-1,68-0,74 26 IEA (2011) Oil and Gas Security: Emergency Response of IEA Countries Steen Hartvig Jacobsen (2010), Denmark expected to be a net exporter of oil and gas for another eight to ten years 27 Gatermann, Reiner (2013) Danes united behind the most ambitious energy plan in the world, European Energy Review, 15 August 2013, 28 Ibid., pp. 7, The Danish Government (2011) Our Future Energy, p.5.

9 Electricity Exports 0,11 0,42 0,67 0,98 0,94 0,00 Imports 0,09 1,03 0,72 1,10 0,96 0,12 0,29 Net -0,02 0,61 0,06 0,13 0,03 0,12 0,29 Imports TOTAL STOCK -0,44 0,16 0,43-1,05-0, CHANGES Source: IEA: Energy Policies of IEA Countries: Denmark (2011) As for natural gas, Denmark and Sweden s combined demand may need to be supplemented from the European market in the next few decades. However, Denmark s main gas company DONG Energy s 2020 strategy does not foresee the building of any LNG terminals. 30 Despite this possibly emerging small-scale exposure to the European market, Denmark will be relatively little affected by this global trend. Drawing maximum financial benefits from its remaining fossil fuels, it is set to gradually phase out these fuels, to invest in feed-in tariffs and set renewable energy premiums and energy savings obligations, 31 in order to maintain a high extent of energy independence in the changing operating environment (see also trend III below). Fossil fuels importers Finland and Sweden will be impacted more than Denmark. As a partial countermeasure to their vulnerabilities as well as a climate policy response, not least driven by EU policy, Finland and Sweden have both committed to increase the share of renewables in their energy mix by a tenth by Finland has set a 20% share target for biofuels in road transport by 2020 and Sweden a 10% target; at the same time, Finland aims to reduce the use of oil by 20% until 2020 mostly in transport and heating, and to substitute 10% of natural gas by biomassbased solutions. 33 Finland targets to reduce the GHG emissions of transport and energy production by 80 % by Finland has sought to make EU infrastructure support funds available for natural gas market actors through an EU Common Projects of Interest listing for the projects of building the Baltic Interconnector pipeline and the Finnish-Estonian LNG terminal. 35 However, these aims are driven by EU policy to diversify supplies and create a regionally better covering gas market to complement the existing Gazprom-supplied pipeline in southern Finland and Gazprom s supplies to Estonia. Finland plans no increase in the use of natural gas in combined heat and power production (CHP) or electricity generation by In its 2009 document, the responsible ministry set a self-sufficiency target in electricity generation by foreseeing an expansion in the share of nuclear power and the evening out of seasonal 30 DONG Energy, 2012 results and 2020 strategy, presentation.pdf. 31 Nordic Energy Research and IEA (2013) Nordic Energy Technology Perspectives, p Nordic Energy Research and IEA (2013), p Ibid.; IEA (2013b) Energy Policies of IEA Countries: Sweden ; Valtioneuvosto (2013) Kansallinen energia- ja ilmastostrategia, pp Government Foresight Report on Long-term Climate and Energy Policy: Towards a Low-carbon Finland. Prime Minister s Office Publications 30/2009, p Valtioneuvosto (2013) Kansallinen energia- ja ilmastostrategia, p. 34.

