Response to interpellation 2024/25:220 on differences in electricity prices between the different electricity price areas
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
KD argues that the flow-based capacity model is positive as it enables more efficient use of the electricity grid and increases transmission capacity without expensive new lines 1. KD emphasizes that the model contributes to more stable electricity prices 2 and that electricity prices have fallen for two consecutive years 3. KD argues that the lack of predictable electricity production in southern Sweden has worsened the power balance 1 2. S argues that the model is unfair as it leads to higher prices in all electricity price areas 4. S believes that the model prioritizes a Nordic rather than a Swedish perspective 5 and that Sweden should eventually become a single electricity price area 6.
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! Finally! Monica Haider has asked me if I am prepared to initiate a review of the flow-based capacity model and take measures to reduce the large price differences between electricity price areas, particularly regarding the increased prices in SE4.
Flow-based capacity calculation was introduced in the Nordics on 29 October 2024. The introduction follows an EU Commission regulation approved on 5 December 2014 by the then Social Democratic-led government. According to EU law, the method shall be used as long as Svenska kraftnät, together with its Nordic counterparts, has not been able to demonstrate that the application would not provide any added value. The Nordic system operators have not been able to demonstrate this, and therefore the method has been implemented.
The Government has no formal role in the development of the method for capacity calculation or in the implementation of the method. It is Energimarknadsinspektionen and Svenska kraftnät, together with the Nordic counterparts, who are responsible for ensuring that the method and implementation are carried out in accordance with the applicable regulatory framework. After the introduction on 29 October 2024, Energimarknadsinspektionen also has supervisory responsibility.
Flow-based capacity calculation of transmission capacity between different electricity areas aims to enable more efficient utilization of the Swedish power grid. The transmission capacity in the electricity system increases - Svenska kraftnät can transmit more power from northern to southern Sweden - and more electricity production in northern Sweden is released without more lines being put into operation. These lines are very expensive, so fundamentally, this is positive for Sweden.
Of course, an effective implementation of the method is a high priority for me and this government. The government will, in close dialogue with Svenska kraftnät and Energimarknadsinspektionen, closely monitor the implementation of the method and the developments in the electricity market. The authorities have a clear responsibility to ensure that flow-based capacity calculation contributes to achieving the energy policy goals that the Riksdag has established at the government's request, particularly competitive electricity prices and goals for security of supply. The government will also closely monitor how the calculation of transmission capacity is further developed so that the method can function in a purposeful way and contribute to a socio-economically efficient electricity supply. Another important part is to monitor our authorities' work to make relevant data available in order to promote a predictable, efficient, and transparent electricity market in Sweden. There is more to be done here.
The government is, in summary, ready to make the efforts required, while at the same time it is important that the authorities are now given the opportunity to gather information and analyze the practical effects of the implementation.
But we must also remember that electricity prices in Sweden have not always been as dependent on weather and wind as they are today. More weather-dependent production in the electricity system increases price volatility, which becomes particularly noticeable during the winter period when electricity consumption is higher. Not least, the previous decommissioning of dispatchable electricity production in Sweden's two southern electricity areas has led to a worsened balance of power, where Skåne and electricity price area 4 now have the greatest supply problems in all of Europe. The Government continues to work to address the fact that SE4 lacks 3,000 megawatts for power sufficiency, something that is not possible to solve in just two years - unfortunately.
In conclusion, flow-based capacity calculation is dependent on the development of the electricity system. It is the design of the electricity system – where electricity production and the electricity grid are built and what characteristics they have – that determines our electricity prices. For that, it is required that we expand our electricity system in a competitive and socio-economically efficient way, so that Sweden gets an electricity system with a design that can meet the demand for fossil-free electricity at reasonable and stable prices every day of the year, regardless of weather and wind. The Government, which I represent, is restructuring the energy policy and, during its first two years in power, has already managed to make approximately 50 decisions on measures deemed to strengthen the energy supply in Sweden in the short as well as the short, medium, and longer term. More electricity production and electricity grids with the right characteristics, in the right place, are needed to achieve a better balance between production and use of electricity in all parts of Sweden, and this is of the highest priority for this government.
