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MONEY

Why is everyone talking about electricity in Sweden?

Electricity has been a hot topic in Sweden recently, particularly after the public broadcaster suggested people might want to avoid vacuuming.

Why is everyone talking about electricity in Sweden?
Cold weather means high demand for electricity, leading Sweden to import electricity from other countries. Photo: Fredrik Sandberg/Scanpix/TT

What's happening?

Svenska kraftnät, the Swedish authority responsible for electricity, last week warned that the electricity grid would be strained due to cold weather.

This prompted public broadcaster SVT to encourage readers to avoid vacuuming, both to keep their own electricity costs down and for the climate's sake. 

Demand for electricity increases during cold weather spells as more people turn the heating up, boil their kettles and so on. This not only means that electricity prices climb, but it also means Sweden often can't provide all the electricity needed from domestic sources and so imports it from other countries.

It's not only consumers who can be savvy about their electricity use; paper manufacturers Holmen turned off machinery last week because the high costs of electricity meant it wasn't worthwhile.

The humble vacuum cleaner quickly became a symbol for a long-running political debate over nuclear power.

Christian Democrat leader Ebba Busch posted a picture of her standing with her vacuum cleaner in the snow on Facebook, arguing that calls for “vacuum rationing” showed Sweden has “big problems with electricity provision”, while the Moderate party shared graphics calling for “a society where you can vacuum whenever you want”.

Does Sweden have an electricity shortage?

Each year, Sweden exports more electricity than it imports, but the demand and supply varies with the seasons. That's partly because Sweden increasingly relies on energy sources such as wind, solar and hydro power which fluctuate, and partly because demand for electricity increases in colder months.

Sweden's goal is that all electricity should be 100 percent renewable by 2040. There have been long-standing ambitions to reduce dependence on both nuclear power and oil and instead use wind, water and solar energy.

On days when Sweden can't provide the electricity needed, it turns on an oil power plant in Karlshamn, or may import electricity. The company that runs the Karlshamn power plant has an agreement that it stands ready to operate during winter, and it was turned on last Monday for example.

When Sweden needs to import electricity, it most often turns to Norway for hydro-powered electricity, but also imports from countries like Germany, Poland and Lithuania which use coal to produce electricity.


The power plant in Karlshamn. Photo: Patrik Lundin/SvD/TT

What is the impact on electricity prices?

Increased demand also pushes up prices. In southern Sweden, electricity reached the price of 2.4 kronor per kilowatt-hour on Thursday morning, while at the same time a kilowatt-hour cost only 50 öre in the north of the country. Over the whole day, the average price in southern Sweden was around 125 öre, around double the price in the north.

Fluctuation between regions is normal, because electricity prices are driven by supply and demand. Northern Sweden has fewer people so less demand, and a lot of electricity is generated there so there is sometimes a surplus – sometimes, even at the same time as there is a shortage in the southern regions.

February's cold weather has also pushed up prices, especially combined with low wind levels meaning little electricity produced from Swedish wind turbines. This meant that the current average monthly kilowatt-hour cost is the highest since 2011 – but this is expected to return to normal levels for the season this week with a slight rise in temperatures.

What does that mean for my bill?

For the average consumer, this won't have a significant impact on your monthly bill. The cost of the electricity itself is actually a relatively small part of what consumers pay, with taxes, fixed prices and electricity grid fees all also factored in.

The extent to which you are impacted by price fluctuations also depends on what kind of contract you have – variable or fixed rate. But the more you use, the more you'll be affected by the kilowatt-hour price, particularly people who own houses rather than apartments, which generally have much higher electricity costs. 

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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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