Dry weather gives high electricity prices in Sweden

The cost of a midsize villa with a mobile electricity price, which paid around 600 kroner for its electricity last June, can pay a thousand times the same month this year. For the year 2018, the bill can be up to 7000 crowns higher than 2017 and for an industrial plant, it is about one million.

– The price is so high right now depends on the dry weather. There is a need for precipitation to fill the hydro plant store. Arne Bergvik, chief analyst at Jämtkraft

does not believe in the lowest electricity rates

The Nasdaq electricity market thinks that electricity prices are going to decline in the coming years. The electricity contract in 2020 is bought for 32 öre / kWh today. But Jämtkraft thinks that prices will rise to 38 öre / kWh.

– I think the rise will be even larger in 2025, the price of electricity could be closer to 42 öre / kWh on the Nordic power exchange, "says Arne Bergvik

. The Nordic electricity market is linked to Europe where the price of electricity is set by coal and gas power plants. This means that electricity prices in Sweden and Europe are influenced by the price of carbon and fossil fuels, products traded in the global market where appetite is increasing. I think that electricity production will be much more expensive in the future, "says Arne Bergvik

The growing demand on the fuel markets

The global economy is now strong. India and China are the two largest consumers of coal and today account for more than half of the world's coal combustion. And imports to countries are increasing, driven by a major energy pole to fuel the country's strong growth. This year, the International Monetary Fund (IMF) predicts that the Chinese economy will grow more than 6% and the Indian economy more than 7%. With such a growth rate, you need more energy of all types, including coal and gas.

– The raw materials we share with emerging markets will be appreciated by buying pressure increases, summarizes Arne Bergvik

Increased import dependency in Europe

In Europe, electricity is increasingly dependent on imports. Germany is closing down nuclear power plants and is becoming more dependent on fossil fuels, despite a strong expansion of renewable energies such as wind and solar power. The United Kingdom has been taxing carbon dioxide emissions for a few years, which has made the country less dependent on coal, but at the same time more dependent on fossil fuels.

– The increase in fossil fuel dependence is the wrong way to go, and in Europe the criticism of fossil fuels, particularly the low-power coal, is being raised. We are seeing more and more businesses and individuals responding to insufficient efforts to reduce greenhouse gas emissions. When the UN climate panel publishes its new report on global warming in October, I think critics will increase again, because the content of the report will worry us a lot, "says Arne Bergvik

Last year, the EU changed the emission trading scheme. It has tripled the price for a little over a year and has made it more expensive to produce electricity with coal and gas plants.

– But the cost increase is too slow and it is still too cheap to release carbon dioxide. So, even as emissions trading continues and as the price of emission quotas continues to rise, we see how cheap electricity generation from brown and coal must be eliminated more quickly to achieve the emission goals. It is likely to occur through targeted legislation or taxes, which have already occurred in the UK and are discussed in France and the Netherlands. And when the production of cheap electricity disappears, electricity prices rise, says Arne Bergvik

Renewable Energy

The ambition of the amount of energy wind and solar to build will be increased in the EU this year and has already been increased in Sweden. About 100% of the 2040 renewable electricity production was established by the Riksdag in mid-June this year. But the energy market is still a big challenge, how to do when the wind moans and the sun does not shine when we become more dependent on wind and solar power.

– Today, there is no large scale solution for storing electricity. This is what we do not have as much value of wind and solar energy as we had otherwise. According to Arne Bergvik, this can give us price pitfalls, especially the windy and cold winter days.

Higher prices give active consumers

In the future, consumers will be able to influence their electricity costs. The framework for the future energy market is hammering in the EU with the aim of making consumers more active. Electricity consumption will be smarter and there will be more opportunities for sales, storage and electricity generation.

– To deal with energy change and achieve emission goals, we must change the way we consume energy. And when electricity prices rise, while digital services and clean production become cheaper, I am convinced that this is what I will do more, summarizes Arne Bergvik, chief analyst at Jämtkraft.

Arne Bergvik, Chief Analyst Jämtkraft