Sweden’s energy spat with Brussels

Sweden's dispute with Brussels over electricity market rules is quickly becoming one of the biggest political energy stories in Europe.

At the centre of the debate is a huge stockpile of congestion revenues; billions of euros generated from price differences across Sweden's own grid and its interconnectors with neighbouring countries. Stockholm argues the money should stay in Sweden to fix domestic bottlenecks and protect consumers, while the EU wants greater flexibility to use some of those funds for wider European grid projects.

But this is no longer just a technical dispute over electricity markets.

This week’s episode  explains how congestion revenues became such a political flashpoint, why frustrations with Germany and EU market rules are growing, and how Sweden’s widening north-south price divide is fuelling domestic pressure.

#EbbaBusch #Sweden #EuropeanUnion #EU #EnergyPolicy #EnergySecurity #ElectricityMarkets #PowerMarkets #Interconnectors #GridInfrastructure #EnergyTransition #Renewables #CongestionRevenues #MarketIntegration #Nordics #Brussels #Podcast #PluggedIn #Montel #EnergyNews

Host: Richard Sverrisson – Editor-in-Chief, Montel News

Guests: 

Arne Bergvik - Energy Strategy Consultant, Sigholm 

Sebastian De Toro - Partner & Head of Investor Services, New Republic

Editor: Alexandra Carlon
Producer: Alexandra Carlon

Transcript

How Congestion Revenues Piled Up

SPEAKER_02 1:18

Now, Wilhelm, before we get into the wider political implications, can you explain exactly what has triggered this spat between the Swedish government and the EU and why congestion revenues and interconnectors have suddenly become such a major issue?

SPEAKER_00 1:34

I'll try to make it short. But domestically, congestion revenue has been an issue that's been going on since early this decade. Wind power in the north being built out, the prices got very low, which started and we started seeing a big disconnect between the north and the south. Then the energy crisis came. High gas prices, and there was more connection in the southern Sweden to Germany, German prices and Danish prices, which made this gap between the south and the north very large. So then the congestion revenue started coming in. And the question was then uh the TSO's view was that okay, we can use this, we can just invest it, build out the grid. But the congestion income came in so fast that they couldn't really get rid of it.

SPEAKER_02 2:24

So it's a case of too much revenue coming from the congestion issues.

SPEAKER_00 2:28

Yes, way too much. At the end of 2022, we had around, or was it almost six billion euros? That has now grown to close to eight billion euros. And while the TSO still have the view eventually we will spend this, since it just started stacking up and stacking up, the trust in that eroded. And both politicians and market participants lost confidence in that. And now they want to look at other ways to spend it. But the EU regulation is quite firm on how you can spend it, and that's what the TSO is currently using it for, but can't really get it to use all this money that's lacking up.

The Simple Maths Behind The Cash

SPEAKER_02 3:11

So congestion revenues, how how how does the TSO get this cash from, if you like? How does that actually happen?

SPEAKER_00 3:20

Well, simply it is the difference between two price areas. So say I'm price area, we can call it price area A, and your price area B. You're a consumer, I'm a producer. So I produce and sell that, and you want to buy that. But in reality, I only get paid the spot price in my price area. Say that's 20 euros. So I get paid the spot price for what I produce, but you buy my electricity that I produce. If you're in price area B, then you get paid that spot price, which is 30 euros. These 10 euros in the middle, that goes to the TSO. But it's not it is considered a debt, a loan. So it's not something like we call in Sweden we usually say income. But it's not an income for the TSO, it's a debt they have to all market participants, which they then can use. And the thought is that they use this money coming in to build out the grid and get rid of this bottleneck, which is causing the two price areas to have different prices in the first place.

SPEAKER_02 4:25

So if we can go on to the political implications and the current spat,

Germany’s Price Zones And Swedish Anger

SPEAKER_02 4:29

Wilhelm. So Sweden's energy minister, Ebba Busch, has said that the country still supports interconnected markets but doesn't want to be taken for granted by Brussels. So how significant are these comments that she's making? And is this kind of a bigger debate about energy nationalism versus integration with European markets?

