UPM.COM
Article | 06/18/2019 06:57:15

UPM Energy operates in evolving energy markets

Electricity markets are in transition as the world moves towards decarbonised energy production. New climate policies and technological developments are driving growth in clean energy sources. How do these changes impact the electricity markets?

According to the Bloomberg New Energy Outlook 2018, global electricity demand is estimated to increase by 57% by 2050. The electrification of the transport system, the growth of the Information Technology and digital industries plus the rising number of middle-class consumers are boosting the demand for electricity.

The good news is, the increasing need for electricity can be covered by clean energy production. Bloomberg estimates that “by 2050, wind and solar technology (will) provide for almost 50% of total electricity globally – ‘50 by 50’ – with hydro, nuclear and other renewables taking total zero-carbon electricity up to 71%.”

Balancing supply and consumption

In electricity systems, there has to be a continuous balance between supply and demand. Rapid changes in weather can cause energy production and prices to fluctuate widely in a very short time. Variations in supply must be compensated by other production methods or flexible consumption.

Flexible consumption is economically attractive for large industrial consumers, but small operators – including private households – can also take an advantage of it. In a nutshell, it means that energy is best used when there is a surplus of electricity on the market that will lead to lower prices.  

In the future, smart grids will manage load balancing and consumption. Automation can switch off the heating system in residential areas when demand peaks or schedule the charging of electric vehicles when energy prices are at its lowest.

Technological developments and the decreasing costs of batteries will support the growth of clean energy sources by making it possible to charge and store electricity in batteries and take that energy into use it when neither solar nor wind power is available.

Flexible consumption saves energy costs

With its long experience both as an industrial energy consumer and producer and coupled with its deep knowledge of operating in electricity markets, UPM Energy has launched a new energy management service to provide its expertise to large industrial energy users.

The service uses electricity forecasts to help consumers take advantage of trends that have an impact on prices. For example, when the market price is at its lowest, that would be a good time to increase production. In contrast, maintenance breaks are best taken when electricity is expensive. Flexible production planning based on changes in energy prices would result in continuous cost saving and diminish financial risks caused by peaking prices.

In addition, UPM provides an opportunity for companies to participate in the electricity markets and benefit from extreme price movements. For electricity producers, UPM Energy´s expert service provides an easy way to sell energy at the market.

Balancing power with water

Thanks to a carbon neutral energy portfolio UPM will remain a strong player in future energy markets. UPM Energy has a cost competitive, low emission and flexible electricity production portfolio in Finland. It mainly consists of hydro and nuclear power. The energy that is produced is sold to Nord Pool, the Nordic spot market.

For UPM, nuclear power is a CO2-free energy source that makes a solid base load for its operations.  As a high-power energy source, nuclear power plays an important role in UPM´s energy production scheme because it provides the stability necessary for a large industry. 

Hydropower is a big part of UPM’s Beyond Fossils strategy. It provides clean and renewable energy that can be stored efficiently and thus provides a good way to balance power needs. When power supply fluctuates and there is not enough electricity available in the markets for industries and households, hydropower can be quickly increased to address this imbalance.

 

Text: Vesa Puoskari