Swedish utilities are competing to buy distributed solar power

Swedish power utilities and electricity traders are increasingly competing to buy solar power from residential and commercial PV systems in a rally to secure large portions of prosumers as their clients for years to come.

“Usually, in Sweden, residential prosumers buy more energy than they produce and, by offering them a contract to buy excess electricity, utilities not only secure clients for the future but they may also take the opportunity to sell or lease them their own PV solutions,” Amelia Oller Westerberg, PV market analyst at Swedish consultancy Becquerel Sweden told pv magazine.

“The proactiveness of electricity traders started, already, in 2011, and more and more utility companies now have various offers for the micro-producers’ excess electricity, their green electricity certificates, and guarantees of origin,” Becquerel Sweden founder Johan Lindahl added. According to him, the offers and compensation vary between the utilities and most of them have in common that the micro-producer is a net consumer of electricity during a year and buys electricity from the utility company. “It can be considered a sort of unique case in Europe, as utilities and traders usually tend to see solar customers as a source of income erosion, while Sweden is showing this is not always the case,” he further explained.

Fair competition

A historical policy landscape rewarding self-consumption has resulted in a market dominated by distributed PV systems, where installers and homeowners are increasing the self-consumption rate of their projects in order to maximize the higher value of the self-consumed kilowatt-hour, compared to the price for electricity injected, as surplus, into the grid. “Currently, residential and commercial PV projects generally have a self-consumption rate of around 30-50%,” Lindahl went on to say. “Excess power can still be sold to electricity traders, and homeowners are paid with a feed-in premium on top of the energy prices.”

According to the two analysts, utilities and traders are offering different rates for surplus electricity and this market is characterized by transparency and fair competition. “PV system operators can find offers that entitle them to a higher price for the excess electricity than the Nord Pool spot price,” Oller Westerberg explained. “Especially if you are buying the PV system from the utility.”

Utilities’ behavior

In a recent study, a group of scientists from Sweden’s Chalmers University of Technology examined the solar business strategies of 30 Swedish electric utilities and found that their behavior is mostly influenced by incentives and pressures related to corporate strategies and the external environment.

They also ascertained that the availability of proper infrastructure is the main factor ensuring the success of a power provider in the solar business while horizontal alignment with corporate strategy and marketing goals was pointed out as another decisive dimension. Furthermore, they considered demand, policy, and availability of potential partners as a third combination of factors having an impact on a company’s plans to operate in the PV sector. According to them, a strong misalignment in one of those three factors can make the solar business difficult to implement.

“In contrast to previous literature, we find that horizontal alignment is not the main driver for solar model adoption,” the authors of the paper stated. “Instead, a model needs to fit a utility’s corporate strategy and allow it to respond to external threats or opportunities in order to be adopted.” They concluded that incumbent utilities are not only able to participate in the distributed generation market but they are also well-positioned to implement potentially disruptive business models.

“What the Swedish example and this study, in my opinion, show regarding utilities’ PV businesses is that if only a few incumbent utilities in a liberalized electricity market start to promote attractive offers for private prosumers, many more will follow when these private prosumers have positive examples to compare with,” Oller Westerberg added.

Current framework

For the last ten years, Sweden has offered rebates for residential PV systems but the subsidy scheme closed for new applications in July 2020. It was replaced by a tax reduction for green technologies that reduces a PV system cost by 14.55% of the total capex for private persons. Additionally, Lindahl explained, there has also been a tax credit scheme in place since 2015 for PV systems with a capacity of up to 69 kW. These two schemes, along with the payments by utilities and traders, should ensure the Swedish rooftop solar market will have no disruption. “Even commercial projects exceeding the 69 kW threshold have good chances in the current market environment if they can ensure higher self-consumption rates,” he went on to say.

According to the latest IEA-PVPS National Survey Report of PV Power Applications in Sweden, authored by Lindahl and Oller Westerberg, the SEK0.60/kWh (€0.059) tax credit that is currently being given to PV installations of up to 69 kW can be considered as a second feed-in premium payment for surplus energy fed into the network, exactly like the grid-compensation tariffs that are paid by grid operators to PV system owners when they feed in electricity to the low voltage grid. “The compensation shall correspond to the value of the energy loss reduction in the grid that the excess electricity entails,” the report read. “The compensation varies between different grid owners and grid areas and is typically between SEK0.02 (€0.002) and SEK0.10/kWh.”

According to the Swedish Solar Association – Svensk Solenergi – the number of pre-registrations of PV systems in 2021 has increased by 43% in the first three quarters, compared to the same period in 2020. Its forecast is that about 34,000 new PV installations will be deployed in 2021, in addition to the 66,000 systems that were operational at the end of 2020.

At the end of 2020, the county had an installed PV power of 1.09 GW.