As winter approaches, concerns about rising electricity prices in Sweden are mounting. Experts predict significant price fluctuations due to reduced water reserves and ongoing nuclear power issues. New pricing models, including quarter-hour pricing and Norway's fixed rates, could further impact costs. Regional price disparities between northern and southern Sweden are expected to persist, influenced by limited transmission capacity and connections to the German market.
Winter Electricity Prices: What to Expect with New Pricing Models
Winter Electricity Prices: What to Expect with New Pricing Models
Greater fluctuations and the risk of higher prices loom as both quarter-hour pricing and Norway's fixed rates are introduced, while price differences between electricity regions are expected to continue. Here's the outlook for the electricity market this autumn and winter.
As winter approaches, the debate over electricity prices, which concerns both private individuals—especially homeowners—and businesses, intensifies.
Last winter, electricity prices were relatively low. But what about this autumn and winter?
Opinions are somewhat divided.
Risk of Higher Electricity Prices This Winter
When Expressen posed the question to Patrik Södersten, an electricity price expert at Fortum, he summarized that there is a "risk of higher prices."
He elaborates:
– After this warm summer, we have less water in our large reservoirs, and hydropower is one of the most important ways to produce electricity in Sweden. This generally leads to higher electricity prices.
– Additionally, nuclear power, which has faced significant issues for quite some time (three of Sweden's six reactors are currently offline), also affects prices. If there is less wind and solar power and it gets cold, with reduced hydropower production and insufficient nuclear power, we must import electricity, which is more expensive on the continent.
However, if the water reservoirs refill and nuclear power operates as planned, there is "no major concern," according to Södersten.
"Crucial for Electricity Prices"
Forecasts from Elskling suggest that prices could be lower this winter compared to last year. However, according to the comparison site's electricity expert Anne By Nazemi, this remains a constant million-dollar question.
"The only thing we know is that it will get colder. How cold remains to be seen, but it will be very crucial for electricity prices, as will how much it blows and when," she writes in an email.
One thing she is sure of: there will be significant price fluctuations.
Patrik Södersten also mentions that "there could be quite a few fluctuations in the market."
New Quarter-Hour Pricing on Electricity...
This relates to supply and demand, and to better match supply and demand—when the unpredictable weather-dependent energy grows—the Nordic electricity exchange Nordpool will introduce quarter-hour pricing instead of hourly pricing starting in October. This means the price changes every fifteen minutes.
– One should expect the market to be shaky before it finds its form. But it only affects a small portion of customers, says Södersten.
Those with fixed electricity prices are not affected by the change, and those with variable prices still pay a monthly average. Only those with hourly price agreements (now quarter-hour price agreements), which account for about one in ten electricity customers in Sweden, are affected and, according to experts, now have the opportunity for even more flexible electricity use, although it requires various smart solutions.
... and Norway's Fixed Rates Impact
In October, the so-called Norway prices will also be introduced.
Norwegians will be offered a fixed electricity price of 40 öre/kWh, with the state covering the rest of the cost up to the market price.
This worries several experts.
"Forecasts indicate that Swedish households will foot the bill while Norwegians can use electricity whenever they want without extra cost. This will primarily drive up electricity prices in Sweden during 'popular' hours when electricity consumption is highest," writes Anne By Nazemi.
The increased electricity consumption in Norway can affect prices in Sweden because the Nordic markets are interconnected. However, Patrik Södersten downplays the risk.
– It's difficult to make such determinations today, that it would mean higher prices in Sweden. It's based on Sweden being one of the largest exporters to Norway, and that it would spill over into the Swedish market, but we think it's too early to say anything about it. Norwegian electricity customers are often hourly price customers who are used to adjusting their electricity consumption, so our assessment is that it will have quite a small impact.
Significant Price Differences Between North and South
Another factor causing concern in the electricity market is the occasionally large price differences between electricity regions. The fundamental problem is that there is not enough capacity to transfer electricity supply from the north to the demand in the south.
And these differences are expected to persist.
"The effect we can see is that prices in southern Sweden have become more connected to Germany, and German prices have become crucial for Swedish electricity prices. We also see that hourly prices fluctuate more in the southern parts. This is because SE4 has a deficit of electricity and is vulnerable when the transport of electricity is still limited by bottlenecks in the network," writes Anne By Nazemi in her email to Expressen.
In Tidningen Näringslivet, Christian Holtz, an electricity market analyst at the consulting firm Merlin&Metis, is on the same track.
He says that the price differences between north and south have been "significant" this summer and believes it will continue this autumn and winter.
– We may see long-term prices in the north at around 20 euros per megawatt-hour, while southern Sweden may see prices of 60–70 euros per megawatt-hour, says Holtz to TN.
Looking ahead, he also believes the imbalance will continue.
– At least until the end of the 2020s, until the industrial expansion in the north is completed and the transmission capacity from north to south is increased.