10 imbalances by developing two-way networks with the EU and Russia to complement the Nord Pool (see also Table 2). 36 Table 2: FINLAND: Total primary energy consumption (TWh) Traffic fuels Other oil Coal Natural gas Peat Wood-based fuels Nuclear power Hydropower Wind power 0,3 6,0 6,5 7,0 Others Electricity import Total consumption Source: Kansallinen energia- ja ilmastostrategia (2013) Sweden targets the phasing out of fossil fuels in heating by 2020 and in the vehicle stock by 2030 (referring to road transport), with a view of having zero net GHG emissions by However, according to the IEA, by 2030, the share of oil in the total final consumption is set to decrease only modestly from the 25% in Natural gas is expected to continue to play a minor role in the Swedish energy mix. However, an LNG plant is initially planned by Swedegas and the Dutch Vopak to Gothenburg, in order to provide less carbon-intensive shipping fuels and help the industry to switch away from oil. 39 Until 2030, like in the case of Finland and Iceland, part of Sweden s security of supplies is set to continue to depend on a more competitive oil market while they each look to benefit relatively little from the new opportunities opening with a more interconnected European natural gas market (see Table 3). Table 3: SWEDEN: Total energy supplies (TWh) Total fuel supply Coal and coke Työ- ja elinkeinoministeriö (2009) ENERGIAN KYSYNTÄ VUOTEEN 2030: Arvioita sähkön ja energian kulutuksesta, p. 13, En sammanhållen klimat- och energipolitik. Regerings proposition 2008/09: IEA (2013b) Energy Policies of IEA Countries: Sweden, pp. 6-8; Natural Gas Europe (2013) Sweden Shows Interest in LNG <

11 Biofuels, peat of which Ethanol 0,0 2,1 1,8 1,5 FAME 0,0 1,2 3,4 3,7 Biogas 0,0 0,3 1,0 1,5 Peat 2,7 3,5 4,6 5,1 Waste 4,1 15, Oils (inc. LPG) Natural gas 6,2 9,2 9,1 7,0 Town gas 0,3 0,4 0,1 0,0 Waste heat, 7,7 10,7 9,0 8,9 heat pumps Hydropower, gross Nuclear power, gross Wind power, 0,0 1,4 11,3 12,0 gross Import export (electricity) Total supply Source: Långsiktsprognos (2012). In Iceland, electricity is exclusively produced from domestic renewable geothermal and hydropower sources. Oil accounts only for some 15% of the total primary energy supply, and is chiefly used in the transport sector. 40 Iceland intends to reduce GHG emissions in transport and energy production by 50-75% by In summary, the trend of the global power shift has some demand side implications for Norway, supply side implications for Finland, Sweden and Iceland, while Denmark looks relatively unaffected on this plane. Being able to exploit their rich domestically available renewable energy resources, the Nordics will be far less impacted than many other European states that are currently losing their relative power; and neither are the Nordics much affected by the shift of energy flows to Asia. Nevertheless, the Nordics will all be impacted by any fluctuations in pricing, even though the Danish case here again looks different (see below trend II). Apart from the states, the extra-european operations of Nordic energy and service companies will be affected in these contexts where the role of state-owned oil and gas companies is in general 40 Orkustofnun (2013) Energy Statistics in Iceland 2012 < enska.pdf>. 41 Ministry for the Environment (2007) Iceland s Climate Change Strategy.

12 increasing; yet they should be relatively well placed for this. 42 For example Norway s 67% state owned Statoil operates already now in more than thirty countries. Just as Statoil, the 57% stateowned Danish DONG, fully state-owned Swedish Vattenfall and half state-owned Finnish Fortum and Neste Oil are all international companies with their origins in strongly corporatist societies where that state, business and society intermingle and have shared interests. As they also have for long had strong corporate social responsibility and environmental protection policies they should be relatively well prepared to deal with the new transnational actors and activists interested in the operations of energy companies at home and abroad. Yet as a rule, their direct experience of combating terrorism against critical infrastructures is shorter. Trend II: empowerment of individuals and new patterns of consumption and production The Nordic countries have for decades been welfare societies with a large middle class, high level of education and access to information. These variables have created ample possibilities for consumer behavior leading to energy consumption. The global trend of individual empowerment means that similar possibilities of energy consumption will be available for increasing numbers of citizens of emerging economies in Asia and elsewhere. In other words, here we find a linkage to the trend of a global power shift (see trend I) leading to expanding energy demand. This instructs Finland and Sweden in particular to seek to lessen their dependence on global prices of fossil fuels and develop domestic renewable alternatives (see also trend IV below) and the new types of networks they require, as is also declared in the 2050 scenarios of the EU. 43 The components of energy security most affected by this trend include the security of demand, pricing and the socio-economic facets of energy. In particular, the socio-economic components, including energy consumer behavior, are grossly overlooked in relation to prospects of energy savings, efficiency and new types of networks. 