Storm Hans Brings Power Bill Relief for Weary Nordic Wallets

(Bloomberg) -- Storm Hans’ battering of the Nordic region last month brought at least one unexpected benefit: a slump in power prices. 

Swedish utility Bixia AB expects rates to be 60% lower in the fourth quarter compared with a year earlier, while on Monday, Oslo and Bergen face negative power prices for the full 24-hour period. That’s after a deluge lasting a few weeks replenished reservoirs in a region where hydropower dominates electricity production. Gas storage sites on the continent are also almost full, which helps to bring down prices.

“We have a much better starting position, which may prevent bills from reaching the horror levels we had last winter,” said Frida Bratt, a savings economist at Nordnet Bank AB. “It’s very good news when interest rates and everything else are surging.” 

Easing electricity rates couldn’t come at a better time. Households from Oslo to Stockholm and beyond are struggling with soaring food bills and the highest interest rates since 2008. Weak currencies in both countries are adding to the strain, with bankruptcies among Swedish companies surging to the highest level in 10 years and the number of Norwegian businesses buckling under their debt also on the rise.

During a few days in early August, Storm Hans dumped water on both Norway and Sweden, causing extensive flooding, landslides and property damage. The village hardest hit by the storm, Nesbyen, experienced the worst flooding in over 100 years, with 256 millimeters (10 inches) of rain falling in August, about three times the normal volume. But along with the devastation, the downpour filled dams in southern Norway to the brim, after standing at just 68% the same time last year. 

Since July, rain with an energy value of about 20 terawatt-hours has fallen in the Nordic region, with half of that coming during the two most stormy days in August. That’s equivalent to the amount of electricity that Sweden’s biggest reactor produces during a whole year, according to Bixia.

“The reserve situation is very good for the autumn, well above normal on average for southern Norway,” said Lena Hagen, a senior analyst at industry consultant Volue. “For the Nordic power balance, it is important to have good availability of both water and wind power” if nuclear plants in Sweden and Finland unexpectedly shut down, she said. 

The Nordic market is also helped by lower continental prices, which have eased with the build up of very healthy gas storage levels. Stocks on the continent are more than 93% full, way ahead of a 90% Nov. 1 target set by the European Union. 

“European gas prices have come significantly down from the very high level that we saw at the end of last year and this in combination with a significantly improved reservoir situation in southern Norway has led to lower power prices,” Statkraft Chief Executive Officer Christian Rynning-Tonnesen said on Thursday. “There is still uncertainty in the market going forward and uncertainty how the development will be.”

Factors including rainfall through the autumn, how windy it is and whether demand jumps during a cold snap, could still result in huge price swings this winter, Volue’s Hagen said. Even so, Europe is better positioned than it was a year ago, when the onset of the war in Ukraine triggered an energy crisis that forced European countries to replace Russian gas.

But even with lower electricity prices and high inflation slowing in both Sweden and Norway, there’s more pain ahead for homeowners. Sweden’s Riksbank looks likely to hike rates again by 25 basis points later this month. Norges Bank is set for two more 25 basis-point hikes for a likely peak of its key interest rate at 4.5%, according to a forecast by Swedbank AB.

(Updates with Norway prices in second paragraph, gas storage level in eighth)

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