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(Bloomberg) — There was at least one unexpected benefit from Hurricane Hans hitting the Nordic region last month: a drop in electricity prices.
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Swedish utility Bixia AB expects rates to be 60% lower in the fourth quarter than a year ago. This comes after weeks of flooding that filled reservoirs in an area where electricity generation is dominated by hydropower. Gas storage sites on the continent are also nearly full, helping to drive down prices.
“We have a better starting position, which could prevent bills from reaching last winter’s catastrophic levels,” said Frieda Bratt, savings economist at Nordnet Bank AB. “That’s great news when interest rates and everything else are going up.”
The easing of power tariffs could not have come at a better time. Families from Oslo to Stockholm and beyond are grappling with rising food bills and the highest interest rates since 2008. Weak currencies are raising tensions in both countries, with bankruptcies among Swedish companies reaching their highest level in 10 years and Norwegian companies rising in numbers. Businesses under the burden of debt are also increasing.
During a few days in early August, Storm Hansa pounded both Norway and Sweden, causing widespread flooding, landslides and property damage. Nesbien, the village most affected by the storm, experienced its worst flooding in more than 100 years, receiving 256 millimeters (10 in) of rain in August, nearly three times the normal amount. But alongside the devastation, the rains filled dams in southern Norway to the brim, only 68% full at this time last year.
Since July, rain with an energy value of about 20 terawatt-hours has fallen over the Nordic region, half of which occurred during the two stormiest days of August. According to Bixia, this is equal to the amount of electricity produced in an entire year by Sweden’s largest reactor.
“The reserve position for autumn is very good, well above the normal average for southern Norway,” said Lena Hagen, a senior analyst at industry consultant Volu. “For the Nordic balance of power, it is important to have good availability of both water and wind power” in case nuclear plants in Sweden and Finland are shut down unexpectedly, he added.
The Nordic market has also been helped by low continental prices, which have been reduced with the build-up of very good gas storage levels. Stocks on the continent are about 93% full, well ahead of the 90% target set by the European Union on 1 November.
Statkraft Chief Executive Christian Rinning said: “European gas prices have dropped significantly from the highest levels seen at the end of last year and electricity prices have eased due to a significant improvement in reservoir conditions in southern Norway. ” Tonnesen said on Thursday. “There is still uncertainty in the market and there is uncertainty as to what growth will be like.”
Volu’s Hagen said prices could still be volatile this winter due to factors such as rain during autumn, how windy it is and whether demand increases during the winter. Still, Europe is in a better position than it was a year ago, when the start of the war in Ukraine caused an energy crisis that forced European countries to turn to Russian gas.
But despite the slowing of low electricity prices and high inflation in both Sweden and Norway, there is more pain ahead for homeowners. Sweden’s Riksbank is expected to hike rates again by 25 basis points later this month. Norges Bank is set to hike its key interest rate by two more 25 basis-points to a possible peak of 4.5%, according to a forecast by Swedbank AB.
–With assistance from Chris Miller.
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