SPEAKER_00 4:49

I think, well, first off, I think Sweden has a long-standing grievance with Europe's largest market, Germany, and how they handle their energy policy. The largest grievance is that Germany won't separate into price areas. That's unfair because Sweden did it from the European proposal for it got presented in December. Today we sit currently Sweden with this large issue of large congestion revenue, just sitting gathering dust on an account. But the EU in the grid package just proposed to take some of that and didn't propose any solution whatsoever on how we can get rid of our large problem. So Sweden dealt ignored and that felt very unfair for the government, market participants. Everyone got quickly very angry about this. So there's like now a wide consensus in the fight that is being held. Although with time that fight has become a little bit muddy, and we got like they got some concessions from the EU. So like the fight now has become maybe a little bit more muddy, maybe not as easily sympathetic to Sweden's costs.

SPEAKER_02 6:02

So it's a way of saying Sweden was forced to divide into price zones, and because of that move, then the congestion income revenues for the TSA have increased manifestly, and the EU is taking some of that away to boost maybe connection with a market that resolutely refuses to divide into price zones.

SPEAKER_00 6:23

Yes.

EU Concessions And The Unspent Billions

SPEAKER_00 6:24

And now the concession from the EU is that they're not taking any internal revenue, internal congestion during you. The EU has said, no, okay, we're not taking a part of that. We're only taking now 25% of the external revenue, which is so everything, every another country, basically. They want to take 25% of that, and that was the concession made, which Swino was happy with. Now, though, they're what they're fighting for now is the other part which they were upset about, which is that we still have a lot of money in an account that we can't use. That's not just gathering dust, but it's gathering interest, I hope. That is what the fight is about now, which still has a large consensus politically and with market participants. Of course, if you come to the question how should we use it, then maybe the consensus isn't there anymore, but the consensus that we have to have some way to use this money and viable to have just sitting in an account.

SPEAKER_02 7:18

Willem, thank you very much for setting the scenes for us today. Thank you. Pleasure to be here.

The Grids Package As Sovereignty Fight

SPEAKER_02 7:43

So um we're talking about a bit of a spat, a bit of a dispute between the EU or European Commission and Sweden. What what's at the core of the issue here or the disagreement, Arne?

SPEAKER_01 7:55

Yeah, so the immediate issue here is the proposed reforms of the European Electricity Grid, referred to as the European Grids Package. And the argument from the Swedish government is that the EU proposal might then reduce Sweden's national control of its electricity grid and force Sweden to spend a quite big pile of congestion revenues according to EU priorities instead of Swedish priorities. So it's very much framed as a sovereignty issue here.

SPEAKER_02 8:25

Both internal and external with Swedish neighbors.

SPEAKER_01 8:28

Yes, indeed. So because of the big differences in price area elektricity prices within Sweden and with Sweden to surrounding countries, there is a quite significant amount of cash and more of a proposition how the EU can align and spend congestion fees in the whole EU in order to improve and reduce price aggravas differences. And this is very much then the perspektiv aven Swedish government that it's unfärd because i Sweden en varin av the congestion fees that other countries would like them to use according to the proposition. And the responset somebody Swedish energy minister has been quite glad that we this is not okay from the perspective of Swedish consumers, and also that the Swedish government would not like to see this development and as a leverage in this discussion, then the connection and the update of this was being put on hold as a leverage in these discussions with the EU.

SPEAKER_02 9:31

So, in a sense, they're downing tools, right? They're saying until we we figure this out so you give us some leeway, we're not going to continue work on this key interconnected between Sweden and Denmark. In the past, has Sweden taken such a strång stand against the EU or against the Kommission?

