Tekoälystä mittavia etuja energiateollisuudelle

PekkaLundmark-60x60Posted by: Pekka Lundmark
30.1.2019
Kirjoitus on julkaistu aikaisemmin Tekoälyaika-blogissa 29.11.2018.

Louis Pasteur sanoi aikoinaan, että sattuma suosii valmistautunutta mieltä. Väittäisin, että harvalla alalla voidaan olla Pasteurin kanssa niin yhtä mieltä kuin energiasektorilla: fysiikan lakien mukaan sähkö virtaa taukoamatta kysynnän ja tarjonnan välillä täydellisessä tasapainossa.

Ja sähköjärjestelmän herkän tasapainon järkkymisestä puolestaan seuraa häiriöitä, turhia kustannuksia ja jopa laajamittaisia sähkökatkoja. Tähän tekoäly voi tarjota ratkaisuja, ja me Fortumissa olemme innoissamme tästä uudesta mahdollisuuksien maailmasta.

Tekoäly valvoo sähkön tuotantolaitoksia

Tasapainon säilyttäminen tuotantopuolella, Fortumin leipälajissa, vaatii, että laitokset ovat huippukunnossa, jotta kalliilta sähkökatkoilta tai kriittisiltä vioilta voidaan välttyä korkean kulutuksen aikoina. Siksi Fortum hyödyntää tekoälyä tuotantolaitostensa eri osien ja prosessien valvonnassa. Me ”kuuntelemme” vesivoiman ja yhteistuotannon gigawatteja, jotka kertovat meille, milloin ja mitä pitäisi huoltaa.

On tärkeää ymmärtää myös tasapainon toista puolta, sähkönkulutusta. Tuulen ja auringonpaisteen tahdissa vaihtelevan energiantuotannon nopea kasvu, sään ääri-ilmiöt ja lämmityksen ja liikenteen sähköistyminen lisäävät sähköjärjestelmän epävakautta enemmän, kuin mikään aikaisemmin. Itse asiassa niin merkittävästi, ettei ihmisen mieli pysty sitä enää hahmottamaan. Onneksemme koko ajan edullisemmaksi ja tehokkaammaksi muuttuvalla laskentateholla ja huikeasti lisääntyvällä määrällä dataa voi jo päästä pitkälle.

Algoritmit ennustavat sähkönkulutusta

Fortum käyttää jo nyt tekoälyä ennustamaan kaukolämpöverkon lämmityskysyntää. Sääolojen, ihmisten käyttäytymisen ja energiantarpeen ymmärtäminen auttaa meitä optimoimaan lämmön tuotannon ja tarjonnan, ja säästämään resursseja hyödyntämällä aina ensin kierrätettyjä ja hiilidioksidivapaita energianlähteitä.

Samojen algoritmien ansiosta olemme voineet ottaa käyttöön dynaamisen hinnoittelun, kun myymme lämpöä asiakkaille ja ostamme heiltä hukkalämpöä takaisin Fortumin ainutlaatuisessa avoimessa kaukolämpöverkossa. Pitkällä tähtäimellä voimme kehittää tekoälyn avulla lämmitysverkoista myös sähkövarastoja, jotka tasaavat tuulivoiman epävakaisuutta.

Toinen hyvä esimerkki on syväoppiva DeepMind -tekoäly, jota Google käyttää datakeskustensa energianhallinnassa. Tekoäly leikkasi datakeskuksen jäähdytystarpeita huikeat 40 prosenttia vuonna 2016, kun sitä ensin opetettiin ymmärtämään datakeskuksen energiankäytön tehokkuutta ja sitten ennustamaan keskuksen lämpötilaa ja ilmanpainetta seuraavan tunnin ajalta. Tulos on erittäin lupaava, sillä datakeskusten energiantarpeen ennustetaan kasvavan 2017 vuoden 200–300 terawattitunnista vähintään 1200 tai jopa 3000 terawattituntiin vuoteen 2025 mennessä.

