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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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ENERGY

EXPLAINED: When should I turn on my heating in Sweden this year?

Energy costs in Sweden are set to reach sky-high levels this winter, which will leave many people wondering when they should start heating their homes. Here's what you need to bear in mind.

EXPLAINED: When should I turn on my heating in Sweden this year?

What’s happening?

As a result of supply stoppages for cheap Russian gas affecting energy prices on the European market – particularly in Germany – energy prices in Sweden have been at record levels for months, especially in the two energy price zones in the south of the country.

With winter looming and no sign of things getting cheaper anytime soon, private individuals are starting to cut down on energy usage as much as they can to slash their bills this season.

Does it make a difference what type of accommodation I live in?

The right time to start heating your home depends on several factors including your own personal preference, the weather, whether you live in rented accommodation or own your own property, and on the age and features of the property you live in.

How does the heating system work in Swedish homes?

More than half of all houses and commercial properties in Sweden use district heating or fjärrvärme, with this number rising to around 90 percent for apartment buildings.

This system distributes hot water from heating plants to houses and apartments through underground water pipes, meaning that heating sources are centralised, rather than individual houses or apartments having their own heating source.

In smaller towns and in houses, district heating is less common, and it’s these households who can benefit the most from waiting longer to turn on their heating.

Do I control my heating?

It depends. If you live in a rented apartment or a bostadsrättsforening (co-operative housing association) with district heating, your landlord or the board of your housing foundation will usually decide for you when to turn your heating on.

Unlike other countries, Sweden has no official legal heating season, with heating in bostadsrättsföreningar usually switched on automatically following periods of cold weather, no matter which date they occur on.

This will usually be designed to provide an indoor temperature of around 21 degrees – you can turn your radiators down if you feel this is too warm, but you won’t usually be able to turn them up if you want the temperature to be warmer.

The Public Health Agency recommends temperatures of between 20 and 24 degrees indoors, with temperatures lower than 18 degrees in apartments posing a health risk.

Temperatures lower than 14 are not recommended as they can cause condensation and mould growth on walls and furnishings, which, again, are a health risk, and can cause permanent damage to properties.

Can I save money by waiting to turn my heating on?

Again, it depends. If you’re renting and you pay varmhyra – rent with heating included – then you won’t save money directly, but heating your home wisely could make it less likely for your landlord to raise your rent to cover increased heating costs.

If you pay kallhyra – rent without heating included, then waiting to turn on the heating will save money on your electricity bill.

Similarly, in some housing associations, electricity and heating costs are included in your monthly fee, meaning you pay your share of the heating costs for the entire building ever month. In this case, your energy costs are more affected by how much energy everyone else in your housing association uses than your individual usage.

On the other hand, this doesn’t mean you shouldn’t care about how warm your heating is – if you have your heating on full-blast for the whole winter, your costs will increase as well as the costs of all of your neighbours, and if the entire association’s energy costs increase substantially, the board may decide to raise the monthly fee or avgift for everyone in the building to cover this.

If you pay an individual energy bill based on your own household’s usage, and not on an average of the whole building, it could pay to wait before you switch on your heating.

How else can I save money on heating costs?

Turning your heating down a couple of degrees can make a big difference to your heating costs, but you can also save money on heating and make your property feel warmer by making it more energy effective.

There are a few easy ways to do this, according to the Swedish Energy Agency.

Firstly, make sure your house is well insulated, not just your doors and windows, but also in the loft: a large amount of a building’s heat escapes through the roof. This also applies to the boundaries between well-insulated and poorly-insulated areas.

If you have a cellar or conservatory, for example, which is not heated and not insulated, make sure the door between this room and the rest of the house is well-insulated with no gaps around the doorframe where heat can escape into the colder room. 

In a similar vein, locate any drafts and do what you can to block them, either with draft excluders or by replacing worn-out draft excluder strips on old doors and windows.

You can also benefit from thinking about how you furnish your home – furniture placed in front of radiators mean it is harder for warm air to circulate, and you can keep your house warmer at night by closing your curtains or blinds to keep eat from escaping through your windows.

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