ICIS Long-Term Power: Swedish nuclear risk would have substantial price impact if resolution not found

Author: Roy Manuell


This is a condensed version of our analysis for ICIS EU Long-Term Power subscribers that was originally published on 16 July by Roy Manuell, Analyst - EU Carbon & Power Markets and Anne Petersen, Market Reporter.

Our ICIS EU Long-Term Power customers have access to extensive modelling of European power markets out to 2050 with various different options and proposals. If you have not yet subscribed to our products, please get in contact with Justin Banrey (Justin.Banrey@icis.com) or Audrius Sveikys (Audrius.Sveikys@icis.com).

Sweden needs to make a decision on where it will store its future nuclear waste with Vattenfall pushing for clarity before a deadline of 31 August.

Given recent political uncertainty with a new government only having formed in the first weeks of July, it remains possible that this deadline will not be met.

Vattenfall has said in recent months that if clarity is not given and a solution for nuclear waste decided on, it may be forced to close several of its Swedish nuclear plants with the Forsmark 2 reactor to be offline as early as 2025 and other reactors to close shortly thereafter.

To examine the potential market impact, we modelled a scenario in which the Forsmark 2 was offline from 2025 and found that Nordic and Baltic prices would rise by €2/MWh per year between 2025 and 2040 if this were to occur.

This underlines the strong regional impact of even just one reactor being forced to shut due to the ongoing nuclear waste issue in Sweden.


  • Sweden is running out of space to store the nuclear waste. At the current rate of nuclear power generation, Sweden will not be able to store any more nuclear waste after 2023
    • Nuclear plant operator Vattenfall has given the government a deadline of the end of August for clarity on where and whether it can store future waste to avoid future plant closures from the mid-2020s onwards.
    • It will take several years to construct a new or extended storage facility, which is the reason for which Vattenfall is adamant that a decision is overdue, why it has set this deadline and been vocal about this issue in the media.
  • An extension to the existing interim nuclear waste storage facility near Oskarshamn has been planned and is awaiting government approval, but the Swedish government has delayed any decision on how to proceed for years.
    • Sweden’s Green Party, which is part of the Swedish government, is sceptical about nuclear power and would prefer to see it phased out. The Party has told ICIS, however, that it did not want an immediate shut down of nuclear power, but wants to phase out nuclear by 2040 at the latest
    • Swedish politics has been tumultuous over the summer with a new government – consisting of the same parties as the previous one – installed on 9 July
    • The new government is now even more fragile than the previous iteration with the Social Democrats leading a minority coalition with the Green Party and fragile support in parliament a little more than a year out from a scheduled election
    • It is therefore quite optimistic to expect a timely and clear agreement on nuclear waste ahead of the August 31 deadline set by Vattenfall given the numerous other political imperatives in the country
  • Sweden’s three nuclear power plants have a combined capacity of 6.9GW and will produce 45TWh of energy in 2021, corresponding to 27.6% of all power generated in Sweden
    • Sweden is a net exporter of energy and will export 29.5TWh of energy in 2021 to other Nordic and Baltic countries, Denmark and increasingly to Germany as the country’s nuclear and coal phase out plans progress


Potential consequences

  • In statements to the Nord Pool exchange in May, the utility warned that unless the Swedish government reaches a decision on allowing more storage “no later than 31 August 2021”
    • According to the utility, the 1.1GW Forsmark 2 reactor “cannot be restarted after the yearly maintenance in 2024, 1.2GW Forsmark 3 cannot be restarted after the yearly maintenance in 2025 and 1GW Forsmark 1 cannot be restarted after the yearly maintenance in 2028”
    • With regards to Forsmark 2, we currently assume its closure at the end of 2040
    • Furthermore, the Vattenfall statement said: “We foresee a risk that Ringhals 3 and Ringhals 4 cannot be restarted after the yearly maintenance in 2025”. Ringhals 3 and 4 each has 1.1GW of capacity
    • Such closures would leave the 1.45GW Oskarshamn facility as the only functioning nuclear power plant in Sweden and remove 5.3GW of baseload capacity from the Swedish grid in the 2020s
  • Both the Forsmark and Ringhals power plants are in the SE3 bidding area and are a vital part of the Swedish power system.
    • The southern SE3/Stockholm, and SE4 bidding areas are already significantly higher priced that the northern SE1 and SE2 areas as they see a relatively higher level of demand and have lost supply with the closure of several local nuclear reactors over the past few years

The political reality

  • As is the case in many markets, nuclear developments are heavily influenced by the political landscape
  • Sweden’s reliance on nuclear is sufficiently strong to the extent that even the country’s Green Party will not support an immediate closure and only a phase out by 2040
    • If the deadline is reached without an agreement, which seems likely, either the deadline can be extended to accommodate a later agreement, or there will be consequences for the operation of Swedish nuclear reactors from the mid-2020s onwards
  • It is probable that the August 2021 deadline given by Vattenfall is mainly set to pressure the government to make a decision and that in reality due to the importance of nuclear the deadline will have some flexibility
    • Even if this is the case, there will undoubtedly be a time in a not too distant future where nuclear shut-downs become unavoidable without an agreement in place

Modelled impact

  • We modelled the impact of the Forsmark 2 reactor being unable to operate after undergoing maintenance in 2024 in our Base Case scenario
    • We took this to mean that from 2025 to 2040 Sweden has 1.1GW less nuclear capacity to measure the potential effect on the region in the event of a political impasse on the waste issue
  • The impact on generation would be a drop of more than 15% of Swedish nuclear output in each year between 2025 and 2040 - equivalent to 7.2TWh lower generation compared to our Base Case
  • As a result, Swedish net exports fell by 6.5TWh - around 17% lower than our Base Case - and generally tightening the Nordic and Baltic regional balance
  • To replace the lost nuclear output, we see an uptick in German coal and lignite generation amounting to a combined total of around 0.5TWh per year
    • Given that the German supply mix is already significantly tighter in the 2020s due to coal and nuclear capacity closures, potential Swedish nuclear closures would certainly exacerbate the overall regional tightness in CWE markets
  • Gas output also increases by around 4TWh across Europe across the 2025 to 2040 period with Britain, Germany, Belgium, the Netherlands, as well as Sweden itself the predominant contributors

Market impact

  • Bullish in the event of a lack of resolution and the subsequent closure of even one reactor in the mid-2020s
  • Our modelling showed that Swedish prices would rise by an average of almost €2/MWh per year between 2025 and 2040 in the event of Forsmark 2 closing in 2024
    • The price impact would also be felt in neighbouring regions with average Nordic prices including Sweden and average Baltic prices each rising by €1.3/MWh per year between 2025 and 2040
    • German prices also rose but by around €0.2/MWh per year and the impact on Poland was minimal
  • Overall we expect a resolution or a delay to the August 2021 deadline, but our modelling demonstrates the scale of the potential impact in the event of a lack of a decision