Will Swedish nuclear plans disrupt the country's electricity market?

Sweden could join the list of European countries planning to build new nuclear units in the coming years. According to a recent study published by the Swedish government, construction of the units is expected to cost several tens of billions of euros. To ensure a return on investment, the report recommends a guaranteed price in the form of a contract for difference, but this is causing concern among some participants in the country's electricity market.

Like other countries, Sweden is addressing its energy security—in other words, ensuring an adequate supply of electricity in the years ahead. Nuclear power could continue to play a role in the country's energy mix, as it does today.

Since ensuring a return on investment for any energy source purely on a commercial basis is extremely risky for investors, new nuclear power plants in Sweden could receive a so-called contract for difference (CfD) for 40 years. However, some believe that a price guaranteed over the long term at around EUR 70/MWh could disrupt the country's electricity market.

"I am concerned that such support could distort competition and price signals, which could in turn affect the willingness to invest in other energy sources,"Anton Holton, head of energy trading at Gavle Energi, told Montel.

Joel Norstedt, head of electricity trading at Borlange Energi, shares similar concerns. In his view, forms of support that guarantee producers a minimum price regardless of demand can significantly distort how the market functions and lead to more hours with negative prices. He says this could also jeopardize further investment in new solar and wind power plants.