SPEAKER_01 9:50

Not in this typical set. Så för exempel Sweden och European right wing or Trump and mager för exempel. The pendulum seem to be svinging back igen. And I think the most import indikator av this is the Hungarian election on the 12th of April. You know Viktor Orban by two thirds to challenging Peter Maggie. And that tells me two things. That populism is not necessarily that popular. And that it is rather difficult to be a nationalist in an international environment. And as we go closer to the EU time frame here, it's a very short sighted snapshot. We have an excess i Sweden of elektricity that is being distributed out

Elections And The Pull Of Nationalism

SPEAKER_01 10:51

of Sweden and that could increase prices in Sweden, but that is a surplus of elektricity that we would not have if we would not have interkonektions. And also the interkonneons interaction. It's not that by like straightforward it's a it's a permanent flow back and forth between different countries and and in the global whole of things: this is improving welfare distribution and it is also improving resilience, and it's it is a much more cost-efficient system than uh would every country try to optimize their own grid in in a standalone standalone commissioning.

SPEAKER_02 11:32

Absolutely. And then the the context you mentioned the mager movement, you mentioned Viktor Orban, but we've also seen it in in Sweden, neighbor uh to the West, which also has a big discussion around interconnectors and cables. We've seen certainly in in Germany with the AFD and their responses to both interconnectors and to wind turbines. But the pendulum is swinging against this kind of level of populism. But what's happening on the energy side? Is there a turn of energy nationalism, or do you think this is going to be fairly short-lived?

SPEAKER_01 12:05

I would say that it is more uh in the light of the election coming up in Sweden on the 13th of September. You might know ruling bloc sits as at 43.2% of the support at the moment, with opposition at 53.9%. So there is so there's a tendency or a need to to show that we are on the side of consumers here that we are putting Sweden first or doing some type of intervention and then showing us uh us being very strong. I think that could be playing into it. Uh, and also uh, we have now a history of a few years of very low prices that has been shielding the Nordics but uh Northern Sweden in particular, but all of Sweden in general from the higher prices in Europe, especially 2022 when the prices were really high due to the crisis in uh in Russia. Så I think that detectives a kommon understanding that that this is this is the normal situationen so to say that that we deserve lå prices in the Nordics or in Sweden, and and uh the interaktion eller integration with European Union would actually not benefit us as much as we have something uh low prices and a lot of elektricity that other countries would like to take away from us. But this is very much a snapshot view igen, and it's very uh focused on the consumer side. And I would say, Richard, that consumption and generation has is quite strongly linked, and and we would not be able to have uh as much generation if we would not have the interconnections between because if you would shrink the markets by by reducing the amount of interkonne, then you would uh have a much more inefficient uh grid and much more expensive grid, and also you would have uh much less generation because producers would not establish in a små market where they risk having locked in volumes and prices, but I think that they're that really what is different to a normal procedure or normal discussion is really how this has blown up a bit out of proportion, uh in in the in a view in the light of that this is threatening then lower electricity prices and and and that money would be stolen away from from Sweden and invested in in other countries' grid infrastructure.

SPEAKER_02 14:39

I mean, is there support for this position that you know Sweden, the Swedish government is standing up for Swedish consumers and preventing the leakage of all this cash, as you put it to to to its neighbors. Is that is that broad is there broad support for that?

SPEAKER_01 14:56

I think there is a broad support for for Sweden Swedish congestion fees för most being us in Sweden in order to to to kind of work with a kite signer price öga differences in Sweden. But I but I do not see that the kind of anti-European Union agenda would go very far. And I think that there is a konsensus since Sweden både från the ruling block and the opposition that working with EU solving through and working on on a proposition that will work that suits everyone is the way to go. So I think that this type of of uh uh anti-transmission cables to to to other countries, that is uh more of a more of a show, maybe, than than uh uh a real policy in the making.

SPEAKER_02 15:49

But as you say, political saber rattling. Um so, why do you think you know governments are increasingly tempted to prioritise domestic pricing over regional cooperation, and perhaps, as you say, the sort of welfare benefits here, you know?

SPEAKER_01 16:05

So I think it is a kind of um could be due to the recent gains made politically by right-wing or nationalist or populist tendencies in the European Union, but also that was one of Viktor Orbán's main topics. And that has also been used in politicians, but also been heavily kritised. So I think the end of the road here, and what the election in Hungary really shows us is that in en international environment, kombining nationalism with pro-EU views is very difficult. And this is a very vik point av this type avetorik, and also that petrol prices will not garante a winning election. And I think that is a väldig från recenta politiska development in the EU.