Monica Haider (S)
Madam Speaker! Thank you for the answer, Minister!
I am glad that the debate finally took place. I agree with the Minister that it is good that the transmission capacity in the power grid increases without more lines being put into operation and that it is fundamentally, of course, positive for Sweden.
The problem is only that it is electricity price areas 3 and 4 that have to bear the bill this time as well, which is not reasonable. We in areas 3 and 4 already pay a much higher price, and with it the majority of the bottleneck charges. And now the prices for us have increased even further.
The answer continues with that the government, in close dialogue with Svenska kraftnät and Energimarknadsinspektionen, will follow up on the implementation of the method and that it is the agencies' responsibility that the method contributes to achieving the energy policy goals that the Riksdag has established. This is, therefore, the agencies' responsibility, not the government's.
The Minister says in her answer that it was the Social Democratic government that made the decision. She also says that it is the agencies' responsibility - not the government's - and that the government has no formal role in this. The answer simply does not add up.
Madam Speaker! The model has received massive criticism from both companies and organizations such as Svenskt Näringsliv, Energiföretagen and several others. The industry has been critical of the model for two years but has not been listened to. One of the problems that the industry pointed out was the risk that the system operators would be forced to increase their margins - something that Statnett has now signaled. The risk is that the others will follow suit and that it will then become even more expensive. This has been carefully pointed out by the industry before the implementation. I want to ask, among other things, whether Svenska kraftnät will also increase its margins due to the uncertainty that the model entails.
Now that the model has been introduced, I wonder if Svenska kraftnät could run the old model in parallel for a few months to see how it would have fared – that should be possible.
Why were sufficient analyses not conducted before the implementation? During the parallel run from December 2022 to October 2024, the model showed that the average prices were higher with the new model in electricity price area 1, 2 and 3. For electricity price area 4, the electricity price was minus 2 percent, according to Svenska kraftnät. It is not good that prices become higher in any electricity price area, I would like to have said.
The average prices do not, however, take into account that electricity consumption varies over the year, so the actual costs for customers are underestimated. If one removes the three summer months, the result is that even in electricity price area 4, the price became higher, plus 4 percent - thus a higher price even in electricity price area 4. All electricity price areas have therefore received a higher price, and we who already have the highest prices in area 4 are to pay even more. It is not reasonable. Does the minister think it is reasonable?
We saw just a few months ago what this model entails: record-high electricity prices in southern Sweden and record-large price differences in Sweden.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! It was the previous, Social Democratic-led government that decided on the introduction. We must be honest that this was discussed already during the Alliance years at the EU level, and it was then carried through at the EU level during the previous government. That is where the decision was taken regarding the regulatory framework for the flow-based capacity calculation mechanism. If one sits on some completely different facts, I would like to be enlightened about them, but I perceive that several Social Democrats confirm that picture, and it is also recorded in the minutes. That said, after it was decided on this at the EU level, it was not a freely chosen task or something that one could have or not have. There were very clear criteria for whether one needs to follow this or not.
This is happening at the same time as all other countries in the Nordic region are doing this. We have given a very clear mandate to SVK, i.e., Svenska kraftnät, that this must be evaluated. They are also clear in return that there is no reason to say that an individual price peak in, for example, Skåne for a few hours one afternoon in December is directly due to the flow-based capacity calculation mechanism. Some time needs to pass, and then we will ensure that an evaluation is conducted.
We have also asked the very relevant question of whether it is possible to run in parallel straight away. Regarding that, the assessment is that it is not possible, because this is based on data from the common area in the entire Nordic region. It will, however, be possible to make comparisons. I look forward to us being able to make evaluations, but so far there is no basis to say that it is the new flow-based capacity calculation mechanism that causes us to have higher prices at times.