Parempi tilannekuva ja kustannussäästöjä

Yhteenvetona voidaan sanoa, että tekoäly avaa mahdollisuuden entistä huomattavasti parempaan tilannekuvaan energiateollisuudessa. Se ei vain muistuta huomiota vaativista asioista, vaan tekee myös välttämättömistä toimista nopeampia, paremmin kohdistettuja ja jopa kekseliäämpiä.

Goldman Sachs on arvioinut, että digitalisaatio ja tekoäly voisi tuottaa noin 15 prosentin kustannussäästöt eurooppalaisissa energiayhtiöissä. Fortumin taseessa on tuotantolaitoksia yli 20 miljardin euron edestä, joten meillä ei ole aikomustakaan jättää tätä kiveä kääntämättä. Voisi jopa sanoa, että valmistautunut mieli suosii tekoälyä.

Artificial intelligence holds a substantial promise for the power industry

PekkaLundmark-60x60Posted by: Pekka Lundmark
30.1.2019
The blog post was originally published on AI Finland’s blog on 29.11.2018.

Louis Pasteur has been famed to say “Fortune favours the prepared”. I would argue that few can agree more with Pasteur than us in the power sector, because according to the laws of physics, the nature of electricity is to continuously flow between demand and supply in a perfect balance every single second.

And losing this delicate balance for equilibrium in the power system causes disturbances, generates unnecessary costs and may even result in large scale blackouts. This is exactly why the emergence of artificial intelligence holds a substantial promise for the power industry, and why Fortum is so excited of this new world of opportunities.

AI monitors power production facilities

In the production end of the power equilibrium, where Fortum is active, avoiding costly failures at times of high demand, or even avoiding critical failures in full, requires that the production assets are in top shape. That’s why we have harnessed AI to closely monitor the behaviour of various parts and processes at production facilities. In our quest to be prepared, we have started “listening” to our gigawatts of hydro and CHP power that tell us when to maintain, and how.

The other end of the equilibrium, energy demand, is equally important to understand. With the rapidly increasing share of renewable generation, climate extremes, electrification of heating and transportation, there will be much more volatility in the system to digest than ever before. Much more than a human mind can in fact comprehend. Luckily, affordable and more powerful computing power, with the help of increasing access to data, can take us far.

Algorithms predict energy demand

Fortum is already using AI to predict the heat demand in our district heating networks. Understanding the weather patterns, human behaviour and energy flows helps us to optimise heat production and supply, and thereby save resources by prioritising recycled and CO2-free heat sources.

Thanks to the same algorithms, we have been able to implement dynamic pricing for the heat we sell our customers and buy back from them in our unique Open District Heating networks. In the longer term, AI can help to shape heating networks into energy storages that can balance the volatility in wind power production.

Another example comes from Google that uses DeepMind AI for its datacentre energy management. By training the system on one of their centre’s power usage efficiency and teaching it to predict the temperature and air pressure at the centre for the next hour, DeepMind was able to reduce the cooling needs by an incredible 40% in 2016. This is encouraging as the datacentre industry is set to increase power demand from 200-300 TWh in 2017 to a minimum of 1,200 or even up to 3,000 TWh by 2025.

Better situational awareness and cost reduction

All-in all, artificial intelligence paves the way in energy for
awareness. It does not only flag items worthy of attention, it also makes required actions become faster, more accurate, even imaginative across the board.

According to Goldman Sachs analysis, digitalisation, including AI, could mean overall 15% reduction in controllable costs for European utilities. And with some 20 billion euros worth of production assets in our balance sheet, Fortum is certainly not leaving this stone unturned. One might even say that “the prepared favor AI”.

Why AI-driven district heating plays an important role in the climate challenge?

viki-kaasinen_60x60Posted by: Viki Kaasinen
4.1.2019

As we all have heard from the IPCC report, humankind has 11 years to prevent the climate warming catastrophe. The challenge requires massive electrification based on renewable energy sources and integration of the entire energy system. We must also recycle materials and energy more efficiently.

In the district heating system, energy recycling means the utilisation of a mix of electrical heat pumps, waste heat, ground heat and geothermal production instead of traditional combustion-based heat production. This kind of district heating system supports carbon neutral energy system which is based on the clean electricity.

