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Why are electricity prices in Sweden falling?

The electricity price shock in Sweden is over – at least for now.

Published: 13 November 2022 10:17 CET

Electricity

Electricity prices mightt be somewhat more moderate electricity prices this winter. (Photo by Krišjānis Kazaks / Unsplash)

The electricity price outlook for continued, relatively low electricity prices for the rest of the year looks favourable.

The record level of three kroner per kilowatt-hour in Southern Sweden in August has been almost forgotten.

In October, the average cost had come down to around 80 öre, even lower than the same month last year. In fact, it was the lowest since July 2021.

Almost halfway into November, the average price is around 40-45 öre per kilowatt-hour in Southern Sweden (electricity area 4), which can be considered historically normal levels.

Higher up in the country, the price is lower.

In recent days, households have been able to recharge their electric cars or turn on electric heating in the house at very favourable terms. The average price during the day on Friday and Saturday has been two öre per kilowatt-hour.

Worst-case scenario avoided

Although prices probably won’t remain that cheap when the winter and the cold hit, the worst price shock has now passed.

There are several reasons why analysts expect somewhat more moderate electricity prices this winter.

Some are weather-related, such as the fact that Norway, after a lot of rainfall, has now sorted out its previous water shortage in the reservoirs in the south of the country.

Furthermore, the weather has been mild – and is expected to stay that way for quite a while.

Gas prices decreasing

Another decisive factor is that gas prices have fallen strongly in Europe (note: gas is largely used for electricity production).

The reason? Full gas stocks despite cuts in Russian gas imports. Right now, it is almost difficult to take in all the gas flowing into Europe.

“There are a lot of tankers (with liquefied gas) outside the ports waiting to be unloaded,” Johan Sigvardsson, an analyst at the electricity trading company Bixia, pointed out.

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How some highly-skilled foreigners are missing out on tax cuts in Sweden

Wait, an expert tax? Who qualifies?

In order to qualify for the so-called expert tax, you have to meet five formal conditions.

You cannot be a Swedish citizen and you must not have been listed as a resident in Sweden at any time in the five years prior to your application.

You also can’t have plans to stay in Sweden for more than seven years (although you won’t be penalised later if you do end up changing your mind and staying longer), and you need to work for a Swedish employer, or a foreign employer permanently established in Sweden.

Finally – and this is the crucial requirement for many researchers, who don’t realise they qualify in time – you must submit your application for expert tax relief to the Taxation of Research Workers Board (Forskarskattenämnden) no later than three months after the date you began working in Sweden.

Why don’t they realise they can apply?

Well, the Income Tax Act, which regulates this rule, stipulates that the researcher’s work needs to include “qualified research or development tasks of such nature or at such skill level that there is significant difficulty to recruit comparable personnel within Sweden”.

This, the Universitetsläraren magazine reports, means that higher education institutions where these foreign researchers work interpreted the rule to mean that only foreign researchers with specialist skills can be granted tax relief.

However, rules on the Taxation of Research Workers Board’s website state that researchers who have worked for one or two years as a postdoctoral fellow can qualify – although PhD students or recent PhD graduates are not eligible.

According to the magazine, HR at major Swedish universities like Lund only recently became aware that such early career researchers could qualify for the grant.

“Knowledge of who can receive expert tax relief varies according to the department, and centrally we are also not always sure which rules apply,” HR specialist at Lund, Julia Edgerton, told Universitetsläraren.

Despite the fact that a large number of foreign researchers who are potentially eligible for the tax break work at Lund, only 23 employees on average per year have been awarded the tax break in the past three years. Edgerton further told the magazine that this number could increase to at least a hundred per year, now that the university is better informed on the rules.

At Karolinska Institutet (KI), this number was even lower – in March 2024 only 16 employees were receiving expert tax relief, KI HR specialist Patrik Rosén told the magazine.

Another source of confusion is the legal requirement that the person applying for the tax break does not intend to stay in Sweden for longer than seven years, which led some universities to believe that employees with permanent positions could not apply.

In practice, however, intention to stay is assessed primarily on what the applicant states in their application, rather than the type of employment they have.

Ultimately, this confusion over who actually qualifies, as well as the short three-month application window from the start of employment, means that people who could have benefited from the tax cut do not find out that they qualify until after the deadline has passed. And with the Taxation of Research Workers Board refusing to accept late applications, these researchers are missing out on seven years of 25 percent tax cuts.

Is anything being done to stop this?

Yes. A government directive in June 2023 launched a review of the expert tax rules in order to see, among other things, if they have had the intended effect and whether any changes are required in order to “increase the rules’ international competitiveness and address any difficulties identified in the application of the law”.

Such changes could include potentially scrapping the rule that applicants must be considered experts in their field, and replacing it with a simple income-based rule, which would allow applicants earning over a certain amount (potentially varying depending on the industry) to automatically qualify.

There is currently an income-based rule in place, allowing anyone earning over 114,691 kronor a month (2024 figures) to qualify, but as this is more than triple Sweden’s 34,200 kronor median salary, there are few researchers who qualify via this route.

The directive also includes potentially increasing the size of the tax cut, as well as extending the application deadline, removing the requirement that applicants may not be Swedish citizens (thereby opening it up to returning Swedish researchers who have spent a significant amount of time living abroad), and extending the time period in which applicants must not have lived in Sweden before applying, while potentially providing an exception for applicants who completed their doctoral studies in Sweden.

The proposals from this review will be presented no later than January 15th, 2025.

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