44 We will survey some of these issues in this potentially vast area in the case of Denmark. Denmark is at the forefront of empowering individuals in energy policy. It has since the late 1970s transformed its energy infrastructure towards a more decentralized, renewable energy centered model where windmills and individual choices play a much larger role than in centralized systems. The state has created several incentives for 88% of windmills becoming owned by individuals and cooperatives first by means of investment subsidies, then from 1981 with feed-in tariffs guaranteeing minimum price, and then by means of finance support for wind farm projects using Danish technology, and carbon tax making fossil fuel generation more expensive. In addition, the state has obliged transmission system operators to connect new generators of wind power; and extend and strengthen the grid if necessary. Were the operators unable to do so, they would be obliged to present alternative solutions, with the costs to be shared between the wind turbine owner and electricity utility. 45 An overwhelming majority in the 42 Bilgin (2012), Energy Transitions and the Revival of Geopolitics, in Krishna-Hensel, Sai Felicia (ed.), New Security Frontiers: Critical Energy and the Resource Challenge (Farnham: Ashgate), pp European Commission (2011) Roadmap for moving to a competitive low carbon economy in 2050, p See e.g. Madlener, Reinhard, Harmsen-van Hout, Marjolein J.W. (2011) Consumer Behavior and the Use of Sustainable Energy, in I. Galarraga, M. Gonzáles-Eguino and A. Markandya (eds) Handbook of Sustainable Energy, pp Cheltenham: Edward Elgar. 45 Brown, Marilyn and Sovacool, Benjamin (2011) Climate Change and Global Energy Security: Technology and Policy Options, pp Cambridge, Mass: MIT Press.

13 Parliament approved Denmark s de-carbonized energy system vision for 2050 in March The voters were also backing it strongly. 46 Finland and Sweden face some structural constraints in following the Danish model even though Sweden has also adopted a policy target of zero net emissions of GHGs by 2050; Finnish authorities, by contrast, were in 2013 only discussing the country s own 2050 objectives in the light of the EU s de-carbonization scenarios. 47 The Finnish and Swedish economies are more energy intensive than Denmark s. In Finland, the final energy consumption per capita is double that of Denmark and in Sweden roughly speaking 50% higher while Denmark s figures are slightly below OECD average. Norway sits between Finland and Sweden in this respect, but Iceland s energy intensity almost doubles even that of Finland. In the Finnish and Swedish cases the reasons beyond cold climate include the centrality of heavy industries such as the forestry and metal industry, but also ship building, machinery and mining. In Iceland the expansion of the aluminum industry has increased energy consumption with this industry alone accounting for 71% of electricity consumption in Being part of the EU s slowly integrating energy policy, Finland and Sweden in particular will need to develop new infrastructure to combine their largely centralized generation and grids, and existing and future interconnections with neighbors. New decentralized two-way networks would allow small-scale individual producers to enter markets. 49 In Finland, this would be a sea change with the legacy of an energy system steered by the industry and its lobby groups where renewable energy support is largely channeled for large producers except for heat pumps and small-scale wood energy. 50 In Sweden industrial heat production accounted for more than half of the renewable generation from biomass; one third resulted from district heating. 51 The Danish model underlines the crucial role of policy incentives in empowering individuals in energy security. Owing to the complexity of energy, and hence, the cognitive capacities and expertise this sphere presupposes, institutional policies are crucial in channeling peoples consumption patterns and for them to develop an interest in household level energy use and production. However, the expected rising energy prices until 2030 within the EU, because of the required new investments in infrastructure, and energy savings technologies and solutions, 52 may facilitate the emergence of such interests. Finland and Sweden have already introduced nearly full coverage of smart metering in households, which represent one component in the move towards more decentralized systems. 53 So far, Finland has introduced feed-in tariffs and Sweden agreed with Norway on a common market for electricity certificates. They will with great 46 Gatermann, Reiner (2013) Danes united behind the most ambitious energy plan in the world, European Energy Review, 15 August 2013, < 47 See IEA (2013b) Energy Policies of IEA Countries: Sweden, p. 12; Valtioneuvosto (2013), p Nordic Energy Technology and IEA 2013, p. 23; 48 Orkustofnun (2013) Energy Statistics in Iceland 2012 < 49 European Commission (2011) Roadmap for moving to a competitive low carbon economy in 2050, pp. 8, Ruostetsaari (2010) Energiavalta, pp University of Straclyde (2013) Assessing Biomass Feasibility < 52 See European Commission (2011), pp European Parliament (2010) Decentralized Energy Systems < p. 13.