Next generation district heating – great potential to reduce emissions

As combustion-based heat production decreases and heating becomes electrified, heat production will be scattered here and there. Instead of a few large primary production plants, there will be many smaller production units that will supply heat for the district heating network, each in its own way. This will lead to a complex district heating system.

The district heating network also provides an irreplaceable flexibility element for the new energy system. The increase of wind and solar power will also affect the future electricity market. However, because the wind is not always blowing and the sun is not always shining, the future electricity system will require flexibility, i.e. ways to store the energy. The district heating system will enable this.

Heat can be produced from electricity and heat can be stored. On a daily basis, heat can be stored in district heating networks, heat accumulators and in buildings. In the future, heat can be even stored in longer-term seasonal storages. District heating also significantly differs from other heating options by enabling energy recycling through the district heating network. For example, it can recycle the excess heat of buildings, industrial processes, data centres and sewage water and utilize it in cost-efficient way.

Smart and sustainable district heating holds great potential to reduce emissions. However, maximising this potential will require residential buildings, commercial buildings and other counterparties to actively connect to the district heating networks. The only way to recycle the energy is inside the network. Individual heat pumps and other similar stand-alone solutions cannot transfer heat between consumers. This needs to be kept in mind when considering the actions we in society want to take to resolve the climate challenge.

How can buildings provide flexibility for the system?

Heat demand varies by season, week day, time of day, temperature etc. Traditionally, demand peaks have been covered by increasing heat production. Usually this has meant producing extra heat at heat plants, often by using fossil fuels.

In the future, demand and supply in a smart district heating system can be optimised and controlled automatically in order to bring flexibility to the system. Buildings are used for different purposes and at different times. Everything does not have to be heated simultaneously. For example, when spaces are not being used, heating and ventilation could be reduced. Or, for example, to avoid peak loads, heating could be reduced while hot water is being used. Consumers wouldn’t notice these kinds of short interruptions.

Fortum cooperates with several different actors in different countries to provide energy savings at the real-estate level. However, just the real-estate level is not enough – a demand side response is needed at the entire district heating system level. Centralized demand side response is a kind of virtual battery, which enables real-estate level steering from the district heating system’s point of view. Fortum has started the development, and the first pilots will be done in the near future in cooperation with the City of Espoo in Finland.

Artificial intelligence (AI) to optimise the entire district heating system

Fortum has developed artificial intelligence to optimise the district heating system and its operations; this will enable the flexible district heating system of the future. AI predicts the heat demand of our customers, steers the usage of storages and guides the control room in the optimal utilisation of assets. In practice, already now, this often also means the prioritisation of carbon-neutral production. AI has already been implemented in Fortum’s district heating systems in Finland, the Baltic countries, Poland and Norway.

AI development work and integration into operations continues. Artificial intelligence will enable automation of district heating when electrification increases the amount of controllable units as the energy system becomes more complex. This way, the district heating system becomes an enabler of flexibility for the electricity system. It can provide mechanisms for the frequency market and cost efficiently decrease investment needs for the electricity distribution network.

Viki Kaasinen

The author leads the development of smart energy systems in Fortum’s Heating & Cooling business

Miten tekoälyllä ohjattu kaukolämpö voi auttaa ilmastohaasteen ratkaisemisessa?

viki-kaasinen_60x60Posted by: Viki Kaasinen
4.1.2019

IPCC-raportin mukaan ihmiskunnalla on 11 vuotta aikaa estää ilmaston lämpenemisestä aiheutuva katastrofi. Haasteen ratkaiseminen edellyttää uusiutuvan energian laajaa käyttöä, massiivista sähkön hyödyntämistä energialähteenä sekä koko energiajärjestelmän integrointia tiiviimmäksi. Näiden lisäksi meidän täytyy kierrättää nykyistä tehokkaammin – paitsi materiaaleja myös energiaa.

Kaukolämmölle energian kierrätys tarkoittaa, että polttamiseen perustuvaa lämmöntuotantoa korvataan sähköisillä lämpöpumpuilla, talteen otetulla hukkalämmöllä ja geotermisellä lämmöllä. Tällainen kaukolämpöjärjestelmä tukee puhtaaseen sähköön perustuvaa hiilineutraalia energiajärjestelmää.

