Sure enough, cars use less petrol, but we drive more while more and more offices are constructed as glass-houses shining luminously, but to little purpose, throughout the night. Houses are definitely better insulated though our living quarters continue to grow in size to the extent that what is gained by having thicker walls is soon lost by having more walls. Many of us, in reality, own two or even three houses with holiday homes included.
Perhaps worst of all in terms of energy spending is the difficult political question of air-travel. Here we are all currently enjoying a bonanza as real prices continue to fall and thus we all fly more and more. In fact, for some time now the majority of us have been expending more energy on holiday air-travel than on the heating of our homes while the actual monetary cost of travel is less than half that of heating.
For energy producers high market demand is advantageous. For the public the same could be the case – that is – if the production, distribution or consumption of energy did not cause pollution or accidents. In many ways this summarizes the debate on energy where costs must be measured against environmental hazards.
This is well known. On the other hand many of us know less about energy as a commodity. With this issue of the Journal of Nordregio we hope to provide some insight into this question. For example, for those of us living in the Nordic countries it is becoming increasingly important to understand how the Nord Pool Spot Market, the bourse for electricity, functions as this market more or less determines the price of all of the electricity we consume. What makes prices go up and down and what are the most likely future trends?
In this context one issue in particular is of regional importance, namely, if prices become too high, will this lead to power intensive industries moving to low-cost countries. China, India and the Gulf countries are attractive as are Iceland and Greenland. New power-hungry aluminium plants are being planned or at least considered in both countries. In many ways, this is something of a parallel to developments in Norway some seventy to eighty years ago when hydro-electricity, provided at secure low prices, led to huge investments being made in melting-plants and other similar industries.
An increasing number of international electric connectors have been established or are being planned between the Nordic countries and continental Europe. For hydro-producers in Norway and Sweden this is definitely an advantage. Prices are still relatively higher in these more southern areas. For contracts one year ahead, by some twenty percent. Therefore it is probably just a question of time before overall prices for Nordic consumers will rise. Is that an advantage with respect to climate change?
The EU has agreed plans to reduce CO2 emissions and to make more efficient use of energy. At the same time the Union is heavily dependent on Russian gas supplies. Norway and Algeria are the two other major suppliers. The new pipeline planned through the Baltic Sea will increase Russian giant Gazprom's access to the European market. At the same the demand for gas is also high and increasing in Russia itself. Prices on the other hand are much lower. As such any prediction that assumes that energy prices will continue to rise across Eastern Europe seems well placed.
The Baltic countries find themselves in the situation where they can produce a lot more energy than they currently consume. They want to remain in such a position while also becoming an energy hub between east and west as this would see them benefit from the high profits associated with these commodities. In other words, they are acting as the rational market demands and just like their counterparts in the Nordic countries, in Gazprom, Exxon or Shell. This should not be a surprise to anyone.
By Odd Iglebaek