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PA IN THE MEDIA

Let infrastructure funds finance the submarine cable

Read the article in Swedish

A solution to the lack of capacity in the main grid that is based on an investment in an offshore cable between Sundsvall and Forsmark is a good proposal with several possible financing solutions. But a strengthening of the main network in the coastal section between Luleå and Umeå via Skellefteå should be given higher priority in the short term. Then the growth potential for electricity-intensive industry in the area can be fully realized. It is crucial to bring more innovative thinking to the discussions about the future of Swedish electricity, says Torbjörn Severinsson, energy expert at PA Consulting.

At DN Debatt Nils Andersson, Alarik Arthur, Stig Göthe and Gunnar Lundberg addressed the need for a faster reinforcement of the network spine from North to South. SEK 10 billion for a submarine cable that is financed by the entire Swedish customer group of electricity grid connections is a small price to pay to secure the electricity supply on the overlying grid in the future. In addition, the cost given today's regulated depreciation periods would probably be spread over a period of between 40 and 62 years.

If Svenska kraftnät does not have the resources to build and finance the project, there are other possible solutions. Several of the current international cables are owned by private companies. This could also be an option for non-cross country cables. The main issue is probably more about the risks of transferring the ownership of socially important infrastructure to private companies.

There are several exciting options to choose from. Svenska kraftnät, the Energy Market Inspectorate and, by extension, the Swedish state could approve one or more private companies as signatories of a concession agreement for a predetermined period of time. The company is then responsible for designing, financing, building and maintaining and operating the cable for a fee. When the concession agreement has expired, or if the rules in the agreement are broken, the cable is taken over by Svenska kraftnät, given a predetermined residual value. A similar implementation model has, for example, been discussed to enable a faster railway between Oslo and Stockholm.

With today's low interest rate situation, there is a lot of capital available that could finance the cable with acceptable return requirements. These are mainly infrastructure funds that are financed with pension capital whose weighted capital costs are low and the risks are manageable. Infrastructure funds have been the driving factor behind the ongoing wind power growth that we are now seeing in northern Sweden. In practice, it is a matter of the wind power companies being able to lock future revenue levels into long-term price agreements, so-called PPAs (Power Purchase Agreements), and thereby eliminate parts of the revenue risk.

We see a cable between Sundsvall and Forsmark as an issue for the future.  In addition, there are already plans for reinforcement action that will improve the position in the core network from north to south. When Sydvästlänken is in full operation during the autumn, we can expect smaller price differences between the price areas.

But today there are more important actions to get started with. In the Norrbotten and Västerbotten regions, there is a distinct need for a strengthened core network. This is found above all in what we call the "coastal route" that includes the main network from Luleå to Umeå via Skellefteå. A new line that connects the coastal line with the other existing eastern main grid line would mean enormous growth potential for electricity-intensive industry in that area. There should be no doubt among industry players about the availability of renewable electricity in these regions in the future, but Northern Sweden should be able to satisfy all industries that want to establish themselves there with renewable electricity, whether they are called Hybrit, Northvolt, or Facebook. This at the same time as renewable energy continuing to flow down towards southern Sweden.

There will be hours during the year in the future when the electricity surplus is not as high in the North as we are used to. But with the ongoing wind power expansion, there will be more than enough energy available apart from extremely rare occasions. Establishment of additional electricity-intensive industry in northern Sweden will benefit the global climate at the same time as it contributes to wider societal values ​​for Sweden.

Torbjörn Severinsson, energy expert at PA Consulting.

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Energy expert, PA Consulting Group

Oskar Almén

Oskar Almén

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