Norway's decision to introduce fixed electricity prices could lead to higher costs in southern Sweden. As Norwegians enjoy stable rates, the interconnected Nordic electricity market may see increased demand, especially during winter, impacting Swedish consumers.
Swedes Face Higher Electricity Prices Due to Norwegian Price Cuts
Swedes Face Higher Electricity Prices Due to Norwegian Price Cuts
Higher electricity prices are expected in southern Sweden as Norway introduces fixed electricity rates this autumn.
Norwegian politicians have decided on so-called Norway prices following a heated political debate over high electricity costs. From October 1, Norwegians can sign contracts for a fixed electricity price of 40 øre/kWh. This move partially removes price signals in the Norwegian electricity market, allowing households to use electricity without facing the consequences of potential shortages.
"The incentive to save or shift consumption to other hours disappears entirely," says Johan Sigvardsson, an electricity analyst at Bixia.
Impact on Southern Sweden
Consumption will be higher than it would otherwise be, leading to higher prices in surrounding areas due to interconnected electricity grids, according to Sigvardsson. Southern Sweden, particularly electricity areas 3 and 4, is expected to be most affected, where prices are already higher than in regions like Norrland.
Electricity analyst Mats Nilsson, an associate professor at Södertörn University, adds:
"It sounds like a dream for Norwegians, but the consequence is that they no longer respond to price signals. When consumption doesn't decrease at high prices, demand increases instead, pushing up the entire Nordic market," he writes in a comment to TT.
Greater Impact in Winter
The price impact may not be significant under normal circumstances, but during colder seasons when consumption is higher, the effect could be more pronounced.
"Yes, especially in winter when consumption is generally high," says Johan Sigvardsson.
In Sweden, there was also talk of similar measures, called Sweden prices, during the peak of the electricity price debate a few years ago. However, it was not the same variant that Norway is now introducing. The Norwegian state treasury, well-funded with oil money, has ample resources to support Norwegian electricity consumers, which Sweden does not have in the same way.
Instead, Sweden opted to pay out electricity price support retroactively, totaling 50-60 billion kronor, to compensate households for prices exceeding 75 øre/kWh.