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Why electricity prices are set for record lows throughout 2020 in Sweden

2020 is set to be the cheapest year for electricity in modern Swedish history.

Why electricity prices are set for record lows throughout 2020 in Sweden
A lot of windy weather is one of the reasons for the low prices. Photo: Magnus Hjalmarson Neideman / SvD / TT

“It's truly extreme,” said Christian Holtz, an electricity analyst at Sweco. 

More wind power and windy weather, along with a lot of water in reservoirs, are two of the factors behind the forecasts.

On the Nordpool power exchange, a kilowatt-hour currently costs around 15 öre, which is extremely low for mid-winter.

The so-called futures, or prices for the second and third quarter, are currently set at around ten öre, and likely to rise to around 24 öre in the fourth quarter of 2020.

“You have to go back to the start of the millennium to find corresponding levels, and then the monetary value was different,” said Holtz. In other words, ten öre today is cheaper than the same price in the early 2000s.

The main explanation for the low prices is the large amounts of rain that have filled reservoirs to unusually high levels.

“The so-called hydrological balance is very significant for the electricity price and it doesn't look like we'll run out of water in the near future. So there is little evidence to suggest that traders will be wrong about prices in the autumn,” said Holtz. 

What's more, wind power has increased significantly. Recent storms have affected the electricity price, sometimes even pushing it to minus prices, while an unusually mild winter has led to less electricity consumption and therefore even lower prices.

The fact that Vattenfall closed a nuclear reactor at the end of 2019 hasn't had a negative impact given that so much of Swedish electricity is dependent on these weather-based factors. 

So how much will your electricity bill be affected?

Despite record low prices, the cost of the electricity itself is actually a relatively small part of what consumers pay in their bill. Taxes, fixed prices and electricity grid fees mean that the typical consumer living in an apartment pays around 2 kronor per kilowatt hours. 

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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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