This made it clear where in Sweden the national grid for electricity needs to be expanded. It also provided a clear indication of where in the country increased electricity production is required in order to better meet consumption in that area and thus reduce the need to transport electricity long distances.
The decision to introduce bidding areas was part of the EU’s attempt to create a common European electricity market.
The borders between the bidding areas are drawn where there are congestions in the national grid for electricity, so-called ‘constraints’, a congested sector on the grid, in Sweden. In northern Sweden there is a surplus of electricity production compared with the demand for electricity. In southern Sweden, the circumstances are the opposite. This means that the transmission capacity – for certain hours where there are large flows of electricity through Sweden – is not always sufficient.
The boundaries of the areas (the blue lines in the map above) are the locations in the national grid where there are congestions (bottlenecks) in the ability to transmit electricity.
Does it affect the price of electricity?
Yes the price of electricity may vary in these areas. Before the division it was the same electricity price throughout Sweden. This price did not reflect either the supply of or the demand for electricity, which actually varies geographically.
For electricity consumers, the introduction of bidding areas meant that the price of electricity may vary in these areas. In southern Sweden, electricity may be more expensive than in northern Sweden from time to time. This difference may be in the region of a few öre per kWh. For most of the year, the price of electricity will probably be the same in all four areas. As investments are made in the electricity grid and new electricity production commences in the areas that currently experience high demand but have a low supply, the differences in the electricity prices between the areas will reduce.
Background to the decision on bidding areas
Back in 2007, a major Swedish study was carried out into how congestions in the national grid should be handled in Scandinavia, and particularly in Sweden. This study was carried out by Svenska Kraftnät, along with the Energy Markets Inspectorate, Swedenergy and the Confederation of Swedish Enterprise.
In 2009, Svenska Kraftnät was commissioned by the government to review the options for dividing the electricity spot market in Sweden into several bidding areas. The report was submitted to the government in October 2010.
During 2009, Svenska Kraftnät also submitted a proposal for a voluntary commitment to the EU Commission. In April 2010, the EU Commission decided to accept this commitment and make it binding. In brief, this meant that Svenska Kraftnät needed to change the way in which Sweden handles congestions in the Swedish electricity grid.
Svenska Kraftnät agreed to submit quarterly reports to the EU Commission. These described the management procedure during the period until the bidding areas were introduced and how preparations were progressing.
In May 2010, Svenska Kraftnät decided to introduce the bidding areas in accordance with the proposal contained in our final report to the government.
On 1 November 2011 the bidding areas were introduced.
Documents in english are available to download here.