Nord Pool's role in the green transition
1/3 of greenhouse gas emissions in the world are related to electricity generation and heating, the largest single contributor to CO2 emissions. The green transition relies on decarbonizing electricity and electrifying the economy to meet the Paris Agreement's goal of limiting global warming to under 2 degrees Celsius.
By enabling the decarbonization of the energy mix through the market, Nord Pool is playing an important role in the process of reaching EU’s ambitious climate targets. The electricity markets are evolving fast to meet the climate challenge and Nord Pool facilitates the participation of new, innovative players such as aggregators and flexibility providers in the pan-European electricity markets. Nord Pool has partnered with innovative players to develop new opportunities and meet new needs arising from the green transition.
A market-based approach towards net zero emissions
Nord Pool is paving the way for the transition by ensuring that electricity is priced in a fair and transparent manner and that the lowest cost electricity sources are used first. The Nordic coupling model ensures optimized use of renewable energy, and by facilitating a phase-out of fossil fuels and a transition to renewables the transparent day-ahead market is directly linked to the UN's climate goals.
The merit order curve plays a crucial role in the transition towards a greener and more sustainable power system. By ranking energy sources based on their marginal cost of production, the curve highlights the cost-effectiveness of renewable energy sources such as wind, hydro and solar power. Due to the low marginal costs of production these sources are positioned at the bottom of the curve and used first. As the demand for electricity increases, the curve moves upwards to include other sources of energy such as natural gas and coal-fired power plants, which have higher marginal costs of production. However, the increasing availability and decreasing costs of renewable energy sources are causing the merit order curve to shift downwards, making them even more cost-effective and competitive.
Merit order as a tool
The merit order curve is a powerful tool for power system operators to make informed decisions about which sources of energy to use to meet demand. By selecting the most cost-effective and sustainable sources of energy, operators can minimize the cost of electricity production and ensure that the power system remains reliable and affordable for consumers while also reducing carbon emissions and promoting a greener future.
Markets price signals as indicators in the need for more renewables
The high price of electricity during periods of high demand create an economic incentive for investment in more renewable energy sources and new technology. Acting as an indicator of a strong demand for renewable energy and more capacity, the high prices also force the enabling and incentivizing of investments and streamlining the planning and regulatory processes.
We work closely with governments, EU, politicians, power producers, TSOs and regulators to ensure a well-functioning market that is capable of granting market access to renewable power while simultaneously phasing-out fossil technologies.
If you have questions with regard to Nord Pool's ESG work you can contact us on firstname.lastname@example.org