14 likelihood have to do much more if they are to properly enable small scale renewable energy producers enter the markets which for its part sets new infrastructural requirements for smarter networks. How these trends would influence demand and prices, and create new possibilities for individuals and households to meter their own consumption, and how consumers opt for new types of contracts and supplies, influences the markets. Overall, the socio-economic drivers of energy security are most consequential in Denmark where policy decisions have empowered individuals and where energy use has been de-coupled from economic growth. Although the Nordics are structurally exposed to ride this new trend, apart from Denmark very significant lock-ins will slow down the conversion to new types of networks and consumer behavior until At the same time, the conversion will bring new vulnerabilities with it as networks become more dependent on computerization, which makes them vulnerable for cyber-attacks. Trend III: The food, water and energy nexus Our third trend, the constantly more interconnected food, water and energy nexus, is closely related to the following trend IV on climate change and also represents similar complexity in crosscutting the four components of energy security. The demand for food, water and energy is expected to increase within the next two decades. 54 As the impacts of the growing demand between regions will vary significantly, the effects on Nordic countries will most likely remain modest. In fact, the region might benefit from climate change thanks to the better circumstances it can create for agriculture (with possible impact on the level of support from the EU s common agricultural policy, however), 55 and from the at least temporarily increased energy production from fresh water as well as potential increase in biomass supplies. According to the Food Security Risk Index, 56 in the global context the Nordic countries feature among the most favorable regions. Finland is ranked as the most food-secure followed by Sweden, Denmark and Norway, with Iceland lacking behind due to its remote location and modest domestic agricultural production. Nordic countries are rich in water resources, which are effectively used for hydropower generation (see trend I above), food production, biomass-based production and for nuclear power generation in the form of condensation water. The increased demand of biofuels due to the EU level and national targets might also to some extent increase the need for fresh water. Globally the demand for biofuels poses fundamental questions regarding how water, food and energy production compete against each other: how grain/crops are irrigated and converted from product of food and feed to fuel, and how land used for food production is replaced by bio-energy crops, which in turn reduces water resources available for food production. 57 The Nordic countries are forerunners in developing second-generation biofuels. The material used in biofuels production comprises mainly side products of other processes. Of the Nordics, Denmark as an agricultural goods exporter is unlikely to be hurt much by possibly rising prices and shortages in global food 54 NIC (2012) Global Trends 2030, p. 31; ESPAS (2011) Global Trends 2030, pp ESPAS (2011), p Maplecroft (2013) Food Security Index. 57 Bilgin (2012), p. 54; Hazell and Evans (2012), p. 385.

15 products trade quite the contrary while Finland and Sweden are partly covered by the protectionist EU agricultural policy and Norway by its own agricultural protectionism. In terms of energy security, the growing demand on these resources might eventually lead towards natural resources supplier dominated markets. Yet, as already can be seen for example in the Finnish biofuels market, the multiplication of suppliers brings with it more competition if and when barriers for competition are controlled which on the global level, however, is not quite the case for food products or biofuels. 58 More competitive markets could result in more volatile prices (biofuels, US corn vs. Finland/Sweden). 59 On the other hand, the competition effect of the increased amount of suppliers might cause a downward pressure in prices. The possible extraction of unconventional gas in Denmark and Sweden by the s would likely require large amounts of water depending on the geological qualities of the finds and consequent technologies that would be used. A water management plan regarding surface and ground water would be needed while the transport needs of servicing the wells would influence nearby agriculture and biomass generation. The water-energy-food nexus assumes new dimensions in the Arctic where Norway out of the Nordic countries is by far the leading actor even though in the wider Arctic picture it is overshadowed by Canada and Russia. 60 In Norwegian fossil fuel policies, the environmental component of energy security, including fisheries and other marine resources, occupies a special role. 61 The Barents Sea has approximately 17% of the total petroleum resources of the Norwegian continental shelf and 30% of undiscovered resources. 62 Several Norwegian and international energy companies started exploring and developing fields in this emerging oil and gas province after the Norwegian Government opened bids for 72 blocks in At the same time the Barents Sea is home to the world s largest cod stock and a sizable haddock stock, which is turn depend on stocks of smaller fish eating the abundant plankton of these waters. On top of people and fish, birds and marine mammals are part of this ecosystem. The fish stock is jointly managed by Norway and Russia. 