Why electricity prices are set for record lows throughout 2020 in Sweden

Why electricity prices are set for record lows throughout 2020 in Sweden
A lot of windy weather is one of the reasons for the low prices. Photo: Magnus Hjalmarson Neideman / SvD / TT
2020 is set to be the cheapest year for electricity in modern Swedish history.

“It's truly extreme,” said Christian Holtz, an electricity analyst at Sweco. 

More wind power and windy weather, along with a lot of water in reservoirs, are two of the factors behind the forecasts.

On the Nordpool power exchange, a kilowatt-hour currently costs around 15 öre, which is extremely low for mid-winter.

The so-called futures, or prices for the second and third quarter, are currently set at around ten öre, and likely to rise to around 24 öre in the fourth quarter of 2020.

“You have to go back to the start of the millennium to find corresponding levels, and then the monetary value was different,” said Holtz. In other words, ten öre today is cheaper than the same price in the early 2000s.

The main explanation for the low prices is the large amounts of rain that have filled reservoirs to unusually high levels.

“The so-called hydrological balance is very significant for the electricity price and it doesn't look like we'll run out of water in the near future. So there is little evidence to suggest that traders will be wrong about prices in the autumn,” said Holtz. 

What's more, wind power has increased significantly. Recent storms have affected the electricity price, sometimes even pushing it to minus prices, while an unusually mild winter has led to less electricity consumption and therefore even lower prices.

The fact that Vattenfall closed a nuclear reactor at the end of 2019 hasn't had a negative impact given that so much of Swedish electricity is dependent on these weather-based factors. 

So how much will your electricity bill be affected?

Despite record low prices, the cost of the electricity itself is actually a relatively small part of what consumers pay in their bill. Taxes, fixed prices and electricity grid fees mean that the typical consumer living in an apartment pays around 2 kronor per kilowatt hours. 

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