Storm Alfrida has shown how vulnerable parts of the Swedish electricity grids still are, despite considerable efforts to make them weather-proof. But instead of increasing investment in modernising the electricity grids, the new revenue regulation risks reducing it next year, writes Oskar Almén, energy expert at PA Consulting.
After Hurricane Gudrun, Eon and most of the electricity grid companies began programs to weather-proof the electricity grids. Weather-proofing includes several measures, from replacing uninsulated overhead cable with buried cable to building new network stations and widening the wiring streets. Because so many of the grid companies don’t meet the legal requirement, the law becomes toothless – the regulator can’t provide power for around 150 bans.
One ‘weapon’ the regulator does have is to regulate the companies' revenue framework, which is designed so the companies with better delivery security receive increased incentives, and vice versa for underperformers. Secondly, the regulator can request a supervision, where the grid companies must report what caused the power outages, including a prevention action plan. Since investments in the electricity grid take time, these action plans can extend over very long periods of time.
The government has decided to tighten the revenue framework from 2020 onwards, but the price reductions for customers in the short term means it feels like it was based on populism and taken without sufficient impact assessments.
The major electricity grid companies, with Ellevio leading, are critical of the tightening of network charges, and for good reasons. Ellevio has announced they plan to cut their investment plans by half for the next supervisory period, 2020-2023. The electricity grid companies' investments are mainly focused on legal obligations and replacing old electricity networks and stations, which are usually categorised as reinvestments. According to the law, the companies are obliged to implement new affiliations and for that they have the right to charge a connection fee from the customer. On the other hand, companies must finance reinvestments themselves without any contribution from their customers, and they need to ensure that there is capital to do so.
According to the electricity grid companies, the conditions for a reasonable return on reinvestment won’t be possible in the next few years. That's why many companies are pulling the handbrake, and the investments are halting. Without reinvestment in the electricity grids, existing lines and stations will only get older and thus increase the vulnerability. The consequence becomes devastating when storms like Alfrida are expected to become more common.
Contrary to the public debate that people's electricity bills should be cheaper, it’s reasonable to assume people would prefer to pay a little more if the alternative is to live with the threat of long electricity outages. We recommend the new energy minister, Anders Ygeman, take a trip to Roslagen to see with his own eyes the effects of Storm Alfrida and to talk to those who have been without electricity for three to four weeks. In addition, we hope the government will reconsider the decision to tighten the abilities for the electricity grid companies, so the work on weather-proofing the electricity grids will happen faster.