Response to interpellation 2024/25:143 on Swedish electricity prices
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
The debate concerns Swedish electricity prices and pricing models. KD considers Swedish prices to be unrealistic and unfavorable as they would mean that Sweden leaves the EU's internal market 1. KD argues that a state price regulation violates EU regulations 1 and that draconian changes would affect the possibility of importing electricity when it is cold. KD emphasizes that today's market provides incentives to phase out fossil power sources 2. V argues that Swedish prices do not violate EU rules 3 and that they are not discriminatory 4. V believes that the pricing should stop an unreasonable transfer of wealth from consumers to electricity producers and Svenska kraftnät 5.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! There are many interpellations today, so it is important to find the right interpellations' answers and direct myself to the right interpellator!
Birger Lahti has asked me what I base my statement on regarding the fact that the proposal for Swedish electricity prices is not feasible. Birger Lahti's and the Vänsterpartiet's proposal is therefore about the Swedish electricity prices being decoupled from high export prices. I am now attempting to provide a description, so we shall see if we have the same picture of what the Vänsterpartiet's proposal entails. The intention is that it should give us a lower Swedish price for electricity, which is set according to the electricity produced for the Swedish electricity market.
To begin with, we have a common internal market with the rest of the EU, which includes trade in electricity. The electricity market's resources are optimized on a day-ahead market, as it is called, in one and the same common auction. Both the electricity prices in each electricity price area within the EU and the electricity exchange between electricity areas and countries are a result of that auction.
Birger Lahti's proposal would therefore mean that Sweden's resource allocation and price calculation are handled in a different way than in the other 26 countries. For my part, the proposal is unrealistic already there because, in practice, it would mean that Sweden left the part of the EU's internal market that concerns the free movement of electricity. There are also no examples of any other EU country that has implemented changes in the free price formation, not even during the energy crisis.
The actors in the electricity market within the EU are free within certain frameworks to place their buy and sell bids. A conclusion therefore is that a state price regulation needs to be introduced in Sweden to achieve Birger Lahti's objective of Swedish prices on electricity. Otherwise, the actors would with great probability bid strategically so that the Swedish price and the export price would ultimately end up very close to each other. Such a regulation of how the actors shall place their bids is not in line with either Swedish rules or EU regulations.
It would also place high demands on the authorities' monitoring of the market to ensure that the actors adhered to the new rules. Another likely effect would be that the regulation created incentives for unwanted arbitrage in various forms, for example, that the actors buy electricity cheaply at a so-called Swedish price and then sell it further at a higher price on the export market. In that case, the prices would approach each other, and it would therefore still not become cheaper.
We must also remember that it was Svenska kraftnät's export restrictions to Denmark during the 2000s that led to Sweden's division into four electricity price areas after notification to the EU Commission. If Sweden were to take measures aimed at generating lower prices for Swedish customers compared to foreign ones, there is an obvious risk that it would conflict with the EU's fundamental rules on the free movement of goods and services.
Then a number of other question marks arise regarding the proposal, for example how it would affect the incentives to invest in new electricity production in Sweden when we are now facing a necessary green transition that must also be competitive.
It is also unclear what would apply regarding the import of electricity. Given that the power balance in the Swedish electricity system has deteriorated since 2020, following the decommissioning of dispatchable power production, Sweden has become more dependent on electricity imports during cold winter days, when the electricity demand is at its highest. According to ENTSO-E, the organization for European network operators, southern Sweden today has the two electricity price areas - SE3 and SE4 - which have the absolute worst power adequacy in Europe. Especially electricity price area SE4 is often dependent on imports from Denmark, Poland, and Germany for its electricity supply.
Sweden continues to work towards resolving the fact that SE4 lacks 3,000 megawatts for power sufficiency, something that is not possible to solve in just two years. With the Left Party's Swedish prices on electricity, Swedish companies and households would risk being left without electricity if the crisis were at the door. Taken together, I therefore argue that Swedish prices on electricity are both unrealistic and unfavorable for Swedish interests.
