The rise in electricity prices has caused financial distress for transmission and distribution companies in Sweden, and for the population in general. A key challenge the country faces is the lack of transmission infrastructure between the northern and southern region. Sweden should focus on strengthening its transmission grid with upgraded cables and create a robust network between the northern and the southern region in order to unlock the power industry’s full potential amid the energy crisis, says GlobalData, a leading data and analytics company.

According to GlobalData’s latest report, ‘Sweden Power Market Size, Trends, Regulations, Competitive Landscape and Forecast, 2022-2035’, Sweden has a balanced power mix consisting of renewables, hydropower, thermal power, as well as nuclear power. The country is less dependent on thermal power for its electricity needs, with thermal power accounting for 7.1% of the capacity mix and 1.9% of the power generation mix in 2021. Instead, the majority of the country’s electricity came from renewable and hydropower sources.

Attaurrahman Ojindaram Saibasan, Power Analyst at GlobalData, comments: “Amid what is been called the ‘energy war’, the Swedish Energy Agency announced that the price of electricity has increased only in parts of the country where fossil fuel generation is used to an extent, hence price hikes were seen only in southern Sweden. However, it should be noted that 90% of the Swedish population resides in the southern part of the country. In contrast, the northern part accounts for 60% of electricity generation.”

The Swedish government announced a fiscal package of SEK 60 billion ($5.8 billion) in August 2022 to subsidize electricity bills for households and businesses. Moreover, in September 2022, the Swedish government announced that it would provide liquidity guarantees to Nordic and Baltic energy companies to avert any financial crisis due to the shutdown of Russia’s Gazprom’s Nord Stream 1 gas pipeline. A fund of SEK 250 billion ($23.2 billion) in guarantees on power trades on Swedish markets has been set up.

Saibasan continues: “Sweden exports the majority of its surplus electricity from the northern region whereas the country imports from European Union (EU) member countries to meet the demand in the southern region. The Russia-Ukraine war has led countries to prioritize domestic electricity, which is a cause of concern for Sweden. For instance, Norway reduced electricity trade with Sweden in 2021 and is now planning to curb exports with all Nordic countries. This creates an urgency to upgrade the country’s transmission lines to make it self-sufficient.”

Sweden adopted a mechanism that sets up four different bidding zones from north to south to overcome transmission issues. This model indicates any transmission constraints and ensures regional market conditions are reflected in the prices in each zone. If there are transmission constraints between two bidding zones, electricity is transmitted from the low-price area to the high-price area. However, this has only helped to reduce the burden of rising electricity prices and has not addressed the infrastructure problem.

Saibasan adds: “Although Sweden has the financial means and support from the EU to implement large-scale grid projects, the challenge is the time-consuming process the country has in place and the various conflicting interests according to Swedish legislation and EU law. Sweden should look to create a streamlined process prioritizing grid projects to unlock its full potential.”