63 In Greenland, which is moving towards independence from Denmark, multinational oil companies hold exploration licenses in the west and northeast coasts, following Norwegian environmental stewardship standards. 64 This all means that Norwegian actors together with their international partners, as well as those working in Greenland, will have to upgrade the infrastructure and international cooperation to counter oil spills and sabotage, and improve sea rescue and icebreaker fleets, all of which necessitates high enough energy prices. Overall, the risks created by this food, water and energy nexus highlight supply side drivers the need for diversifying supplies and for new sources. In global terms, this includes LNG, 58 See Hazell and Evans (2012), p ESPAS pp Aalto, Pami (2013) Explaining the Arctic Exception in EU-Russia Relations: What is Missing?, Northern Review 37 (Fall 2013): Aalto and Tynkkynen (2007), pp Tamnes, Rolf (2011) Arctic Security and Norway, in Kraska, James (ed.) Arctic Security in an Age of Climate Change (Cambridge: Cambridge University Press), p Honnelund, Geir (2012) Making Fishery Agreements Work: Post-Agreement Bargaining in the Barents Sea (Cheltenham: Edward Elgar), pp. 1, Byers, Michael (2013) International Law and the Arctic (Cambridge: Cambridge University Press), pp

16 unconventional gas and renewables and possible increases in the prices of natural resources as well as the in-built environmental stewardship components of energy security. This trend also creates some pressures for joint negotiations for contracts with suppliers on the EU level for Nordic EU members. Trend IV: climate change and adaptation In the Nordic region in 2010, energy production accounted for 62% of GHG emissions. 65 Climate change reorients global demand from oil and coal towards less GHG intensive natural gas and renewables. Owing to the relatively small role of natural gas in the Nordic countries energy mix (except for co-generation district heating in Denmark and Finland), and the fact that little expansion foreseen by 2030 (see trend I above), in the Nordic context we mainly speak of implications to infrastructure for renewable energy production. Due to the short and middle term weakness in economic growth and the unconventional gas boom in the USA, global investment in the development of renewable energy sources has recently slowed down. In the Nordic countries the share of energy related R&D investment rose between thanks to decarbonizing policies. Its share of total R&D funding varied between 7% (Norway) and 11% (Finland). 66 The responses of the Nordic countries to this trend are highly influenced by the corresponding policies of the EU. Vis-à-vis this trend the Nordic countries are a more coherent group than visà-vis trend I of a global power shift. They are all members of the EU Emissions Trade System (ETS). Denmark, Finland and Sweden are bound by the EU s so called targets aiming at a 20% reduction in GHG emissions from 1990 levels; raising the share of energy consumption produced from renewable resources to 20%; and improving energy efficiency by 20% by In 2014 the Commission proposed a new 40% target for emissions, leading to a 27% target for the share of renewables in the whole EU and 25% increased levels of energy efficiency by The Nordic states have higher GHG emissions per capita than many other industrialized countries owing to their energy intensive industries (see trend III above), sparsely populated areas requiring extensive transportation capacity and the cold climate with a high demand for heating. The Nordic states commit themselves to reduce GHGs by 15-40% by 2020, with Finland and Iceland in the low and Sweden in the high end; and Iceland and Norway qualifying their targets with the condition of a new global GHG emissions agreement being reached. 69 At the same time Norway promises to be carbon neutral with a new treaty by 2030, assisted by international trade in carbon credits. Sweden attempts no net carbon emissions by 2050 either, by utilizing carbon sinks or credits. 70 Achieving the targets requires improvements in energy efficiency especially within the energy intensive industries, of which the competitiveness is highly dependent on energy prices which, for their part, tend to increase with more ambitious 65 Nordic Energy Research and IEA (2013), p See ESPAS, p. 91; Nordic Energy Research and IEA 2013, p European Commission, 68 European Commission (2014), pp Nordic Energy Research and IEA 2013, p Nordic Energy Research and IEA 2013, pp

17 climate policies. 71 Here we return to how integral to Nordic energy security are the environmental stewardship and social components. Regarding the need to develop renewables the Nordic countries can adapt better than many other European regions. Their rich renewable resource base accounted for one third of their total primary energy supplies in Here they are mainly differentiated by which renewables they aim to exploit. As discussed above (see trend I), Denmark and Sweden have ambitious commitments set to distance them from fossil fuels moving on to 2030 and Sweden cannot, however, much rely on increasing the share of hydropower, which currently is a major source of renewable energy, while Denmark practically lacks that resource. By contrast, Iceland and Norway might in this respect benefit from climate change by 2030 due to increasing water supplies as a consequence of the melting waters from the glaciers. Yet the impact might be temporary as the glaciers especially in Iceland are prospected to be drained by Having no glaciers, Sweden and Finland have already harnessed most of their available hydropower capacity. The expected climate change induced increase in the annual variation in rainfall and consequently in the availability of hydropower, and the impact on electricity prices, will in any case be significant for the Nordpool electricity market on which they all rely for seasonal adjustments in supplies especially so for Finland which in 2010 imported almost 15% of its electricity from this market. 