This government takes the problems very seriously. We are presenting realistic and feasible solutions to strengthen Sweden's energy supply both urgently as well as in the short, medium, and long term. It is the design of the electricity system—that is, where electricity production and the power grid are built and what characteristics they have—that determines our electricity price. Sweden needs to have an electricity system with a design that can meet the demand for electricity at competitive prices every day of the year, regardless of weather and wind. We have indeed noticed that it changes quite quickly in Sweden.
The basis for a well-functioning electricity market is to build electricity production and grids with the right characteristics in the right place to deliver electricity where demand exists, at the right time and in sufficient quantity. We must therefore not only build faster but also build smarter.
The government has managed to make approximately 50 decisions on measures deemed to strengthen the energy supply in Sweden towards 2030, and there will be more.
Birger Lahti (V)
Madam Speaker! I thank the Minister for Energy and Industry for the opportunity for debate.
I note initially that the Minister for Energy has failed to answer the question I asked regarding which specific provisions in Swedish legislation or applicable EU legislation would prevent or prohibit the introduction of "Sverigepriser" (Sweden prices) and in what way such a method would contravene these rules. Marginal pricing would still apply, and export and import could still take place without further obstacles. The Riksdag's investigation service is also not certain that the introduction of the Beken model, or "Sverigepriser", would contravene EU rules on the free movement of goods, the regulation of energy policy, or the Treaty of Lisbon. RUT uses the term "probably" in its answers.
Madam Speaker! I must ask the Minister if she thinks the pricing of electricity is working well. The highest price for electricity per hour in Sweden was 831.33 öre per kilowatt-hour on August 30, 2022. The largest variation in electricity price during a single day has been just over 830 öre per kilowatt-hour.
I have looked into the minister's answers and landed on something resembling "spot the difference" pictures. The minister claims that we would be leaving the EU's internal market regarding the free movement of electricity and that there are no examples of countries that have implemented changes in pricing. This statement is not correct. Countries such as Poland, Spain, Portugal, and Italy have made adjustments in the pricing methodology to prevent pricing phenomena that one would never have expected to occur.
The pricing method applied within the EU is more than 30 years old. Today, the conditions in the electricity market are completely different than at the beginning of the 1990s, and like everything else, the pricing methodology must be adapted to changed conditions. For example, it was never intended that export volumes could become price-setting and lead to gigantic wealth transfers from electricity customers to the state and the electricity companies, which has been the case in Sweden. Other countries have other phenomena that need to be considered.
Ursula von der Leyen stated in August 2022 that the electricity market was dysfunctional and needed to be reformed, and that the current pricing model had served its purpose, which has also partially occurred regarding the distortions that have existed in Central Europe. But since Sweden has not raised the export issue with the EU, this has not been considered in the reform work that has been initiated.
Since the Minister for Energy has not answered my questions regarding applicable Swedish or EU law but has only stuck to a general reasoning, I will content myself with stating that Sverigepriser, as far as I can judge, cannot be considered to contravene the EU's rules on the free movement of goods and services or the rules for energy policy in the EU Treaty. I can only state that one has not even attempted to ensure that the Swedish consumers will be those who benefit from the pricing model.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! I have had the opportunity to debate these kinds of questions about so-called "Sverigepriser" on a number of occasions, also with Nooshi Dadgostar. When I have met Birger Lahti's party leader, our exchanges have often been very limited, so I am glad that Birger Lahti and I have a little more time today.
I am a bit surprised that the member does not feel that I have answered the question. I have truly tried to take the time to give a full answer, show respect for one of the Riksdag's parties, and try to break down the reasoning properly. I mean that I also, in my initial answer, answered what Birger Lahti returned to in his first post.
Birger Lahti asked if I am satisfied with the fact that we have such enormous price fluctuations - that is, that the price moves so much up and down - and with the power shortage we have. No, I am not. That was also the reason why I sought the support of the Swedish people to replace the red-green government and take responsibility for just the energy issues. We need to have an energy minister and a government that understands that it does not work to shut down such large units of base load and believe that it should not result in a power shortage.
Power shortage was exactly the result Sweden got. It means that we are now incredibly much more vulnerable to changes in weather. It is unworthy that Sweden's electricity prices, competitiveness and opportunities to connect new companies depend on which forecast the meteorologists give at the end of the news every evening. This is completely absurd, and we are now leaving it.