Uuden sukupolven kaukolämpö tarjoaa suuren päästövähennyspotentiaalin

Polttamiseen perustuva lämmöntuotanto vähenee ja lämmityksen sähköistyessä lämmöntuotanto tulee hajaantumaan eri puolille kaukolämpöverkkoa. Muutaman keskitetyn lämmöntuotantolaitoksen sijaan tulevaisuudessa tulee olemaan suuri määrä pieniä tuotantoyksiköitä, jotka tuottavat lämpöä kaukolämpöverkkoon – jokainen omalla tavallaan. Tämän muutoksen myötä kaukolämpöjärjestelmä monimutkaistuu.

Kaukolämpöverkko tarjoaa myös korvaamattomia joustomahdollisuuksia uudelle energiajärjestelmälle. Tuuli- ja aurinkovoiman määrän merkittävästi kasvaessa myös sähkömarkkinat muuttuvat. Aina ei tuule tai paista. Tällöin sähköjärjestelmältä vaaditaan joustoa, erityisesti pitää pystyä varastoimaan energiaa. Kaukolämpöverkko mahdollistaa tämän.

Sähköllä tuotettua energiaa on mahdollista varastoida lämmöksi. Päivätasolla lämpöä voidaan varastoida kaukolämpöverkkoihin, lämpövarastoihin ja rakennuksiin. Tulevaisuudessa lämpöä voidaan varastoida jopa pidempiaikaisiin kausivarastoihin. Kaukolämpö eroaakin ratkaisevasti muista lämmitystavoista mahdollistaessaan energian kierrättämisen kaukolämpöverkossa. Näin esimerkiksi rakennusten, teollisuuden, datakeskusten tai jäteveden hukkalämpö pystytään kierrättämään ja hyödyntämään kustannustehokkaasti.

Älykäs ja kestävä kaukolämpö mahdollistaa merkittäviä päästövähennyksiä. Sen koko potentiaalin hyödyntäminen vaatii kuitenkin asuinrakennusten, liiketilojen ja muiden osapuolten aktiivista liittämistä kaukolämpöverkkoon. Erilliset lämpöpumput ja muut itsenäiset ratkaisut eivät voi viedä lämpöä käyttäjiltä toiselle, vaan energiaa voidaan kierrättää ainoastaan kaukolämpöverkon sisällä. Tämä on hyvä pitää mielessä, kun pohdimme yhteiskunnallisia toimia ilmastohaasteen selättämiseksi.

Kuinka rakennukset voivat tarjota joustoa energiajärjestelmälle?

Lämmityksen kysyntä vaihtelee. Se riippuu vuodenajasta, viikonpäivästä, kellonajasta, ulkolämpötilasta ja niin edelleen. Perinteisesti kysyntähuiput on hallittu kasvattamalla lämmöntuotantoa. Yleensä tämä on tarkoittanut lisätuotantoa paikallisilla lämpölaitoksilla, jotka toimivat usein fossiilisilla polttoaineilla.

Tulevaisuuden älykkäässä kaukolämpöjärjestelmässä joustoa voidaan luoda automaattisesti kysyntää ja tarjontaa optimoimalla ja ohjaamalla. Rakennuksia käytetään erilaisiin tarkoituksiin erilaisina aikoina. Esimerkiksi kun rakennuksen tilat eivät ole käytössä, lämmitystä ja ilmanvaihtoa voidaan pienentää. Tai vastaavasti kun kuumaa vettä käytetään, muuta lämmitystä voidaan vähentää kysyntähuippujen tasaamiseksi ilman, että loppukäyttäjä edes huomaa tällaista pientä muutosta.