SPEAKER_02 16:58

Absolutely. That's that's very interesting indeed, Arno. I mean, I think it's is the root of the problem here, maybe that you know, transmission capacity is maybe there isn't enough of that available to meet all this renewable generation, and so grid infrastructure is becoming a very important part of the debate.

SPEAKER_01 17:17

Indeed.

Interconnectors As Security And Value

SPEAKER_01 17:18

And I think that the reason why I am uh I tend to be rather certain on the point that this is more of a sabre rattling that you said, is because there is really no discussion. The health transmission capacity is a very efficient way of sharing intermittent energy with surrounding countries. And one very important tool in the toolbox on how we can increase security supply, include more renewable energy, push costs down of elektricity, and part of the system solution that will avoid a lot of suboptimising in in every in every corner of the EU. So I think if Europe wants to be strong and be able to compete against Kina and the United States, then we really need to be more efficient, and efficient interkonneas between countries är much important. Because elektricity, as the EA wrote in the International Energy Agency rot in the in the 2024 world energy outlook, that we are entering at speed the age of elektricity. That the elektricity is really the way forward, not only because of digitalisation and data centers, but also because of security of supply. When security of supply is at play, then we will have that really big changes in our energy system. And then we need more transmission capacity because of welfare distribution, but also when it comes to integrating more uh renewables.

SPEAKER_02 18:59

I mean, you know, uh like you say, I think energy islands or uh, you know, energy protectionism is really uh very, very detrimental in this. You know, we should be looking for not just you know an efficiency, but also you know, the European stand as as one and and and being part of that copper plate, uh Arne, I'm sure that that's what you're saying, because interconnection goes both ways, right? So if there's a scarcity of of hydropower in in Norway, I'm sure Sweden will come to the rescue, or or others, maybe the wind in the UK.

SPEAKER_01 19:28

So it goes both ways, right? Yes, definitely. And it goes both ways. It can alternate between a day or a year, and and it at the moment we have a uh quite unique situation where Sweden is almost exporting or not exporting at all all uh hours of the year, but this will uh will uh this is uh uh will pass quite quickly because at the moment we barely have any new commissioning of generation in in uh in Sweden, but also in the Nordics, it's a very bleak uh picture compared with just a few years ago. So,

Data Centres And The End Of Oversupply

SPEAKER_01 20:03

for example, turbine orders in Sweden is down by 99 percent uh in 2025 compared with the peak in 2019. So so we really have a we really have um uh contraction of supply because we have an excess of supply currently and the prices are really low. But that means also as there's no better cure to to to a low price than a low price, nothing encourages consumption as much. I would say that the the if you just would add uh a few or like in a conservative way, just add a few of the electrification plans and data center plans in the Nordics, you will see that we will we will have a consumption that is about to surge. Of course, not everything will will be realized, but you in the other hand, if you ask yourself another hypothesis, you cannot say that nothing will be realized. So that means that this situation where where the Nordic power prices are very much lower than European peers, uh which was uh never the case between, for example, 2007 to 2019, then we were very much connected, we had a much higher degree of market coupling. Well, that time is coming at an end to an end, if if this is true, and it's coming to an end really uh fast. We're looking into maybe a few years from now, we will we will see uh if if you would uh use this fundamental approach, you would expect to see much more uh coupling, price coupling with the Nordics and the European peers, and you would also see interconnection capacity being enough to support other markets, but also when the Nordic market import, this is a very useful thing to have.

SPEAKER_02 21:44

Absolutely, that's that's that's for sure. And I think um it it it's very clear that as you mentioned, there the oversupply is going to be dwindling as we see new demand centres, for example, data centres, etc., uh coming online in the Nordics. If I can just Ask you a final question, Arna.

How A Face Saving Deal Emerges

SPEAKER_02 22:02

So, how do you see this spat playing out between the Swedish government and and the European Commission?

