Sweden Urges Germany to Reform Domestic Power Market

When the winter chill hits Sweden, it’s not just the temperature that drops, but also the electricity prices, and it varies depending on where in the country you live—sometimes quite drastically.

Andreas Cervenka, an economy writer for Swedish daily Aftonbladet, recently pointed out the absurdity of the situation: electricity prices in southern Sweden were a whopping 18,000 percent higher than in the middle of the country. This was attributed to low winds in Germany affecting the region’s power generation.

For example, if you’re in Malmö, you could end up paying just over 31 kronor [€2.70] for a ten-minute shower, while someone in Sundsvall, almost a thousand kilometers away, would only pay a bit over 17 öre [€0.015] for the same shower.

Overall, despite these price spikes, Sweden still boasts some of the lowest electricity prices in Europe. Energy expert Arvid Hallén explained that the recent increase was largely due to Germany’s energy policies, leading to a call for reforms from the Swedish government to make the power market less reliant on imports.

The issue lies in the difference in electricity prices across various regions or “electricity areas.” In Europe, electricity is traded in bidding zones, essentially separate markets with fluctuating prices based on local supply and demand. With limitations on cross-border transfers, the capacity of interconnectors plays a vital role in determining prices.

Germany, for instance, has a single bidding zone despite regional differences in supply and demand, contributing to price volatility. Sweden advocates for multiple bidding zones to mitigate price swings and ensure a more stable grid.

The energy landscape is further complicated by Germany’s transition to renewable energy sources like wind and solar power, which can lead to price fluctuations. When these sources underperform and Germany needs more energy, it turns to imports, affecting prices in neighboring countries like Sweden.

To address these challenges, Sweden is considering options like building a new power cable to Germany, but only if Germany introduces a price zone in the north. This aligns with the push for a more efficient and balanced European electricity market.

In the grand scheme of things, factors like natural gas prices, weather conditions, and energy source transitions influence electricity prices across Europe. Norway, too, is grappling with high export demands affecting local prices, signaling broader issues in the European energy landscape.

While the situation may seem complex and challenging, there’s still hope for a more stable and cost-effective energy market with strategic reforms and collaborations between nations. It’s a delicate balance that requires cooperation and innovation to ensure a reliable supply of electricity for all.