Fortum tekee yhteistyötä useiden eri toimijoiden kanssa eri maissa tarjotakseen energiansäästöjä kiinteistöille. Kiinteistötason ohjaus yksin ei kuitenkaan ole riittävää, sillä kulutusjoustoa tarvitaan koko kaukolämpöjärjestelmätasolla. Keskitettyä kulutusjoustoa voikin ajatella eräänlaisena virtuaaliakkuna, joka mahdollistaa kiinteistöjen ohjaamisen kaukolämpöjärjestelmän näkökulmasta. Fortum on jo aloittanut kehityksen tällä alueella ja ensimmäiset pilotit tehdään lähitulevaisuudessa yhteistyössä Espoon kaupungin kanssa.

Tekoäly avuksi koko kaukolämpöjärjestelmän optimointiin

Fortum on kehittänyt tekoälyn optimoimaan ja ohjaamaan kaukolämpöjärjestelmän toimintaa. Tämä osaltaan mahdollistaa tulevaisuuden joustavan kaukolämpöjärjestelmän. Tekoäly ennustaa asiakkaiden lämmönkysynnän, ohjaa eri lämpövarastojen käyttöä sekä ohjeistaa valvomoa käyttämään eri tuotantoyksiköitä optimaalisesti. Tekoäly on tällä hetkellä käytössä Fortumin kaukolämpöjärjestelmissä Suomessa, Baltiassa, Puolassa ja Norjassa ja käytännössä usein jo nyt tarkoittaa hiilivapaan tuotannon priorisointia.

Tekoälyä kehitetään edelleen ja sen integrointi tiiviiksi osaksi toimintaamme jatkuu. Tekoälyn avulla pystymme automatisoimaan kaukolämpöjärjestelmää, kun sähköistyminen lisää ohjattavien yksiköiden määrää ja koko järjestelmästä tulee yhä monimutkaisempi. Tällä tavalla kaukolämpö mahdollistaa joustoja myös sähköjärjestelmälle. Se tarjoaa mekanismeja sähkön taajuusmarkkinoille ja vähentää tehokkaasti sähköverkon investointitarpeita, joita laaja energiajärjestelmän sähköistyminen muuten edellyttää.

Viki Kaasinen

Kirjoittaja johtaa älykkään energiajärjestelmän kehitystä Fortumin Heating & Cooling –liiketoiminnassa

Nuclear energy in the EU long-term strategy

Esa HyvärinenPosted by: Esa Hyvärinen
19.12.2018

Last week I attended a workshop organised by CEPS, a leading think tank and forum for debate on EU affairs, in Brussels. The workshop discussed assumptions that underpin the EU’s long-term energy decarbonisation scenario and the role nuclear might play in achieving the Union’s energy and climate policy goals. I also gave an industry view.

Based on several recent analyses and reports – IEA, IPCC, EU Commission, as well as those carried out by the industry (Eurelectric and Foratom) – it is clear that nuclear plays an important role in climate change mitigation. The role is significant already today and, based on those reports, it will either grow or at least remain the same. None of the reports suggest that the importance of nuclear would be diminishing.

This is based on nuclear’s ability to produce a large amount of CO2-free energy. As we expect electrification to move ahead in all energy consuming sectors, including heavy industries, this ability becomes valuable again. Most likely, the word “baseload” will return to the vocabulary of energy policy as quickly as it disappeared a couple of years ago, when “volatility” and “flexibility” took over.

If we take this as a starting point, what should we do to exploit the potential of nuclear energy? I think we should look at the full menu: competitiveness and long-term operations (LTO) of existing nuclear power plants and new builds.

  • Competitiveness

The past few years have been very challenging for nuclear companies. Wholesale electricity prices have been on the downward trend until recently. In the Nordic countries, the average price in 2017 was 40% lower than that of 2010. The low price level has been driven partly by economic downturn and partly by the oversupply caused by subsidies primarily for renewable energy sources.

Basic economics apply: when the supply increases and the demand remains stable, the price drops. At the same time the investment money put into the nuclear plants has almost doubled due to increasing safety requirements and ageing plants.

  • Long-term operations (LTO)

Based on Commission’s assessment, approximately 50 nuclear reactors out of the 126 currently in operation in the EU are at a risk of an early closure over the next ten years or so if the operators do not pursue LTO licenses. I would assume that the reactors to be closed based on political decisions are not included in that number. This in spite of the fact that IEA estimates nuclear LTOs to be the cheapest option to produce electricity on a levelised cost of electricity basis (LCOE).