Today's electricity market is not perfect. What Ursula von der Leyen presented in her statement is what the Swedish government has pushed in various EU contexts. This is also the reason why we now have an investigation underway regarding electricity market design. Sometimes, from the opposition side, the focus is primarily on what we are doing in the area of nuclear power, but the electricity market design investigation is much larger and concerns how the system should function in its entirety. Nuclear power is a part of this system both now and in the future.
We do not have a perfect system today, as we have said, but this is by far the best way to determine which resources can be used and when they can be used. It provides stronger incentives to phase out more expensive power sources, especially the fossil power sources gas and oil. It ensures that the EU's climate policy with pricing of carbon emissions through emissions trading also has an impact on power production, so that fossil power sources can be phased out.
The so-called marginal pricing is also not unique to the electricity market. Are there proposals from Vänsterpartiet to change this also in other areas? There are a number of commodities, for example gold, oil, grain and metals, which are priced in the same way on a global market.
The problem with today's electricity market, which is energy-only, is that it does not provide sufficient incentives to build new production, especially not for predictable baseload power.
Shutting down production happens quickly. Building up takes time, and investors find it difficult to count on investments over a long period. Why is that the case in Sweden? Well, partly because we have so much wind power in our system. There has been such a one-sided focus on wind power and also a failure to demand that the wind power companies deliver more power. We do, however, have conversations with the wind power companies about this, and they are interested in meeting that demand. This is the reason why we get these enormous price fluctuations. But it does not have to be that way, and now we are shifting.
Birger Lahti (V)
Madam Speaker! It was good to hear that the Minister has stepped in to stop the red-green electricity, as she put it. It was an interesting observation.
Madam Speaker! Another strange wonder the Minister uttered is how it would affect the incentives to invest in new electricity production. We have had this dysfunctional pricing model, but the willingness to invest has not exactly taken off. With the priorities the government leans towards, it has instead gone in the opposite direction. For twelve years, Sweden has had electricity areas, and for the last three or four years, it has meant higher electricity prices in Sweden, not least in price area 4. Investments have also decreased when it comes to building electricity production in southern Sweden. That argument can therefore be set aside. Instead, the pricing model has reduced the competitiveness of companies in southern Sweden.
The Minister fears speculation with the Sweden price model. But with Sweden prices, supply and demand work exactly as they do today. The only difference with Sweden prices is that Nord Pool first makes a settlement based on the volumes demanded in Sweden, and after that, the settlement is made for the total volumes, which also includes the export volumes. The export volumes will be priced based on the same volumes as occur today. No limitation of the exports is intended, and no favoring of Swedish electricity customers at the expense of foreign electricity customers will occur. The method is therefore not to be considered discriminatory and works with the marginal pricing model for these volumes exactly as today.
Regarding the supervisory authority, the Energy Markets Inspectorate stated in a statement in the autumn of 2022 that their only task towards the electricity producers is to monitor that no market manipulation or insider trading occurs and to develop what that entails with a free electricity market. That an electricity trader buys Swedish electricity and sells it for export lacks relevance. That is not how it works on today's electricity market, and it would also not work on an electricity market adapted to Swedish electricity prices.
The Minister concedes that the reason we have four electricity price areas is the export restrictions to Denmark in the 2000s. This argument lacks relevance to the issue. The introduction of Swedish electricity prices has no impact on transmission restrictions to neighboring countries. This indicates a misunderstanding or a lack of knowledge on the part of the Minister for Energy, as I see it.
So, as for the import part. The Minister writes that Sweden has become dependent on imports. During 2023, we had a net import of 140 hours, which means barely six days. Swedish electricity prices encourage electricity cooperation and do not change anything in how the import part is priced compared to how it happens today. Here, as in several other statements, the Minister for Energy needs to familiarize himself with the issue. When it comes to the import of electricity, it will not take any other forms than what is the case today.
I return in my final post to what the minister said in the response that the government takes the problems most seriously.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! The Left Party's reasoning regarding Sweden's imbalance in the electricity system is as irresponsible as if I were to tell my children: We have a net surplus of food, dear children. It is just that there is a huge amount of food half the year while you other half of the year have to go and lie down with rumbling stomachs. But do you know what? Now that you are lying down hungry and crying yourselves to sleep, remember that we had an abundance of food a few months ago. Then we had so much food that we could feed the entire neighborhood and invite everyone outside our home.