SPEAKER_01 22:08

I think everyone will be winners officially. Okay. Yeah. I think everyone will go away as a winner. And I think there will be, of course, as always, there will be a discussion that will lead to some type of final proposition or that that everyone could live with. So it will not be uh already now we know it will not be as as uh dramatic as was was firstly proposed or was proposed initially by the European Union, and it will not be as uh bad as uh as uh sounded uh as as sounded by by the government uh when they sounded alarm. So I think that it would be be somewhere in between a deal that everyone will be able to live with, and uh and I think the official view will be that um we there we showed them and that we that we that we we we reached our our our goals both in the EU and in Sweden.

SPEAKER_02 23:06

And maybe they can start return to uh upgrading the the Conti scan line.

SPEAKER_01 23:12

Yes, indeed, and maybe also the Hunster Power Bridge interconnection with Germany that was uh cancelled a few years ago. And efficient electricity markets translated into to cheaper electricity.

SPEAKER_02 23:24

So, yeah, that's how we look at it. Yes, perfect. Thank you very much, Dana, for being a guest on this week's plugged in podcast. Thank you for having me.

Sweden’s Pragmatic History With The EU

SPEAKER_02 24:01

You know, we're talking about this this this spat between Sweden and the EU. I mean, Sweden has traditionally been a very strong supporter of European market integration. What what's changed?

SPEAKER_03 24:13

I mean, first to be honest, I I think we should not oversimplify uh Sweden's position historically. So when it comes to our view on the European Union and integration, I mean we entered the European Union in 1995 after a referendum where they just won with a slight majority. Uh we voted against the Euro. And we have also been quite skeptical of large EU budgets. So I think if you look at it in general perspective, we are members, we think that integration is good in many ways, but we are not we're not being 100% pro all of the time. I think that our view is quite pragmatic, not so ideological. So I mean if things work well, we are in favor of them, and if and if they're not working well, of course the public sentiment changes. And when it comes to integration, I think that most people perceive that integration has worked well for them. And so that's why we perhaps have been positive in that way. But if you're looking at the situation right now, especially when it comes to energy policy, there is both internal debate in Sweden on energy policy, where it's quite divided between left and right, and that comes down to it boils down much to the energy sources, so it's nuclear versus renewables. But then the entire area gets a little bit hijacked by this debate. And when we also see increases in prices, as we have seen after the Russian invasion of Ukraine and what's happening now in the Strait of Hormuz and other things happening, of course, people are watching this area and thinking, are we doing things right or wrong? And and the debate also regarding the the congestion fees and the transmission grid has highlighted that we are paying a lot of money and people are feeling that the European Union perhaps wants to grab that money, that is supposedly Swedish money, and that makes people a little bit more reluctant to what's going on in the European Union. And it's easy for politicians in Sweden to exploit that feeling some on the electorate and uh and and and uh create some heat. But I think when you when you look at it, I don't think that Swedish politicians in general are against European integration, that there are some parts of the integration that they are skeptical about.

SPEAKER_02 26:38

W why is it taking this stuff tough stance now, Sebastian? On

Cost Of Living Drives Tough Talk

SPEAKER_02 26:43

this issue in particular.

SPEAKER_03 26:44

No, but I think what's happened is actually that that prices have gone up, the cost of living is uh is is a very vivid debate in Sweden. People are uh feeling that they're paying too much for for energy and other things as well, and food prices, for example, and it's easier for the the Swedish politicians to exploit that feeling. So I think that's a sense of urgency is that something has happened right now, and that the debate from other energy topics is is also transferred to this to this, I mean to the situation with the grid and the congestion fees. And there is also, I think, if you also want to broaden it, and that's not something that has happened exactly right now, but has been mounting over a couple of years, is that Sweden was a country that actually did introduce the different price area, bidding areas, according to the regulation that that the European Union supposedly should have implemented all over Europe. But we are one of the few countries that have done so, and Germany hasn't. And of course, there has been a growing sentiment about this. Is this right? Is it fair? Should we do this? Because there is at least a political dimension that is costly here. Perhaps it might be good for the economy to have those different bidding areas. It might be good for Sweden as an economy, even though Germany hasn't implemented it. But from a political perspective, in Sweden it's difficult because, of course, the people in southeast Sweden are really fed up and a lot of people are living there, so that's a big electorate. And Swedish politicians had to deal with that. So if you combine this growing irritation about the situation between Sweden and European Union and what has happened over the last two or three years with prices growing and people being angry around these issues, I think that's the the reason why it has been accelerated. And then I think also this quite offensive or broad, uh you can say a more vivid statement from Ebba Bush is also part of her personality. She's a quite outspoken politician, so perhaps other politicians would have phrased it differently.

