According to a recent report, the plans of the Swedish state mining company LKAB and three other companies would increase electricity consumption in Swedish Lapland by 40 terawatt hours already by 2030. It could drastically increase the price of electricity, especially in Finland.
Swedish plans for the production of green steel and chemicals in Swedish Lapland may lead to a sharp increase in the cost of electricity in Finland and also in the entire Nordic market.
Economist by David Sundén according to the report, the implementation of the investment intentions of four Swedish companies alone would lead to a doubling of the price of electricity in Finland by 2030, even if there would be plenty of new electricity production.
Sundén has tried to model what the plans of the Swedish state mining company LKAB, steel company SSAB, H2 Green Steel and fertilizer company Fertiberia for the production of carbon-free sponge iron, steel, ammonia and fertilizers in northern Sweden would mean for the Nordic electricity market.
in Finland the price of electricity is often highly dependent on the price of northern Sweden, i.e. the SE-1 region. There is a transmission connection of more than a thousand megawatts of electricity between northern Sweden and Finland, and the new 800 megawatt Aurora transmission connection is about to be completed next year.
North Sweden's inexpensive electricity produced by hydropower balances the Finnish system, especially when there is little wind production.
There are four price zones in Sweden, because the transmission connections within the country are insufficient. In the northern SE-1 area, there is usually overproduction and the price is therefore cheap. Finland is one price area, so the prices in Northern Sweden directly affect the price of electricity in the whole of Finland.
Northern Sweden affordable electricity is already attracting an unprecedented wave of industrial investments to the region in the next few years. All the companies are going to the area precisely because of the cheap electricity. However, with investments, cheap electricity can be a thing of the past.
According to Sundén, the current investment plans would increase electricity consumption in the SE-1 area by 20 terawatt hours already by 2026.
20 terawatt hours is about a quarter in relation to the electricity consumption of the whole of Finland. Even this amount of new electricity consumption would mean a drastic increase in the price of electricity. According to Sundén's analysis, the price of electricity in the SE-1 area would increase by 176 percent, or almost triple.
In Finland, this would lead to an approximately 50 percent increase in the price of electricity compared to not making these investments.
Sundé uses 2018 as the base year for price development, because the electricity price development in the last two years has been exceptional due to the energy crisis.
In Finland, electricity has recently been clearly more expensive than in 2018, when the average taxed price of electricity on the electricity exchange was 5.8 cents per kilowatt hour. Last year, the average price was 6.7 cents.
A year 2026 consumption growth is just the beginning. According to Sundén, the investment plans of Swedish companies would increase electricity consumption in northern Sweden by around 40 terawatt hours by 2030 and by as much as 90 terawatt hours by 2050 compared to the current situation.
The Swedish state mining company LKAB is responsible for the majority of the plans.
90 terawatt hours is already more than the current electricity consumption of all of Finland.
Green industrial investments are eagerly sought in Finland as well. The idea has been that investments that increase electricity consumption will quickly also lead to the creation of new electricity production.
If Sundén's calculations are correct, the equation is still not going to be easy.
For a year In the calculation extending to 2030, he assumes that new wind and solar electricity production has been created in the whole of the Nordic region for an additional 70 terawatt hours of annual production. It corresponds to the annual production of about six nuclear reactors the size of the Olkiluoto triple reactor, so it would be a massive energy investment.
Even if electricity production were to increase this much, the implementation of industrial investments in northern Sweden would lead to a doubling of the price of electricity in Finland compared to the level of 2018.
In northern Sweden and Norway, the price would quadruple.
Electricity consumers in Finland would suffer a loss of around 2.7 billion euros a year due to Northern Sweden's investments, Sundén calculates. The price for Swedish society would also be high.
Industry there are ready-made plans on the drawing board even from 2030 onwards. LKAB's projects are particularly massive in terms of green hydrogen production, storage and the production of iron sponge that utilizes hydrogen.
Sundén calculates that LKAB's plans until 2050 alone would require, in addition to 70 terawatt hours, approximately 42 terawatt hours of electricity production located in the north. Alternatively, Sweden's internal electricity transmission connections should be strengthened by 140 percent of the current level. The cost would be huge.
A researcher the conclusion is that the scale of LKAB's investment plans in particular is unrealistic. The investments lead to such a large increase in the price of electricity that the production of green steel would no longer be competitive.
“The companies' short-sighted investment plans have apparently not taken into account the fact that their own or other companies' plans are so large that they have a significant impact on the entire Nordic electricity market,” writes Sundén.
He calculates that Northern Sweden's industrial plans would lead to the fact that fossil fuels would have to be used even more as a regulating force for electricity, and it would also be economically profitable.
This would especially happen in Finland, when the price of hydroelectricity, which has been received until now from northern Sweden, would increase and availability would decrease. In the end, the effect of these green investments on emissions could therefore be less favorable.
Sunden's the report was published on Tuesday morning, but HS got to see it beforehand.
CEO of the energy industry Jukka Leskelä has not seen the report, but he states to HS that any modeling has to make a lot of assumptions about the development of consumption and production and therefore the results are subject to great uncertainty.
“I myself have heard the estimate that the main flow direction of electricity will reverse [Suomesta Ruotsiin]when Sweden's industrial investments advance”, says Leskelä.
He still believes that new electricity production will quickly follow industrial investments.
“Bottlenecks are network investments and perhaps also the personnel and special technology required by construction projects,” Leskelä estimates.
As an independent The report by David Sundén, who works as a consultant, was commissioned by the Skandinaviska Policyinstitutet research institute. The background force behind the institution, which was founded by the Southern Swedish Chamber of Commerce at the end of last year, is the heavy set of Swedish business life.
The financiers are said to be, among other things Marianne and by Marcus Wallenberg the foundation as well as several influential figures in economic life.
The report is the third part of a series funded by the research institute, which critically examines the foundations of green transition investments in the steel industry in particular, as well as the economic and social effects.
Policy institutes have not published any other studies so far.
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