This may sound like a banal and brutal analogy. But that is exactly how it is, and it is exactly this reasoning that Vänsterpartiet uses regarding net exports. The fact that on certain days we have a huge amount of electricity and export more than we import says nothing about a shortage of power. This shows that the opposition still has not understood why Sweden is losing tens of thousands of jobs because companies cannot connect to the power grid. It does not help to tell the companies: You know what? We do have a net export of electricity when the wind blows and the sun shines. But for those of you who have an industry that needs electricity 24/7, 365 days a year, there is no electricity. But be happy anyway, because we export masses in the summer!
This is a very unrealistic and irresponsible argument that shows what happens when ideology takes precedence over physics.
I have said that I do not care whether it is wind power, hydropower, nuclear power, or solar power in the system as long as it can deliver the characteristics the system needs. Who can seriously look Swedish industry, Swedish companies, and Swedish households in the eye and say that they are satisfied with the power shortage we have? In electricity area 3 and 4, they are desperate. Sometimes we have very high positive prices. But sometimes we, as now, have negative prices for part of the day, and for the rest of the day, the price is a few cents. Right now, the electricity price is very low in all of Sweden. To have it this way is not reasonable.
Instead of imaginary solutions, the government has taken several measures that the previous S-led government with the support of V was unable to decide on. Among other things, it was announced this summer that the government is stopping the Hansa Powerbridge power line to Germany. The reason is that the German electricity market does not function in such a way as to provide correct price signals to the electricity market's actors, primarily because Germany, unlike Sweden, is not divided into electricity price areas. We have conveyed this to Germany, but we cannot dictate that Germany should introduce electricity price areas in a way that corresponds to the significant bottlenecks in the country.
In order to be able to conduct an offensive policy and dialogue for Swedish interests, it is crucial that Sweden itself has a correct implementation of the EU's common rules of the game. I mean that I have accounted for where I believe the unrealistic lies. The Left Party's ethno-nationalism, regardless of the good intentions, would undermine this order, which would neither benefit Swedish companies nor Swedish households.
Birger Lahti (V)
Madam Speaker! I thank the Minister for the answer.
The only thing I can agree with is the dissatisfaction with the power situation in price area 4, and I have already made it clear that the policy that has been pursued until now has only led to greater problems. But technicalities regarding production, storage, and power, we will have to take another time.
The government thinks, as has been said, that one takes the problems most seriously. The Left Party does not share this view. The government has not acted to safeguard Swedish interests but has passively watched as the failed pricing model has resulted in an overcharging of companies and households for a socially necessary function by over 300 billion SEK over the last three years.
Sverigepriser is not about solving the supply issues of electricity and is not an entry in the debate on nuclear power versus wind power. Sverigepriser is about stopping the unreasonable transfer of wealth from consumers to electricity producers and Svenska kraftnät in its role as the principal for a deficient grid. The Swedish ministries have also bathed in money from electricity consumers because they have not even attempted to curb the dysfunctional pricing model. It is a gigantic transfer of capital from Swedish consumers to those I listed.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! I want to start with the track that I was on earlier. I see it as a matter of honor to try to answer the questions being asked. I mean that the answers are in my initial response.
If there are details in this that still appear unclear, I am open to delving further into them in the future. It is a matter of honor for me that the interpellations should be able to fulfill their function.
I want to conclude by saying that however you turn and twist this, it is clear that Sweden has a welfare, a competitiveness, and an opportunity to connect new companies to an electricity grid that stands or falls on whether it is blowing or not or if it is cold.
Today it is windy, so electricity prices are very low. During last week, it was windier less, which on some days, such as on Tuesday, gave very high prices in Sweden. We are also very dependent on imports. It doesn't matter that we have a surplus some days if we are so dependent on imports.
If we make draconian changes in Sweden that everyone else will mean go against both the regulatory framework that exists within Sweden which we ourselves have decision-making power over and EU regulations, it will have a significant impact on our ability to import on the days when it is not windy and the sun is not shining and it is really cold in the country.
We cannot have it be so insecure. I look forward to continuing to fight to make the electricity system more robust. With that, I thank you for the interpellation debate.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.