Norway's Fixed Electricity Price May Impact Swedish Rates

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Norway's Fixed Electricity Price May Impact Swedish Rates
Photo: Johan Nilsson/TT

About a third of the households in Southern Norway have taken advantage of the so-called Norway price, fixed price on electricity. From today, October 1, Norwegians can let the state take the cost of an electricity price over 40 öre/kWh – something that can result in more expensive electricity bills in Sweden.

The Norway price, a kind of state insurance against high electricity prices, has received attention in Sweden as well, partly because many would probably want something similar here, but also because analysts have warned that Swedish electricity consumers will have to take the hit in the form of higher electricity prices.

According to the Norwegian website Elhub, about half of the owners of holiday homes in southern Norway (Norwegian electricity area 1 and 2) have signed up for the Norway price, a fixed price of 40 öre/kWh, excluding taxes and other surcharges. If the market price exceeds that level, the state will cover the difference.

Over half a million households

Among all households in southern Norway (electricity area 1 and 2), where most people live and usually have the highest electricity prices, the proportion that has chosen a fixed price is between 26 and 38 percent, or just over half a million households. The statistics are updated up to and including September 29.

The question is whether it is enough to affect electricity prices in Sweden?

"A third of the households in southern Norway is enough to have some impact on Swedish electricity prices, but I expect the impact to be limited," says electricity analyst Christian Holtz at the consulting firm Merlin & Metis in response to TT's question.

Would have needed more

However, he had expected more.

And it would probably have needed a higher proportion of households for some noticeable price effects, reasons Johan Sigvardsson, analyst at the electricity trading company Bixia:

"Very little on the margin", he says in a written comment about the potential price effect. And then mainly when the power system is strained.

Holtz also points out that the Norway price only applies to households, and not to heavier electricity-intensive industry that consumes large amounts of electricity.

Electricity analysts in Sweden have warned that a fixed Norwegian state price for electricity can spill over to higher Swedish electricity prices. This is because electricity consumption in Norway may become higher than otherwise, because the Norwegians are not motivated to save electricity when the electricity supply is low and the electricity price is high. Then the price in Sweden rises because the electricity markets are linked, is the analysis, especially during cold periods with a strained power system.

In the northern parts of the country, almost no households have signed up for the Norway price, but there the electricity price is often lower than 40 öre.

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By TTEnglish edition by Sweden Herald, adapted for local and international readers
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