  • New builds

In today’s world, anything that costs 6, 7, or 10 billion and takes 20 years to build – i.e. doesn’t generate income before that – is very difficult to finance. Therefore, if we wanted to see new nuclear plants – in addition to those six currently under construction in the EU – to be built, they would have to become cheaper and faster to build, and safer at the same time. They would also have to be better adapted to a more volatile power market where and when the market requires that capability. I know that in several countries nuclear power plants have developed their flexibility capabilities already, so it is doable. Also small modular reactors (SMRs) are moving from R&D projects to reality.

Exploiting the full potential of nuclear in decarbonisation

The EU Commission’s Clean Planet for All communication states that, ”By 2050, more than 80% of electricity will be coming from renewable energy sources. Together with a nuclear power share of ca. 15%, this will be the backbone of a carbon-free European power system.”

I was very happy to read this statement and I fully agree with it. It is easy to believe that it was not an easy task to push it through the Commission machinery. The question is how to make this happen.

Time to transform the nuclear industry

Nuclear companies themselves hold many things that can be used to improve the competitiveness of the nuclear industry. We should be more active and open in looking for best practises from other nuclear operators and other safety-critical industries. Digitalisation, fresh and modern leadership skills, and change management should find their ways to the nuclear industry too – it is clear that the world has changed and the nuclear industry must change too.

All nuclear power plants are somewhat unique. Harmonised safety and licensing requirements, standardised designs, equipment and components are lacking. This increases costs. To address this challenge, Finnish nuclear license holders, together with the national regulator, have started a project to develop a standardised licensing and qualification process for the systems and components used in nuclear power plants.

This is the start of a long journey. If we want to create real impacts, we must take it to an international level – starting with the EU and the close involvement of the Commission – as well as supply companies and regulators. It is a modest start, but we need to start somewhere because the status quo is not sustainable.

What should the EU do?

To start with, I would like to quote the Commission’s strategy: We need ”to offer clear, long-term signals to guide investors, to avoid stranded assets, to raise sustainable finance and to direct it to clean innovation efforts most productively.” ”The Action Plan on Sustainable Finance will help connect finance with the EU’s agenda for sustainable development.” And further: ”Environmental taxation, carbon pricing system and revised subsidy structures should play an important role in steering the energy transition.”

”Today, the costs of some of the advanced low-carbon energy carriers and technologies remain high, and their availability is limited. A massive research, coordinated and innovation effort, built around a coherent strategic research and innovation and investment agenda is needed in the EU within the next two decades to make low and zero-carbon solutions economically viable and bring about new solutions not yet mature or even known to market. In this context, a forward-looking research and innovation strategy should be guided by zero-carbon solutions that have the potential to be deployed by 2050.”

While there are issues, like standardisation and harmonisation, that are nuclear-specific to a certain extent, in most general policies the nuclear industry is asking for equal treatment with other low-carbon technologies: similar treatment in the power market, where the ETS should be the main tool to drive decarbonisation; similar treatment in terms of taxation and abolition of nuclear-specific taxes; similar access to financing as other low-carbon technologies; similar approach in research, development and innovation policies to develop new nuclear concepts to meet the demands of the future.

I know that nuclear is a controversial issue in the EU, but it should not prevent us from making reasonable decisions. The Commission’s Clean Planet for all [http://europa.eu/rapid/press-release_IP-18-6543_en.htm] and other recent reports hopefully create a good basis for working together and making sure that the nuclear industry can contribute to decarbonisation with its full potential.

COP24 adopted the Katowice Rulebook – An early gift from Santa

Kari KankaanpääPosted by: Kari Kankaanpää
17.12.2018

The Silesian capital of Katowice was an international hotspot for past two weeks. It wasn’t because of its coal smog that lingered in the air, instead it was due to the global climate community convening there to debate the future of the climate policy framework.

Results meet the expectations

The single aim of the COP24 was to make the Paris Agreement operational by adopting the rulebook of the treaty. COP24 also finished the so-called Talanoa Dialogue – a year-long process taking stock of what countries have done since the adoption of the Paris Agreement in 2015.