74 A major part of the Danish solution is to develop an extensive wind power network and technology. In 2011 windmills provided 21% of the electricity supply. 75 By 2020 the aim is to cover approximately 50% of Danish electricity consumption by wind power. 76 The growing demand for wind power depends on access to raw materials needed in wind mills (and also in electric vehicles), which belong to the scarce rare earths currently imported mainly from China. 77 The other Nordic countries are also planning to increase the share of wind power. In Iceland the first windmills were built in In this sparsely populated country with vast open areas, wind power has high potential. 78 Finland and Sweden generated around a tenth of their electricity supply from biomass in Denmark and Sweden covered almost and over a half, respectively, of their district heat supply by biomass and waste sources. 79 Finland and Sweden, and recently also Denmark have strongly invested in biomass research and development. 80 In Denmark in 2011, 23% of the energy used 71 IEA 2012, p Nordic Energy Research Björnsson, H. & Pálsson, F. (2008), Icelandic glaciers. Jökull No See Nordic Energy Research and IEA 2013, pp. 27, Nordic Energy Research and IEA 2013, p. 22; Gatermann, Reiner (2013) Danes united behind the most ambitious energy plan in the world, European Energy Review, 15 August The Danish Energy Agreement Accelerating Green Energy Towards Alonso et al. 2012; ESPAS p See Veðurstofa Islands (2013) The Wind Energy Potential of Iceland. 79 Nordic Energy Research and IEA 2013, p Nordic Energy Research 2011.

18 for heating was from renewable sources. In district heating that share was 40%. 81 Denmark has a centralized system of large scale straw plants, while Finland and Sweden use wood and its side products. Due to the EU targets for increasing the share of biofuels, their demand is expected to grow remarkably. However, in the current industrial processes only a small amount of domestic biomass resources are exploited. This means that the response to the implications of trend I on a changing balance in global fossil fuels trade, and to climate change, is only partial. Moreover, the GHG balance of different biomass sources used in the Nordic countries varies enormously, with peat being the worst and not comparable to wood side products; most first-generation biofuels only incur marginal GHG emission reductions considering the full production and transport cycle. 82 The projections on exploiting hydropower, wind and biomass until 2030 offer a role for Denmark, Finland, Norway and Sweden vis-à-vis the European and even global level adaptation to climate change, in addition to the still untapped and unharnessed potential in Icelandic and Norwegian tidal and wave power, as well as Icelandic hydrogen, which as industries are still in their infancy. The significance of Norway s vast water reservoirs will also grow as a storage and balancing mechanism, helping to exploit the fluctuating supply of other renewables such as wind and solar power in the European electricity markets. Iceland, however, has until now been a case apart in being geographically isolated from European energy grids. The IceLink project foresees the building of the so far longest underwater cable between Iceland and the UK in order to export renewable electricity from Iceland. Supply side drivers, and to a lesser extent demand side drivers may therefore in fact be making the Nordic countries more competitive vis-à-vis this trend regardless of the global difficulties encountered by the renewable energy industry in the early 2010s. The intervening variables that may counter our neutral or relatively positive assessment of the impact of this trend on Nordic energy security include the need for stable national and EU policy frameworks and financial support for the development of renewables; needs for new types of infrastructure (see also trend II above), the ongoing transition from energy intensive industries towards ICT and other sectors; and the prospects of developing Arctic fossil fuels in Norway and Denmark/Greenland. 3. Discussion: rebalancing Nordic energy security The four global megatrends discussed above have both differentiating and integrating impacts on energy security in the Nordic region until In our analysis the indigenous Nordic variables conditioning how the megatrends are translated into regional level patterns are in most cases likely to prove relatively resilient during the next decade and a half. This is due to lasting features in the Nordic countries resource base, as well as several lock-ins to existing energy systems and long lead times in switching to new systems including the building of new infrastructures. Denmark is an exception of sorts as it is in fact among the trendsetters on the global level. Nevertheless, on the general level the individual differences among the Nordic 81 Danish Energy Agency (2012) Energy Policy in Denmark, p See Hazell, Peter B.R. and Evans, Martin (2011) Environmental, Economic and Policy Aspects of Biofuels, in I. Galarraga, M. Gonzáles-Eguino and A. Markandya (eds) Handbook of Sustainable Energy, pp. 376, Cheltenham: Edward Elgar.

