Policy decisions in major European power markets are set to reshape electricity prices, trade flows, and market conditions in the Nordic region over the next decade.
The report Integrated Power Markets: How European Market Design Reforms Could Shape Nordic Electricity Markets Towards 2035, commissioned by Nordic Energy Research and carried out by THEMA Consulting Group, shows that reforms to capacity mechanisms, rapid renewable expansion, and changes to cross-border trade will have significant impacts on both price levels and volatility towards 2035.
The region’s electricity system is tightly integrated with continental Europe through interconnectors to Germany, the Netherlands, Great Britain, Poland and the Baltics. As a result, policy decisions beyond its borders directly influence market outcomes.
Prices could shift sharply
One of the key findings is the scale of potential price changes. In some scenarios, electricity prices could fall by more than 50% compared to a baseline, driven largely by rapid growth in solar and wind power across Europe.
At the same time, insufficient firm capacity on the continent could increase the risk of price spikes, particularly during periods of high demand.
“Shortfalls in continental firm capacity could increase peak price risk in the Nordics, while ambitious renewable expansion could significantly lower Nordic prices. Restrictions on cross-border trade could also leave the region worse off overall. The Nordic power market simply cannot be analysed in isolation from its neighbours,” says Arndt von Schemde, Partner at THEMA Consulting Group.
Four trends driving the changes
The report identifies four key developments: expansion of capacity mechanisms, rapid growth in renewable generation and battery storage, changes in cross-border trade and interconnector availability, and potential reconfiguration of bidding zones, particularly in Germany.
Together, these factors will reshape how electricity prices are formed across Europe.
Uneven impacts on consumers and producers
Changes to cross-border trade could have uneven effects. Restrictions on interconnectors may lower prices for consumers, but at the cost of reduced revenues for producers.
Because the region exports more electricity than it consumes, producer losses may outweigh consumer gains, resulting in a net economic loss.
Battery storage is expected to play a growing role in stabilising markets by reducing price volatility and extreme price events.
Greater engagement needed in European energy policy
The findings highlight how tightly linked European electricity markets have become and how multiple policy changes can reinforce each other.
“Our findings show that developments in neighbouring countries can significantly influence Nordic prices and market conditions, highlighting the importance of cross-border coordination and engagement in European energy policy,” says Klaus Skytte, CEO of Nordic Energy Research.
