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Stockholm utility seals 'emergency' power supply deal to keep city's lights on

Stockholm utility Stockholm Exergi AB has struck an emergency power supply deal with Swedish grid operator Ellevio AB (publ) to ensure electricity continues to flow to the capital in the wake of the country's push to phase out coal and gas capacity.

Sweden increased threefold its levy on fossil fuels in July, in a bid to price out the country's remaining coal and gas plants, Bloomberg reported on Jul. 31.

This has made operating fossil-powered plants uneconomical, and the Stockholm region found itself in what Ellevio called an "acute problem of capacity shortage." The issue stemmed from a combination of lower local power generation and higher demand than the grid was able to meet.

But the new deal, announced on Oct. 25, has alleviated the crisis, Ellevio said, with the grid operator adding that it has agreed with the government to enable Stockholm Exergi to continue producing power at its combined heat and power plant in Värtän.

Stockholm Exergi said Oct. 25 that the deal with Ellevio would ensure 320 MW of power would be generated in a renovated cogeneration plant rebuilt to run on biofuel, specifically tall oil. The collaboration will last for 12 years and the site will continue to act as a peak load facility while it undergoes refurbishment.

Stockholm Exergi will also invest in other plants, also powered by biofuel, while also "exploring the potential" for a new facility in Stockholm powered by waste. It expects to invest between 1.6 billion and 2.1 billion Swedish kronor in total, a spokesperson said.

"This is a solution to an emergency situation, a first step," Ellevio CEO Johan Lindehag said. "There are great needs still ahead, but we look forward to the next step and a continued constructive discussion with the government."

Lindehag argued that policymakers should create incentives for investments and other long-term solutions that help meet the power needs of consumers and industry. Issues around electricity grid capacity will emerge in several regions of the country and at all levels of the electricity networks, he said.

Stockholm Exergi is jointly owned by Finnish utility Fortum Oyj and the city of Stockholm.

As of Oct. 25, US$1 was equivalent to 9.65 Swedish kronor.