19 states are likely to stay recognizable. In turn, these differences mean that some real limits to regional cooperation continue to exist unless we speak of division of labor and compatibility in responding to energy security problems by The first trend pertaining to global power shift and a consequent new balance between the supply and demand of fossil fuels differentiates the Nordics into two groups. For Norway and Denmark, this connotes mostly positive adaptation on their own terms with the prospects of financial gains. Finland and Sweden face forced adaptation in the role of part-funders of the global power shift as they pay for continued imports while for Iceland this effect is lesser. Trend II on individual empowerment and new patterns of energy production and consumption with more decentralized energy systems highlights Denmark s proactive adaptation and indeed, trend-setting policies. Trend III on the food, water and energy nexus leading to more natural resource supplier dominated and volatile markets portrays the Nordic countries as a relatively well-supplied and as such a homogeneous group. Yet Norway faces potential conflicts in utilizing its Arctic fossil fuel resources to respond to the security of supply concerns of its European major customers without endangering the environmental stewardship component of energy security. Regarding trend IV on climate change and adaptation the impact for the Nordics may be relatively neutral or even positive as far as supplies are concerned. They are committed to de-carbonizing national targets respecting and above EU targets but aim to attain these with the help of different renewable energy sources and policies. Denmark stands out with its bold fully de-carbonized long-term vision until 2050 while Norway and Sweden aim at carbon neutrality. The Danish policy is funded by fossil fuel proceeds and domestic energy consumers, but it may ultimately enhance Danish energy security and pay off along the social component of energy security in terms of new industries and jobs. The other Nordics mostly look to increase incrementally the share of renewables in the energy mix with lower investment risks but may end up paying higher prices without the same stimulus prospects into the domestic economy. To summarize our response to our first research question: regarding the global megatrends we have analyzed, Nordic energy security is likely to be less affected when compared with many of the region s European partners. Until 2030, the Nordic countries are less exposed to global fossil fuels trade than many EU member states even though Finland, Sweden and Iceland, in this order, will continue to experience some vulnerability. The Nordic countries possess rich renewable, water and food resources; and are leaders in the integration of electricity markets in particular when more interregional trade and European integration vis-à-vis this final product is foreseen and when the share of electricity in final energy demand is being forecasted to rise in Europe by a quarter by The Nordic countries have also taken some steps towards developing new types of energy systems and networks, in particular Denmark. Yet alongside a reasonably secure regional picture, each of the major actors possesses a somewhat different outlook (Figure 2). 83 IEA (2012), p. 180; EU (2011?), p. 6.

