Sweden Faces Rising and Volatile Electricity Prices Amid Energy Policy Choices

Electricity prices in Sweden are set to increase over the next decade, with varying degrees of volatility depending on the government's energy policy approach. According to a recent report by Energiforsk, the ongoing energy crisis triggered by Russia's invasion of Ukraine, combined with the rise of weather-dependent wind power and the shutdown of nuclear reactors, has made electricity prices a heated political issue since the 2022 elections. The report envisions two main scenarios: a market-driven path where prices may be lower but far more volatile due to reliance on renewable energy, and a state-supported route that emphasizes controllable power sources like nuclear energy, resulting in higher but more stable prices. Lars Bergman, a professor emeritus involved in the analysis, noted that while prices will rise regardless of the scenario, state intervention could stabilize the market amid increased electricity demand from industrial electrification. The current government, known as Tidöregeringen, has implemented support mechanisms, including guaranteed minimum prices for electricity mainly aimed at nuclear power, but faces challenges ensuring complementary support for other renewables such as offshore wind. The report highlights a dilemma: low electricity prices are critical for industrial electrification investments, yet these investments depend on reliable power sources requiring significant public backing. This complex balancing act will shape Sweden’s energy and industrial landscape in the coming years. Meanwhile, in the broader economic context, consumer price inflation in Sweden rose modestly by 0.9% year-on-year in September, slightly below forecasts, with core inflation excluding energy also decreasing, suggesting some easing in overall price pressures as the electricity market grapples with these long-term shifts.