Tuesday, December 7th, 2021
Chaos on Europe’s electricity market
Swedish power plant has to help Poland
Connected and open. In this way, Europe’s electricity grids enable electricity to flow freely across borders to where it is needed most. But that doesn’t work smoothly in times of skyrocketing prices.
The roughly fifty-year-old oil power station in Karlshamn normally only goes into operation on particularly cold days. Operator Eon keeps it ready in the winter months as a reserve for the electricity network, in case the electricity supply, which is increasingly being converted to renewable energies, cannot meet the demand. The European electricity market is not functioning normally this autumn. That is why the heavy oil fueled kiln in Karlshamn has now been fired for the second time at relatively mild temperatures.
This time the reason is an acute power shortage in Poland. The network operator there asked the neighboring countries for help. In addition to Germany, Lithuania and the Ukraine, Sweden also increased its electricity supplies. The two countries are connected by a power line in the Baltic Sea. According to the operator PSE, the current bottleneck in the Polish network is due to unexpected failures and maintenance work in several Polish power plants. As a result, the electricity exchange prices in Poland climbed to a record level last week.
The price explosion and the bottlenecks in Poland are, however, not an isolated case in Europe at the moment. Rising prices for the fuels coal, oil and gas as well as the CO2 emission rights required for their combustion have been driving up the costs for the electricity producers for months – and thus the wholesale prices as well as the prices for the end customers across the continent. At the same time, in some countries, renewable energy sources also provided unusually little electricity due to unfavorable weather.
Swedish-Norwegian squabbles
Such fluctuations in individual countries should actually be balanced out by the cross-border open electricity market in Europe. The national networks should be open to the neighbors. But this only works to a very limited extent at the moment. The neighbors Sweden and Norway have partially closed their borders for electricity exports to the other country since last week. Norway itself is Europe’s largest electricity exporter, but recently the country sold its electricity more frequently at higher prices via new submarine routes to Germany and Great Britain than via the Swedish grid.
In contrast, exports from Sweden to Norway increased. As a result, the Swedish network operator, citing stability problems in its own lines and difficulties in securing the supply in the country, severely limited electricity exports to Norway. In response, Norway drastically reduced the possibility of delivering electricity across the border to the neighboring country. This not only tears gaps in the Swedish supply in winter, but should also create additional bottlenecks in Finland and Denmark. These countries usually import some of their electricity from Norway through the Swedish network.
The episode shows that the idea of a common, open electricity market in Europe is still a vision of the future. For the envisaged energy transition, however, such a Europe-wide network, in which electricity can flow unhindered, especially from the coasts in the north to the population and industrial centers, is essential.