I want to conclude by once again mentioning the fact that electricity prices have now fallen for two consecutive years to the lowest level in four years. That is, prices were lower last year than the year before. That is the situation we have. We have not had such low electricity prices since the pandemic, when very much in Sweden stood still and we, so to speak, had low prices for the wrong reasons. We need to have a bit of a grip on the order when it comes to this. We still have extreme volatility, and that is fundamentally driven much by the fact that it is weather-dependent. At the same time, we have significantly improved our transmission capacity due to the capacity calculation mechanism. There is now a more even supply of electricity in the country where it is needed and when it is needed without us having rolled out billions and billions in new cables. That also needs to happen, but it would have become even more expensive if this model had not been introduced.
With that said, I have great humility regarding the fact that we will need to evaluate and see, but these are the facts we have on the table now.
Monica Haider (S)
Madam Speaker! I want to begin by saying that it is obviously not the model itself alone that accounts for the price level in Sweden. However, it further pushes up the price in southern Sweden, where we already have very high prices. This feels very unfair. There is no requirement to introduce the flow-based model. One could have developed the CNTC model that we had, but Svenska kraftnät has not even investigated that. I wonder if the Minister can answer why.
The Minister, in his answer, brings up the ordinance that was approved by the Social Democratic government, just as the Minister said earlier, on 5 December 2014. That was the case, but the Social Democratic government did not take a position on what design the model should have. It would have been possible to make local and regional adaptations of the method. If the sitting government had wanted to do something else, I assume the government would have done so, for this government has shown that it is very well able to do so in many other issues. One example is not letting Svenska kraftnät bear the connection cost for offshore wind power, which the Social Democratic government introduced.
Given how many bottleneck fees there are, both accumulated and new ones flowing in, I wonder if the Minister really cannot consider deciding to skip the connection cost for offshore wind power.
Madam Speaker! There are also different ways to implement the model, and the industry has been critical of the introduction of the model as it currently stands. We have also been able to read statements from the Minister where the Minister says that there will be a fight if this does not turn out well for Sweden.
In what way will the minister argue? Even today, the industry says that this model is not best for Sweden. What the industry says is that it is very good for both Germany and Norway, but not as good for Sweden. Would it not have been better to ensure before implementation that this model is also good for Sweden and does not increase costs for households and industry in southern Sweden, where it is already much more expensive?
It would also have been good if the authority had listened to the concerns that the industry has had for two years, but that has not been done. The fact that it looks the way it does is not set in stone, but it could have been done in a different way. When it comes to, for example, limiting high imbalance costs, Svenska kraftnät should partly ensure a high availability in the transmission capacity between the areas on the intraday market, and partly be tasked to investigate the possibilities of stimulating resources for local balancing.
On November 5, 2011, Reinfeldt - or rather Svenska kraftnät - decided that Sweden would introduce four electricity price areas instead of having one area. Now, a new review of the electricity price areas is taking place. I wonder if the minister will argue on that issue if she is not satisfied with the proposals. According to the Tidö Agreement, Sweden should eventually be able to become a single electricity price area.
That we have several price areas in Sweden is one of the reasons why the model works worse here. In the countries where the model has previously been introduced, there is only one electricity price area. What does the Minister think about the division of electricity price areas in Sweden, now that it is becoming relevant? Is the Minister prepared to task Svenska kraftnät with describing the consequences of the model in the ongoing electricity price review?
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! The review of electricity price areas will be received shortly, and I look forward to returning to that issue then.
We do not have electricity price areas just for the sake of it in general, but they are designed based on where we have bottlenecks, i.e., where we have problems moving the electricity from point A to point B. That brings us back to what this interpellation is about, i.e., a flow-based capacity calculation mechanism that is intended to facilitate the possibility of moving electricity from where it is produced to where it is needed.