20 Figure 2: Rebalancing Nordic energy security Norway is set to remain a notable fossil fuels supplier assuming high prices and can combine that with a wider role in the increasingly renewable production characterized Nordic and EU electricity networks. Its supplies can help to even out seasonal imbalances and partly compensate for the shrinking indigenous fossil fuel supplies within the EU, and support the aims of decreasing the reliance on Russia. The global demand for Norwegian energy expertise can grow and hence positively influence the social component of the country s energy security. Along the environmental stewardship component, there are risks in utilizing Arctic fossil fuel resources. Denmark can capitalize on its pioneering, decentralized and increasingly renewable reliant energy system, supported by domestic fossil fuels helping to finance the planned de-carbonizing transition, assuming high global oil prices. We expect a well-balanced supply-demand situation for Denmark as a current small exporter. Finland faces perhaps the most significant adaptation needs. These needs concern a move from an energy policy driven by currently declining energy intensive industries towards a more consumer driven, competitive model that is gradually being introduced on the EU level on which the country s energy policy centrally depends. Regarding supply security the Finnish-Estonian LNG project originates on EU level policy targets but as far as Finland is concerned, until the 2014 Russian-Ukrainian conflict it resonated vaguely with any nationally confirmed supply problems. Foresight for developing the country s renewables segment further is very cautious. In a word, Finland continues to be part dependent on global fossil fuel supplies and prices as well as EU regulation. Sweden s supply security outlook is similar to Finland s as far as fossil fuels are concerned but is better protected owing to its larger hydropower resources and biomass production and in principle could plan a future as an electricity exporter, at least more so than Finland. Sweden has a more proactive renewables and climate policy which involves more risks

21 in terms of prices and along the social component of energy security, yet it potentially promises more. Iceland is in many ways a case apart. It will be less exposed to global fossil fuels supply than Finland or Sweden. It may become an electricity exporter to the UK if electricity prices rise as expected by the EU and the IEA. Yet Iceland is likely to stay outside of Nordic energy system interdependencies. Regarding our second research question on the extent to which the Nordics should work together, and how, we should recall that responses to global trends posing risks must usually be national in the first place as international policy coordination is demanding. 84 This is also well seen in the EU context where member states have only pooled parts of their capacities in the energy sector, for example. So far, the responses of the Nordic countries to the global trends we have discussed have been mostly national. At the same in Denmark, Iceland and Norway, the renewable energy segment of these policies has been relatively stable, while in Finland and Sweden more variable; this has made investments riskier and adaptation less proactive. However, apart from their national policies and participation in EU level R&D programs, the Nordics also cooperate among themselves. They channel some 4% of national low-carbon energy technology investments to Nordic programs on sustainable energy systems, including renewable energy, electricity grids and low-carbon transport. 85 Several observations can be made regarding Nordic cooperation. First, it is clear that the current common Nordic pot could be larger to be more effective. However, at the same time, expecting the social component of energy security to become more salient in the future, larger regionally managed fund would mean more taxpayers funds used further away from electoral control. After all, Nordic cooperation budget for 2013 was frozen nominally onto the 2012 level, owing to concerns on effectiveness and sustained need, and the effects of the financial and economic crisis. Second, given that their energy mixes and competences are mostly quite different, only somewhat limited gains can be made by working on individual renewable energy segments in the Nordic context. To illustrate: Denmark does not plan a long-standing future as fossil fuels power unlike Norway does. Instead Denmark develops wind power which is small in Norway despite the country s high potential. As for biomass, Denmark, Finland and Sweden each have capable actors but are using different sources and producing different commodities. Third, given their pioneering Nord Pool electricity market, which sets a partial model for developing the integrated electricity networks targeted by the EU, the Nordics are well positioned to cooperate on this level and should expand that cooperation further on towards the Baltic States and northern Europe in general. Fourth, cooperation on and investment in low-carbon transport makes sense too. Norway has competence in gas-powered maritime traffic; Finland and Sweden are quite capable for developing bio-fuels while the whole region has a healthy electricity generation expectation by 2030 that would be required by larger scale use of electric vehicles. Fifth, work on the environmental stewardship component of energy security in general makes sense as each has relevant expertise. 84 World Economic Forum Global Risks report (2013). 85 Nordic Energy Research and IEA 2013, p. 43.

22 This leads us to the sixth point. The Nordic countries are each quite small, niche type state actors while largely the same can be said of their energy companies in a more global context, except for Norway s Statoil. This means that their marketing capacities are limited. Considering options to combine them for export purposes would be sensible. In this, states and companies should work more together in order to fit themselves into the expanding actor network of global energy security where Nordic actors represent the same repository of European actors with shrinking centrality. Although the Nordics are relatively well secure in their energy policies until the 2030s, their standing would not suffer from an enhanced ability to export energy security.