Expectations for the meeting under the Polish COP presidency were quite modest. By the middle of the second week, the prospects for the outcome were still as foggy as the weather in Katowice. Believe it or not, the negotiators had not even been able to agree on the simple and evident issue of how to assess the recent IPCC 1.5 degree report: to “welcome” or “note” it. Climate diplomacy is sometimes hard to understand…

The Katowice Rulebook was finally approved late Saturday night and the Paris Agreement will become operational as planned at the beginning of 2020. The Rulebook is not inclusive, and the most controversial issues were postponed to the future. However, the rules include a robust monitoring and reporting system for greenhouse gas emissions and financing of climate action. Rules also specify how countries have to submit new commitments in the global stocktakes starting in 2023.

What is in the deal for us in the energy sector?

COP24_pinThe Katowice Rulebook gives predictability that the global climate policy framework will be the basis also for increasing the ambition. Climate mitigation and adaptation require new knowhow and innovations in climate-neutral technologies, in developing carbon sinks and in the circular economy. This in turn increases demand for low-carbon business solutions. The Nordic countries have increasingly more knowledge and experience in these fields for export to the rest of the world.

Business plays a key role in energy transition, as it has both solutions and financing. Business and industry are increasingly better acknowledged in the process and in climate action. However, ambitious climate targets and a market-based policy framework are needed in order to make the low-carbon transition possible.

Carbon market cooperation stalled in the negotiations

The biggest disappointment was that decisions on the use of cooperative approaches (in other words, market mechanisms) were postponed to COP25 in 2019. These would allow countries to meet a part of their domestic mitigation goals through climate action in other countries. The market mechanisms were opposed, especially by Brazil, and the key dispute was the double counting of emission reductions.

Carbon pricing and, for example, the linking of regional pricing schemes is not visible in the Katowice Rulebook. However, the Paris Agreement allows countries to link carbon markets “consistent with” UN guidance. In the absence of such guidance, countries are free to set up market systems that link together to meet targets and accelerate action at a lower cost.

Fortum highlights the role of a strong carbon price and market that deliver meaningful pricing of GHG emissions and where also the removal of carbon dioxide is rewarded. In our view, carbon pricing is the most cost efficient, flexible and technology neutral tool to deliver emission reductions. The scope of carbon pricing should be extended both geographically and to new sectors.

Changing dynamics of countries in the negotiations

COP24 can be considered as a victory of multilateralism, because all the countries except the US remain onboard in the Paris Agreement. The EU together with China were in the forefront of negotiations in Katowice. China wanted to promote the establishment of common rules and used its power to persuade the most reluctant countries. Despite the official US position, the US delegation was constructive and rational in the negotiations.

India and Russia kept a low profile in COP24. There was one new coalition of countries: ABU countries (Argentina, Brazil, Uruguay). Brazil was strongly against the rules of the market mechanisms and succeeded in postponing this to the next COP meeting. A number of countries led by Saudi-Arabia didn’t want to recognise the scientific IPCC report.

A just transition requires a political eye game

Recent events in France were highly visible in the talks. They raised questions about the costs of climate action and how to keep everybody onboard in the transition to a low-carbon future. Processes and policies need to be inclusive, citizens and consumers need to be engaged in the discussions, and nobody should be left behind in the low-carbon transition.

************

COP24 under the Polish presidency met the expectations. It was not a success story, but had a happy end. Santa Claus finally came to town and brought the Katowice RulebookCOP24_Kari-Kankaanpaa_C4C as an early Christmas gift for the shattered negotiators of COP24. Stay tuned, however. The saga is already scheduled to continue in Chile in late 2019.

Kari Kankaanpää is Fortum’s Senior Manager, Climate Affairs. He represented Fortum in the COP24 in the delegation of the International Emissions Trading Association (IETA). Fortum was also partnering with one of the business side events, World Climate Summit, during the COP24.

