Arto Räty is the Senior Vice President of Corporate Affairs and Communications at Fortum, a leading Nordic clean-energy company. We had a fascinating conversation with him about the challenges we face. Especially, how climate change impacts the Nordics and why the Nordics have to set an example to the rest of the world by moving towards a system that is affordable and sustainable.
The impacts of climate change are already apparent in Nordic countries, not to mention Africa or the Arctic. As Räty pointed out, many of the issues in the world are actually follow-ups from developments done by western societies. So, as developed countries, the Nordics have a responsibility to take action globally and set new standards for the rest of the world by combining the knowledge, potential and resources.
Fortum is the leading charging station operator for electric vehicles (EV) in the Nordics. Their charging network consists of about 2,500 chargers and last November Fortum opened a high-power charging corridor between Oslo and Helsinki, where each HPC station allows to charge EVs for 125 km in about 10 minutes. And this is only one example of how Fortum contributes to transforming the energy industry.
The Nordic Energy Report explores ways to move Nordic countries towards a low-carbon green economy that is necessary to tackle climate change. A slightly provocative question to start: isn’t climate change a good thing from the viewpoint of the Nordics?
If you think about the so called extended heat waves that have scorched much of Europe this summer, conventional power plants may have to ramp down production elsewhere in Europe and wind production volumes can remain low when the temperature is very high. This means the cost of electricity doesn’t increase only in the center of Europe, it also affects Nordic countries because we are more and more interconnected.
Another point is that Nordic countries are not isolated from the rest of the world. If climate change has negative implications as it has had on the living conditions in Africa, it impacts Europe too. We see the impacts of climate change up here in the north as well. Extreme weather is no longer “something out there”. Heat waves and storms are more and more frequent in the Nordics as well. From a biodiversity point of view, the Nordic region is very sensitive to changes in average temperatures. The ecosystem has been built according to the weather conditions, so the ecosystem has to change according to weather and that takes time.
The Nordics are all very developed countries with developed economies and societies. Do you think that the Nordics should set an example for other parts of the world to demonstrate that a low-carbon economy is actually possible?
I will always underline that we are not an isolated area. We cannot close the door and say that we are in a safe haven, let the others take care of themselves. As developed countries we have to bare our responsibilities, considering that many of the issues in the world are actually follow-ups/outcomes from development done by western societies.Therefore we need individual countries in the European Union to influence the policy of the European Union. Also, we have to take actions globally, as we have access to the global arena and the systems in the global arena. We cannot change the climate or stop the warming of the globe by doing things only in our individual countries.
Speaking about the potential shift towards a low-carbon economy in the Nordics, are there any specific findings in this report that show a direction where should the countries and the enterprises in these countries head to?
The report highlighted the world's smartest low-carbon energy system which has to be based on three pillars. Number one is affordability. We need to build a system that doesn’t make our energy bills too high. Number two is the security of supply, which means that we can keep the systems running in all conditions, even when the sun doesn’t shine and the wind doesn’t blow. Number three is sustainability. The system has to be built in a sustainable way – carbon neutrality as the goal. So affordability, security of supply and sustainability are three aspects that need to be taken care of in a balanced manner.
Which obstacles or hurdles do you see in tackling climate change? Are these more related to political obstacles or something else?
The leading theme of the report was that we need more cooperation and coordination between policy makers in the Nordics and Baltics. We have so much knowledge, innovation and potential in this region. Combining forces could allow us to be much bigger and more powerful in setting the standards for the rest of Europe and even beyond. The key elements in tackling climate change are cooperation, coordination and harmonisation.
Each country is too small on its own to create a meaningful test bed for smart technologies and solutions. We need more harmonisation and a level playing field to support the development of innovative companies. We are able to cooperate in defense and do a lot regarding the issues in defense area. So why on earth are we not able to do the same in energy business?
Energy is still the key and core element of society, its survival and its operations. When I listen to the politicians in our countries, it seems that they have fully understood the problem. Now we need a strong commitment from our politicians to pursue this road forward and deal with difficult issues and let the market function. If the conditions are set in a proper way, the markets will handle this. If a level playing field is established in the Nordics, then we can push change forward. The transition has to be done in an affordable and sustainable way, the security of supply must always be kept in mind. It has to be well planned and executed.
And in terms of affordability, the transition can’t be significantly more expensive because otherwise it will not be implemented, right?
Yes. And that's where we also need cooperation also between politicians and industries. For some politicians the industry seems to be like an enemy and for some politicians industry is a partner – and a partner it should be because this definitely is a joint effort. And if you look at the major industries today, they have seen that if they don't change, they will not survive.
You mentioned the three pillars, so I'd ask that in terms of affordability, sustainability and security of supply, which energy sources should be used in the Nordics in order to decrease carbon emissions in the future?
We need a full mix of CO2-free energy sources and they should be all treated equally. For me the only preference when it comes to CO2-free energy sources is that we need to achieve climate neutrality. That's why we need all the sources, starting from nuclear, hydro, wind, solar and bio.
And the best tool to guide this kind of development is the EU emission trading system. As you have seen, the emission price has been climbing up. Three years ago we talked about 3-5 euros. Now it's close to 30 euros. When the price goes high enough, it automatically guides the industries and operators to choose low-CO2 sources, like switching from coal to gas in power production. And we don't have to force anything. It happens automatically. Of course, there are also legal measures to do that. In Finland we have implemented the law so that the use of coal will be phased out by May, 2029.
In terms of nuclear power, there have been some predictions that the fourth generation nuclear power plants should be ready for implementation in about 10 years. Could this new technology emerge a nuclear revolution in the Nordic region?
That is something to be seen. When somebody says that the new generation is ready in 10 years, it's a statement today, but we have seen how long it really takes to develop new technologies. There is an ongoing development process to build so called mini nuclear power plants, but we all know it's going to be very long development phase and there are still a lot of open questions. In Fortum we carefully follow new developments. We would like to see what are the possibilities in the future, so let's wait and see what comes out.
What change should be considered by Nordic countries in terms of infrastructural developments in relation with climate change? More bike roads? Something else?
The cities need to become smarter as a whole. The way we move people, the way we construct, renovate and live in our buildings and how we use energy has to become smarter. Cities have the possibility to lead the way to a more circular economy which is also one of Fortum´s business areas. One of our business divisions is the City Solutions – heating, cooling and waste solutions in the same package. And we all know that the bigger the city is, the more demanding it is. Since the cities are not that huge in the Nordics and we are pretty well-developed, I think we are in a good path at the moment but a lot more can and should be done.
To continue with the infrastructure, Fortum has built an impressive charging network for electric cars around Europe. There's over a hundred charging stations in Helsinki. What future do you see for this business in the Baltic states?
When it comes to our business plans, I can’t give any comments. But of course we are always keeping our eyes open for business development opportunities that are aligned with our strategy. So let's see what happens.
Fortum recently disclosed the consideration of selling the business you have in the Baltic States. Why is that?
We continuously review our business in order to create value through portfolio optimization. We are assessing different kinds of strategic options including divestment, but no decisions have been made yet. There are different options for us. The first option is to maintain the current ownership with no changes. The second is to divest the whole business. And the third option is to do something in-between. Based on the initial assessments, the district heating and cooling business in Estonia has been identified as an operation that could potentially benefit from a different ownership structure. So we're not thinking about closing the business, but maybe under a different ownership the business could flourish even better. So to sum up, companies are looking at new opportunities all the time and trying to optimize their portfolios.