Northern lights

Nordic utilities have illuminating lessons for UK firms on how - and how not - to cope with colder winters. Gerard O'Dwyer and Monika Hanley report

Britain has been facing unusually cold and snowy winters in recent years and should this become a long-term climate trend, UK utilities may have to change their operational practices to suit. There are examples of good (and bad) practice to draw on in Europe’s north.

The Nordic region is often regarded as a role model for corporate and public governance, and its modern economies have become adept at dealing with long, harsh winters where ambient temperatures can dip below -40 degrees Celsius. The success of these northernmost European states, and in particular those with Arctic territories such as Finland, Sweden and Norway (which excludes Denmark), relies on sound year-round national strategies to ensure utility services remain open in all weathers. Efficiency, coupled with expertise in dealing with extreme weather, has to be combined with robust communications and social infrastructures.

Electricity utilities have for a long time worked closely with governments to ensure the country stays open for business, whatever the weather. In Finland and Sweden, for instance, power companies are required under their respective licences to invest at least 5 per cent of their turnover in winter-proofing power plants, transmission and distribution grids, and substations. In fact, between 2001 and 2011 they spent an average of 8.5 per cent of their turnovers on winter-proofing and outage prevention.

Such a high level of preventative spend means significant outages are rare. When they do occur, they are usually localised. Generous consumer compensation regimes in Nordic countries (especially Sweden and Finland) mean that unscheduled outages can also prove costly for power suppliers and grid operators. Finland’s Fortum was hit with compensation payouts of more than €20 million (£16 million) for the first quarter of 2012 under that country’s regime. The penalties related to outages caused by snow blizzards and storms in December. In the same period, Finnish grid operator Fingrid paid out €40 million to 200,000 electricity customers affected by outages linked to failures in the regional grid system.

The December/January winter outages in Sweden and Finland heralded the introduction of even tighter preventive procedures by major utilities such as Fortum and Sweden’s Vattenfall in the first half of 2012.

“The weather management and outage preventative systems we employ in Finland, and across the Nordic region, are very advanced,” says Veli-Pekka Nurmi, director of the Finnish Accident Investigation Board. “That does not mean they are perfect and fail-safe. We would like to see more money spent on assembling rapid response crews with the full array of expertise, including tree cutters and specialised machinery.” His organisation would also “like to see more resources invested by utilities in customer information systems to deal with high-volume outage inquiries”.

The vast majority of Nordic utilities – about 80 per cent – have website-based information services in place to inform customers of the location and duration of outages, supported by a text-messaging system. During a network failure that affected Vattenfall’s supply system in Sweden on 26 December, the company sent more than 270,000 text messages to its customers about the outage.

According to Alexandra Ohlsson, a senior meteorologist with the Swedish Meteorological and Hydrological Institute: “Nordic emergency services are geared to expect the unexpected. It would be rare if Sweden suffered a service meltdown in winter because of extreme weather. The infrastructure is designed to prevent rather than respond. This is also a more cost-efficient approach in planning smart economies.”

To improve matters further, regional electricity integration is planned by the four Nordic countries. A pan-Nordic market for electricity is scheduled to be open by 2015, which should mean even more reliable domestic and cross-border weather and electricity supply management systems, Nurmi says. In June, pan-Nordic energy agency NordREG published a roadmap report, which it presented to all the Nordic governments. This outlined how the common market – which will be far more integrated than that

envisaged for the European Union – will have an extreme weather continuity of supply plan, including cross-border supplies of power to regions affected by failures.

The Nordic example of how to cope in a cold climate could be emulated by UK utilities, should winter weather become consistently worse in Britain. The perils of not taking a joined-up approach can be seen in the Baltic states, which experience equally severe winters but have not put the same amount of time and resources into ensuring the lights stay on. The Baltic winter of 2011/12 saw a steep rise in energy prices in Estonia, Latvia and Lithuania as utility costs and financing came under pressure.

Lithuanian utility bills in the past two years (heat, electricity and water) have risen by about 10 per cent over the winter months, causing unrest among consumers. Residents living near the site of the Ignalina nuclear power plant, which closed in 2009 because of safety concerns voiced by the European Union, protested that heating bills had increased four times since the shutdown. The average monthly heating bill for a flat in the area is around £230. The Lithuanian government attracted few plaudits when it turned down a Lithuanian District Heating Association (LSTA) proposal this year to harness heat from electricity production at the oil and gas-fired Elektrenai power plant.

Latvia has also been experiencing difficulties. While bills are significantly lower in Latvia than Lithuania (by 27 per cent or so), utilities there face significant winter payment problems because of the effect of the continuing economic crisis. Record numbers of homes are being repossessed in the capital, and last winter Riga residents racked up £13 million in unpaid utility bills.

However, the future may be looking brighter for Latvia. The country’s largest heat provider, JSC Rigas Siltums, has announced plans to increase renewable energy production by 20 per cent. Once two green combined heat and power plants in Zasulauks and Ziepniekkalns are operating, heating tariffs may fall.

Meanwhile, Estonia – the most prosperous Baltic state (with only 17 per cent of household monthly costs going on utility bills) – is also facing winter energy cost increases. Both the national gas company AS Eesti Gaas and power utility AS Eesti Energia plan to raise prices this year. Heating prices have already gone up 3-4 per cent annually in recent years because of rising oil shale production costs.

Gerard O’Dwyer is based in Helsinki and Monika Hanley in Riga. Both are freelance journalists

This article first appeared in Utility Week’s print edition of 28th September 2012.

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