SPEAKER_02 28:52

So to frame it in terms of sort of energy nationalism or protectionism, even isolationism would be too simplistic, do you think, Sebastian?

SPEAKER_03 29:02

I think that's too simplistic, yes. I mean I I think that s Swedes in general are in favor of the European Union and European integration. But of course we want the different parts to work well. And here when when it comes to um the question of us having different bidding zones, Germany don't have it, we have the congestion fees that has been discussed that they should be used in other countries

Risks For A Common EU Energy Market

SPEAKER_03 29:28

instead of Sweden, those particularities uh are irritating people. But not integration and and in general, I would say.

SPEAKER_02 29:36

But what are the implications for a kind of common energy policy, a connected Europe, if sort of national governments you know protect their own national interests in in similar ways? Does that does that undermine the the European common market for energy, for example?

SPEAKER_03 29:54

I mean, if all countries would end up in a situation where you only think about your own country, that would of course be problematic. Because in the best of worlds, I would say that be an integrated market, both when it comes to energy and other markets as well, is is beneficial for the European Union as a whole and for most of its members. So, I mean, if you try to take the energy market, of course, if there is if there is a possibility for energy producers to locate themselves where there is big demand, or energy big energy consumers to locate themselves where there is large production uh capacity, or if that's not possible, if there is a a good opportunity of trading, of course, at the big picture that's that's beneficial uh for all if the rules are similar, if taxes and other rules are are fair uh between the countries. But from a Swedish perspective, of course, people are saying that they aren't fair. So in that sense, there might be uh political uh logic uh in opposing to be 100% compliant with with this kind of overarching goal. Then of course there is another dimension, and that is the the new world where your political security has to be taken into account, and that perhaps could change this equation a bit, making it much more logical also for countries to think a little bit uh of their own, because if there is some mounting crisis, perhaps you have to think about how do you uh secure energy production uh within your own uh country.

SPEAKER_02 31:30

I mean, how how do you see this playing out now, Sebastian? Because obviously from a Swedish perspective, it's you know, you know, the Swedes feel unjustly treated here and and the preferential treatment giving given to Germany, for example, as you've as you've laid out. But from the European side, it's like, well, these are the rules and you have to abide by the rules, the that that that that the common electricity rules. So how how are we are we at kind of at a at a kind of um uh immovable point here?

SPEAKER_03 31:59

Well, I don't know if the final word has still been said about which how would you say which interpretation of the rules that is the right one? I mean, from the Swedish perspective, of course, it's not seen as fair that we have the different bidding zones in Germany don't, because supposedly they should have bidding zones also. And if that system makes that we have more congestion fees mounting up than other countries, and that we have to pay those money the the money that we have amounted from Swedish electricity commun consumers to other parts in Europe in order to deal with with um the lack of transmission capacity, I would say that Swedes wouldn't agree on that. And I think that the position that Ebba Bush has taken in this field is is defended by all politicians in Sweden. I don't think that no politician would survive survive following I mean an another uh position that she has taken in this mirror.

SPEAKER_02 33:04

Sebastian, thank you very much for your insights into this very delicate matter, and uh thank you for being a guest on the Plugged In Podcast.

SPEAKER_03 33:12

Okay, thank you very much.

Closing Thanks And Listener Request

SPEAKER_02 33:15

And to you listeners, thanks for listening to this episode of Plugged In. If you enjoyed this discussion, please like, rate, and follow to make sure you get the latest podcast episodes as soon as we release them every Thursday. We'd also love to read your reviews of the podcast. It helps us to keep up to date with what you, our listeners, think of the podcast and what content you want to receive more of. Finally, you can head to Montelnews.com for more news and analysis from our team of journalists across Europe and beyond. See you next time.