Why electricity procurement has become a strategic risk issue for Swedish companies

Swedish companies have traditionally taken a cautious and conservative approach to electricity procurement. For many years, this was sensible. Prices were relatively predictable, supplier relationships were stable, and procurement could often be handled through recurring tenders and familiar contract models.

That market no longer exists. Electricity procurement has become a strategic question for companies whose operations depend on reliable and competitive energy costs. Companies that continue to rely on old models may find themselves exposed to risks they do not fully see or control.

“The market has changed, and companies need to change with it. Price movements that were once exceptional have become part of everyday electricity procurement,” says Andreas Bäck, Business Manager, Power at Gasum.

The Swedish electricity market has changed fundamentally

The Swedish electricity system is undergoing a structural change. A growing share of electricity production comes from weather-dependent sources such as wind and solar power. This makes supply more variable and causes prices to move more sharply depending on weather, demand and available transmission capacity.

At the same time, Sweden is increasingly connected to the wider Nordic and European electricity markets. Cross-border electricity flows mean that prices in Sweden are influenced not only by domestic production and consumption, but also by developments in neighbouring markets.

Sweden’s internal grid structure adds another layer of complexity. Much of the country’s electricity production is located in the north, while a large share of consumption is in the south. When the grid cannot transfer enough electricity between regions, price differences between bidding zones can become substantial.

For companies, this means that electricity procurement can no longer be managed only as an annual tender focused on visible fees. A familiar supplier or a fixed contract may create a sense of security, but they do not automatically protect the company from changes in the market situation.

“The key question is no longer only what price the company can secure. Companies also need to understand their exposure, improve forecasting, manage imbalance exposure and make procurement decisions that support both cost predictability and business continuity,” Andreas Bäck explains.

Strategic risk grows when procurement models do not match the market

Strategic risk grows when the company’s procurement model no longer matches the market it operates in. Price volatility is the most visible risk, but it is not the only one. Forecasting accuracy, imbalance exposure, hedging decisions, contract transparency and operational flexibility all affect the total cost and risk level of electricity procurement.

Companies typically buy electricity based on expected consumption. If actual consumption differs from the forecast, the difference must be corrected through intraday trading or the balancing market. In volatile conditions, even a relatively small forecasting error can lead to significant additional costs.

This is especially relevant for industrial companies whose electricity use changes with production volumes, maintenance breaks or operational disruptions. It is also important for companies with renewable power production, where output depends on changing weather conditions.

“If a company has purchased electricity for a certain expected load but actual consumption is higher, the difference has to be settled at the prevailing market price. During extreme price periods, this can very quickly become a major cost,” Bäck explains.

Another warning sign is relying too heavily on fixed-price contracts without a long-term risk management strategy. Fixing part of the electricity price can support budget certainty, but it does not automatically mean that risk is well managed. Companies need to know how much consumption is hedged, over what time horizon, with which instruments and within which risk limits.

Companies should also look beyond the visible delivery fee. A small difference in fees may be much less important than poor forecasting, unclear balancing charges or poorly timed hedging decisions. Procurement models that focus mainly on headline price can miss the factors that create the greatest financial impact.

“In a volatile market, the lowest visible fee is not always the most important factor. Companies to understand their exposure, how their costs are formed and what kind of risk management model best supports their business. This requires transparency in how the electricity costs are formed,” Bäck says.

Companies should act now to reduce risk and improve control

A more active approach to electricity procurement does not mean that every company needs its own trading desk. It means companies need a structured way to understand exposure, manage risks and benefit from changes in the market situation.

1. The first step is to analyse the current situation. Companies should review how their electricity costs are formed, how accurate their consumption forecasts are, who carries imbalance risk and how much visibility they have into supplier charges. This creates the basis for improving the power procurement model.
2. The second step is to create a clear hedging and risk management policy. The policy should define what share of expected consumption is hedged, over what time horizon, with which instruments and within what risk limits. The purpose is not to eliminate uncertainty, but to make risk deliberate, visible and aligned with the company’s business priorities.
3. The third step is to improve data and flexibility. Better consumption data supports better forecasting. Operational insight helps anticipate deviations before they create costs. Where possible, companies can also identify flexible loads or processes that can be adjusted in response to market conditions.

“Companies do not need to build all capabilities internally. With the right partner, they can get access to market expertise, forecasting, balance management and portfolio management while focusing on their own core business,” Bäck says.

Gasum can support companies throughout the power market value chain by combining physical electricity delivery with forecasting, balance management, market reporting and portfolio management. Gasum’s experts can help customers build an efficient procurement model, manage risks and make informed decisions based on up-to-date market information.

Gasum can also help companies create a more transparent and competitive approach to hedging. By using several counterparties, individual hedging transactions can be competed instead of being automatically executed through one provider. This improves transparency and helps ensure that decisions are aligned with the customer’s interests.