Now it’s time to take action – climate change won’t wait

PekkaLundmark-60x60Posted by: Pekka Lundmark
26.11.2018

The Intergovernmental Panel on Climate Change (IPCC) put out an alarming message in October: the future of our planet will be decided within the next twenty years. The scientific community’s report also contains hope: climate change can be solved, but we must act here and now.

There must be an immediate and steep reduction in greenhouse gas emissions in order to limit global warming to 1.5 degrees. According to the IPCC, carbon dioxide emissions and carbon sinks must be equal in magnitude by 2050.

On a journey towards the decades of electricity

Globally, greenhouse gas emissions from energy production and use account for about 2/3 of all emissions caused by humans. In Europe, and especially in the Nordic countries, there has been an active effort to reduce emissions from electricity production.

However, electricity’s share of final energy consumption is only about 20%, and that’s why decarbonising electricity production alone doesn’t go very far. But the solution may be in the electrification of society.

Emissions-free electricity can help to reduce emissions in other sectors: in heating, transportation and industry. This development is supported also by new technology solutions that boost energy efficiency. Even though the overall use of energy in Europe is estimated to decrease in the future, the use of electricity will increase significantly with this development. Our European sector association, Eurelectric, has recently noted that increasing electricity’s share of energy consumption in the EU to 60% could decrease emissions in the EU by 95%.

In the push towards the 1.5-degree world, we must also advance a transition towards more sustainable production and recycling of materials. Resource-use efficiency must be improved by, e.g., utilising biomass primarily in the production of high-value materials and products. However, burning forest industry by-products unsuitable for this purpose, like logging residues, will be justified still for a long time when it is a replacement for coal.

The IPCC also highlights nuclear power in curbing climate change. In all 1.5-degree scenarios, the amount of electricity produced with nuclear power must increase manifold, globally, by 2050.

EU climate strategy must lead the way

This week the EU Commission will publish its long-term climate strategy. I think this is a great opportunity to show climate leadership and to set a target of a carbon-neutral Europe by 2050. It is also important to plan a cost-efficient emissions reduction path towards that target and to set rational intermediate goals for 2030 and 2040. Clear and ambitious targets are vitally important for companies planning investments, and they also impel other countries.

For Europe’s competitiveness, it’s important that reducing emissions is cost efficient. The best solution is to harness the markets to support a sustainable energy system because it will take more than public funding to solve climate change. Private capital finds the best ways to reduce emissions when there is a financial incentive to do so, i.e. a high enough price on emissions.

So it is imperative that the EU trusts its emissions trading system (ETS) and develops it further, e.g. in conjunction with the checkpoints in the 2020s. This means tightening the emissions ceiling in line with the set targets. If member states decide to implement overlapping national steering mechanisms such as various bans on fossil fuels or taxes on emissions, it is very important that their impact is neutralised by reducing the number of emission rights in the market. Otherwise well-meaning measures in one country may facilitate increasing emissions in another. The best solution would be to direct additional steering mechanisms to sectors outside the ETS such as transportation.

At the same time, the EU must be active with other continents to expand emissions pricing in order to lower the risk of carbon leakage and to level the competitive playing field.

The scientific community’s messages must be integrated in company strategies

Climate change is estimated to be the biggest global change for companies since the mainstreaming of information technology. In fact, climate change has already become a part of business for many companies by creating new growth and opening new opportunities. And for an increasing number of them, it has become a matter of survival.

At Fortum, climate change was identified early on as a megatrend driving our business strategy. In conjunction with our latest strategy update, we did a scenario analysis in which we assessed the energy system’s development at various global temperatures. Our company’s vision “For a cleaner world” conveys the message that we want to lead the change towards a low-emissions energy system and the optimal use of resources. Our customers, shareholders, financers, and other stakeholders encourage and demand us to develop new and increasingly better solutions.

We at Fortum are aiming for a climate-neutral energy system, and we believe that the 1.5-degree world is still technically possible. But in such a way that we can simultaneously ensure energy’s security of supply in all conditions and keep the costs reasonable. We hope that the political decisions made in different countries, in the EU, and globally support this goal and that we together achieve a low-emissions energy system through means – and at costs – that are realistic.

Pekka Lundmark