Why? I'm not going to nag about who decommissioned a huge amount of controllable power production, but it wasn't me. Where? Somewhere in southern Sweden. What was the effect? It became a yo-yo of electricity prices and significantly fewer companies that can connect to the electricity system.
So we have electricity when it is windy, but we lack electricity when it is freezing cold in the winter. And winter is a recurring concept in Sweden. Every year, winter comes! Even the audience in the stands nods; look at what people have a grasp on! Therefore, we need to have electricity where it is needed, when it is needed - always. That is why I have defended that we introduce this model which makes it possible to transfer more electricity from where it exists to where it is needed.
A number of questions are being raised here; let us work through them.
Could this not have been tested before? It is done.
Could one not have listened to the critics before? It is done, and it has also been followed by action.
It is further claimed that this leads to higher prices. Now I have heard it so many times, so now I would like to have the source for that claim. What source do Monica Haider and the Socialdemokrater have for the claim that it is a flow-based capacity calculation mechanism that gives higher electricity prices? Higher electricity prices when? Yes, sometimes there are significant peaks.
It may be that we have reason to adjust in the model, and in that case, I first want a basis and an evaluation. That is why we have given this assignment. But there is no basis for claiming that now. If it does in the future, believe me, then I will listen, and then there will be a fight – not with Monica Haider but with the "sister system", as Ingvar Carlsson would have said.
Monica Haider (S)
Madam Speaker! Thank you to the Minister for the answer!
Since the model was introduced, there have been very large price differences in Sweden. This is, of course, not fully explained by the model, but there are also other factors. What is new is that the price in area 2 is now often lower than in area 1 and that the electricity price in area 3 is approaching the price in area 4. The purpose of the model is to effectively utilize the Swedish grid from a Nordic perspective, not a Swedish perspective. That is what it is about. It is the Nordic region that is in focus.
Just as the Minister says in his answer, we are more weather-dependent today than before. Unfortunately, the model does not take into account the latest known information at delivery, but the information that is taken into account is from two days earlier. The model therefore limits the market's ability to act on the latest known information.
The model shall take into account information on critical network elements in the spot market's price calculation. Here, Svenska kraftnät has, based on the secrecy legislation, chosen not to disclose these network elements, which makes it much more difficult to forecast price developments in order to optimize resources. Under the current secrecy legislation, data on the electricity grid is classified for security policy reasons, which is not done in other Nordic countries nor in any other country.
My question is therefore whether the Minister is prepared to review the secrecy classification of critical network elements, as it is a special arrangement we have here in Sweden. How will the government follow up on the model's consequences to ensure that households and companies, for example in Kronoberg County, are not paying too much for their electricity? It is not reasonable to have electricity prices five or six times higher in southern Sweden.
Energi- och näringsministern Ebba Busch (KD)
Madam Speaker! Thank you, Monica Haider, for many relevant follow-up questions!
The question of transparency regarding how this is calculated and the underlying data for it is something that has been raised with me as Minister for Energy and something that I have also raised with my agency. Dialogue is ongoing; that is as much as I am prepared to say. If one does something radically different compared to others, one must have very, very good reasons for it.
Otherwise, I look forward to returning next autumn on the issue of the evaluation of the model. That is my assessment. By then, one year will have passed with the flow-based capacity calculation model. Otherwise, we can only note that the value of more stable electricity prices cannot be overestimated, as it also affects how things can be priced at the other ends.
It is a very correct point that this is being done together with the Nordics. It improves the transmission possibilities within Sweden. Why? We often talk, somewhat misleadingly, in the debate about that we have a huge surplus of electricity and that we export so much, while people sit there at home and wonder how that adds up - why do we lack electricity? Why do we say no to companies that want to connect? Why do we lose out on thousands of jobs in my municipality? Well, because on other days we are completely dependent on our Nordic neighboring countries. Then we import only because we do not have enough electricity where it is needed and when it is needed. We thus have a capacity shortage.
Thank you for the interpellation! We will hear from each other again.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.