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Sweden’s Vattenfall halts offshore wind power project

Swedish state-owned utility Vattenfall said on Monday that it was putting a major offshore wind power project on hold, citing "unviable investment prerequisites" in the country.

Published: 2 September 2024 15:14 CEST

Sweden's Vattenfall halts offshore wind power project

Vattenfall's offices in Solna. Photo: Jessica Gow/TT

Planned for construction off Sweden’s southwest coast, the Swedish Kriegers Flak wind power project was planned to start producing electricity in 2028 and and generate 2.7 terrawatthours (TWh) per year — equivalent to the yearly consumption of around 500,000 households, according to Vattenfall.

The project borders already existing wind farms on the Danish and German sides of the Kriegers Flak reef, Vattenfall said.

In a statement, Vattenfall described it as Sweden’s “most mature offshore wind power project,” but said “investment prerequisites for offshore wind in Sweden are currently not viable.”

“Vattenfall has therefore decided to pause all further development of the project,” the company said in a statement.

The utility said if conditions were to improve “the project can be resumed,” adding that it had previously said that “one of the main prerequisites for investing in the project is a reasonable connection point to the national grid offshore.”

Vattenfall noted that it was currently developing “offshore wind projects in Sweden that together have the potential to annually deliver 18 TWh” by 2035.

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Politics in Sweden: The end of the era of wishful thinking on new nuclear

“Electrical energy too cheap to meter”. This was the promise made for nuclear energy by Lewis Strauss, Chair of the US Atomic Energy Commission, in an address to journalists back in 1954, at the birth of the nuclear power industry.

In the run-up to and aftermath of Sweden’s 2022 election, Ebba Busch, now Sweden’s Business and Energy minister, came close to echoing Strauss’s words.

“Nuclear is zero-emission, safe and cheap,” she said in a speech to party activists back in 2022. “We are securing cheap electricity for households,” she declared, when she last June published a law loosening the rules about where and how many reactors can be built.

What Strauss — who recently found new fame as the villain in the film Oppenheimer — did not know was that, rather than an inspiration, his words would stand forever as a warning.

More than perhaps any other type of infrastructure project, the costs and construction times for nuclear power plants have tended to spiral wildly out of control, often going five times or more over budget.

But on Monday, when Mats Dillén, the economist tasked with drawing up a subsidy system sufficiently generous to draw in investors, delivered his conclusions, the reality of the challnge began to bite.

New nuclear, according his reckoning, will be very expensive indeed and it is the government, and as a result taxpayers, together with electricity consumers, who will have to foot most of the bill, with investors given cheap loans covering 75 percent of the cost.

To his credit, Dillén did not indulge in what he dismissed as glädjekalkyler — a word that combines glädje, meaning “joy” and kalkyler, “calculation” — essentially doing your sums with rose-tinted spectacles on, or indulging in financial wishful thinking.

Although he reduced the headline figures by doing the analysis for four new nuclear power plants rather than the ten the government has promised, his analysis of the cost of new plants was fairly conservative based as it was on how much recent plants have actually cost.

Building four reactors, he estimated, would cost some 400bn kronor (€34bn), of which 300bn in his model would be loaded onto national debt at the peak of construction, representing 2.5 percent of GDP. If the costs rose 50 percent above the inquiry’s expectations — which is not at all unlikely — this would then push the addition to national debt to 450 billion kronor, or about 4 percent of GDP.

READ ALSO: Where’s the money coming from for new nuclear?

The real costs to Swedish citizens could be higher still, however.

On top of the cheap loans, Dillén proposes promising investors a guaranteed power price of 80 öre a kWh (for context the average price over the past 12 months in Sweden has been about half that), with the government subsidising the difference. Finally, there is a risk-sharing mechanism which would lower investor’s interest costs if their investments turned out to be less lucrative than they had hoped.

This is a generous deal for investors, but perhaps not a great one for the Swedish taxpayer.

It’s little surprise, then, that Busch and Environment Minister Romina Pourmokhtari — who were both present when Dillén’s inquiry launched with a fanfare in December last year, was nowhere to be seen when he delivered its conclusions.

It was Niklas Wykman, Sweden’s Minister for Financial Markets, who received them alone. Pourmokhtari’s press spokesperson claims it is standard procedure that only one minister receive conclusions of an inquiry, but multiple ministers have been present for conclusions on migration here, forestry here, and education here.

Wykman made financing new nuclear sound a lot more challenging that Busch and Sweden’s Prime Minister had done during the election campaign in 2022, and in their first years in government.

“This is complicated, not only because it is complicated itself to built nuclear power stations but because the electricity market changes over time,” he admitted. “This is about big investments which need to be made here and now, but which will provide income over a very long period.”

Busch’s only comment came in an Instagram post, where she depicted the proposed financing model as about “removing the barriers that have existed for nuclear power”, rather than expecting the government to provide loans directly funding fully three quarters of the cost and then guaranteeing a subsidised high electricity price for the next 40 years.

View this post on Instagram

A post shared by Ebba Busch (@buschebba)

The opposition parties were, as you might expect, less enthusiastic.

“This is going to be a sinkhole for taxpayer’s money,” warned the Green Party’s joint leader Daniel Helldén, noting that every new nuclear power plant built in Europe in recent years had ended up being between three and five times over budget.

People living in Sweden could end up having to pay an “Ebba Busch tax” for decades to come, he warned.

Rickard Nordin, the climate and energy spokesperson for the Centre Party, was equally critical, calling it “unacceptable” that households would end up having to pay hundreds of thousands of kronor each just to help the government meet its election pledges.

It would be cheaper and faster, he argued, to meet concerns about the intermittency of renewable electicity and the stability of the grid by building storage facilities using batteries, gas, or other technology.

In some ways, the publication of Dillén’s conclusions, however harsh the truths they spell out, actually increase the chance that Sweden will go ahead and new nuclear power plants. The funding model is probably generous enough to draw investors, and the government is now dealing in reality rather than indulging in wishful thinking.

The fact that the opposition parties are against it, however, could mean the plan is dead in the water nonetheless.

The government parties may have the votes in parliament to pass a bill bringing in the new financing regime, but few investors are likely to risk stumping up the cash if the main party of the opposition, the Social Democrats, remains opposed, given that the projects have such a long time horizon.

Fredrik Olovsson, the party’s energy spokesman, did not seem impressed.

“This looks, quite simply, like it’s going to be extremely expensive. It feels like the government has lost control,” he said. “They went into this and said it could be done quickly and cheaply, and now they’re coming back with a proposal that says it will take a long time and be expensive.”

It would also be undemocratic, he continued, for the government and its support party the Sweden Democrats to push through this funding arrangement and strike an agreement under it without involving the opposition, particularly as the costs involved had never been broached during the election campaign.

“I don’t think the government has a mandate to strike 40-year deals with anyone when they didn’t even campaign in an election on them,” he said.

Politically, of course, this might suit the three parties in Sweden’s coalition government. They can go into the 2026 election accusing that the Social Democrats, Green Party and Left Party of blocking their plans for new nuclear and they can blame the opposition’s intransigence for Sweden being way off track for meeting its climate goals.

But for Swedish businesses, consumers, and, of course, the planet — for whom the rapid roll-out of more fossil-free electricity, whether it be wind, solar or nuclear, is crucial — such a standoff would be very bad news indeed.

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