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It is the electricity company Bixia that describes in its electricity price report the uneven price situation in the electricity market in Sweden. Last year’s average price in the electricity exchange ended at 41 öre per kilowatt hour, significantly higher than this year’s average price of 11 öre.
The most important reason for the low price of electricity this year is the very good access to hydroelectric power.
– We have had extremely strong hydrology throughout 2020. Large amounts of snow last winter turned into water and continuous replenishment through rain have contributed to high hydropower production. The record mild winter also led to much lower electricity consumption than normal. This meant that we entered the spring with already good reservoir levels and after a cold May, the snow turned to water during the summer, explains Johan Sigvardsson, electricity price analyst at Bixia.
Reduced production
Low prices on the electricity exchange made nuclear power unprofitable and thus somewhat reduced its production. This meant that the electricity transmission capacity from the north to the south of the country decreased to maintain the voltage level in the main grid, according to Bixia.
– These are the reasons why prices in the south have been much higher than in the north, despite the fact that we had such a large supply of hydroelectric power. It simply has not been possible to transport it from north to south, says Johan Sigvardsson.
Sweden is divided into four electricity price areas and prices have varied widely between the different areas. Large hydropower plants are located in the electricity price zone SE1, which includes Norrbotten and parts of Västerbotten, and the electricity price zone SE2, which consists of Jämtland, Västernorrland, Dalarna, Gävleborg and parts of Västerbotten.
There is a surplus of electricity, which means that prices are lower, while there is a deficit of electricity production in the SE3, Stockholm and SE4 electricity price areas, which includes the rest of the country south of Jönköping. This leads to higher prices.
Significantly higher wind energy production
The average price in the electric zones SE1 and SE2 during the year was around 14 öre per kilowatt hour, while the average price in the electric zone SE3 was 22 öre per kilowatt hour and in the electric zone SE4 slightly more than 27 öre.
While there has been a lot of hydroelectric power, there has also been a lot of wind power produced. Wind power production has increased 35 percent over last year.
– A lot of wind power has been installed in Sweden at the same time that it has blown a lot, mainly during the first quarter of the year. It is wind power that has meant that we have had negative electricity prices twice, something that has never happened before in Sweden. On the other hand, it is common in countries with a lot of wind energy, such as Denmark and Germany, says Johan Sigvardsson.
Nuclear power plants shut down production
One effect brought about by the increase in wind energy production during the year is that some nuclear power plants have chosen to temporarily shut down their production because prices have been very low.
– It has been a very difficult year economically for the electricity producers. Especially for those wind energy producers who have a variable remuneration and have not consolidated all or part of their price, says Johan Sigvardsson.
Still variable prices
The fact that electricity prices vary between different electricity price zones is due to the fact that the capacity of the main network is not always sufficient to be able to transport electricity from Norway and northern Sweden to the two zones. southernmost power companies, and these are linked to more expensive countries in the Baltic Sea. While the price of electricity has varied greatly between different electricity price areas this year, it has also varied greatly with shorter time frames such as days and weeks. Something that Johan Sigvardsson thinks we should get used to.
– As base energy decreases and we gain greater export capacity to the mainland, we will also see electricity prices even more variable over time. So electricity production is increasingly linked to the weather. In a normal year, hydropower will still be able to stabilize the price outlook, but in dry years like 2018, the price will hold. However, we must not forget that in the Nordic countries we have the cheapest electricity production in Europe thanks to our natural resources and such a large proportion of hydroelectric energy, he explains.
Some crown effect
In recent years, the Nordic electricity market has become more integrated with the European one, as the lines between the areas have widened. Although the price of electricity in Nordpool has not been greatly affected by the corona pandemic, it has had certain consequences.
– The use of electricity fluctuates with the rhythm of the economy. We could see that the demand for electricity fell dramatically in May and June in much of Europe, which was due to the closures. Now, however, we are almost at the same levels as previous years. What has had the biggest impact on demand with us in the Nordic region this year is the unusually mild weather, says Johan Sigvardsson.
Long-term increase in electricity prices
The amount of renewable energy, mainly wind, is not only increasing in the Nordic region. Global, European and national climate and environmental targets drive the development of renewable energy and help reduce the use of fossil fuels, says Johan Sigvardsson.
– Apart from years of strong hydrology, we can expect electricity prices in the Nordic countries to be slightly higher than the average price in 2020 for the next ten years. But without the expansion of renewables, prices would be even higher. At the same time, our electricity use will increase, mainly because more data centers will be established in the Nordic region at the same time as the vehicle fleet is rapidly electrifying, he says.
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