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Wind power significantly impacts electricity prices in Sweden

A recent report by Rickard Sandberg, Head of the Center for Data Analytics, investigates the effects of wind and temperature on electricity prices across Sweden, revealing that wind conditions significantly influence price volatility. Published in January 2024 by Energiforsk, it highlights the growing impact of wind power on the electricity market's dynamics.

Exploring the wind's influence on electricity pricing

The report titled “Wind and Electricity Prices in Sweden – A Statistical Analysis” thoroughly examines the effects of wind strength and temperature fluctuations on the nation's electricity costs. With wind energy now constituting a significant portion of Sweden's power generation, its influence on market prices has become increasingly pertinent.

Sandberg's analysis, employing robust statistical models across various bidding zones, underscores the complex interplay between natural conditions and energy economics. This research charts the historical impact of these variables and sets the stage for future energy policy and market strategy considerations.

“In Sweden, electricity prices fluctuate with temperature changes; colder weather leads to higher demand and prices, while an increase in wind and electricity generation brings prices down. Currently, we have an overview of the notable influence this has had at a time when wind energy contributed to 20% of the country's electricity production,” says Rickard Sandberg, Associate Professor and Head of the Centre for Data Analysis at the House of Innovation.

Top 5 findings

  1. A one-degree temperature change impacts electricity prices by 4 öre, while a 1 m/s change in wind speed alters prices by 11 öre.
  2. Wind's impact on electricity prices is nearly three times greater than that of temperature fluctuations.
  3. The highest wind-related price impact was observed in the Stockholm and Gothenburg regions.
  4. Summer months see a greater influence of wind on price variability compared to temperature.
  5. Electricity prices are lower on weekends, highlighting demand's role alongside weather conditions.

“Analyzing the long-term impact of wind power expansion on electricity prices would be insightful, potentially revealing more fluctuation but generally lower prices due to increased energy supply. This research, yet to be conducted, could contribute significantly to developing a resilient and sustainable energy system in Sweden,” says Rickard Sandberg.

Infrastructure and policy implications

The implications of Sandberg's report are far-reaching, extending beyond energy production and market pricing. It highlights the critical need for infrastructure and policy that can adapt to the increasing variability introduced by renewable energy sources. Moreover, the findings advocate for a more nuanced understanding of energy supply dynamics, encouraging investments in technologies and systems that can harness wind power's potential while mitigating its impact on price volatility. This research informs policymakers and industry stakeholders and supports the broader goal of transitioning toward a more sustainable and resilient energy system.

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