EPAD Auctions

Concept Updated 2026-10-04

Svenska kraftnät auctions financial EPAD contracts covering about 15% of the SE2–SE3 and SE3–SE4 transmission capacity, so that market actors can hedge the price difference between Sweden's bidding zones where no liquid market does it for them.

The auctions draw about 25 participants each and price well, but long implicit tails point to tactical bidding, and the zone analysis due in January 2027 and a June 2026 hedging assignment both turn on how much zone price risk can be hedged.

Running since — 7 February 2023Coverage — about 15% of SE2–SE3 and SE3–SE4 capacity, zones SE2–SE4Participation — about 25 actors per auction (Q1 2026)Funding — 20 mnkr from congestion income (2027 decision)

Sammanfattning

Svenska kraftnät auktionerar sedan 7 februari 2023 EPAD-kontrakt — finansiella produkter som låter marknadens aktörer prissäkra prisskillnaderna mellan elområden — motsvarande omkring 15 procent av överföringskapaciteten mellan SE2 och SE3 respektive SE3 och SE4. Auktionerna genomförs via Svensk Kraftmäkling med marginalprissättning och kopplade auktioner över zongränserna, och produkterna är månads-, kvartals- och årskontrakt. Under första kvartalet 2026 deltog i snitt 25 aktörer per auktion, men Svenska kraftnät ser fortsatta tecken på taktiska bud (långa implicita svansar) och kunde inte analysera den kontinuerliga handeln fullt ut efter flytten till Euronext. Direkta kostnader på 20 miljoner kronor finansieras ur flaskhalsintäkterna. Frågan blir mer central eftersom Svenska kraftnäts analys av alternativa elområden (leverans 29 januari 2027) ska belysa effekter på den finansiella elmarknaden och regeringen i juni 2026 gav Ei och Svenska kraftnät i uppdrag att föreslå åtgärder för bättre prissäkring.

EPAD (electricity price area differential) contracts are financial products that help market participants hedge the price differences between bidding zones (Source - Ei Beslut Flaskhalsinkomster 2027 (2026)). Sweden’s four Bidding Areas regularly price apart, and without a liquid market for those differences, an actor exposed to the SE2–SE4 price gap cannot lock it in. Svenska kraftnät therefore runs its own EPAD auctions, adding supply of these contracts on a regular schedule.

What Svk offers

Auctions since 7 February 2023, for the zones SE2, SE3 and SE4, in monthly, quarterly and yearly contracts.
Volume equal to about 15% of the transmission capacity between SE2 and SE3 and between SE3 and SE4.
Brokered by Svensk Kraftmäkling AB (SKM), with contracts cleared at Nasdaq Clearing under the December 2024 rules; trading has since moved to Euronext. (Source - Svk EPAD Auctions Q1 2026 and Trading Rules (2026))
The programme’s direct costs are paid from congestion income: 20 mnkr in the 2027 decision (Flaskhalsinkomster › Approved uses (2027 decision, ärendenummer 2026-101903, decided 2026-05-29)).

How an auction works

Buy and sell auctions, coupled across each border: Svk must buy in one zone at the same or a lower price than it sells at in the adjacent zone, and the volumes must match exactly; otherwise the auction does not complete.
Marginal pricing (pay-as-clear); allocation by price, then order timestamp, then pro rata.
Orders in 1 MW steps, placed 08:00–10:00 CET on the auction day, results at 12:00; participants need a Nasdaq Clearing membership (or a clearing member) and collateral for their orders; brokerage fee 0.0075 EUR/MWh.
The auction schedule (dates, products, volumes) is published in advance.

What the auctions show

By Svk’s Q1 2026 summary (Source - Svk EPAD Auctions Q1 2026 and Trading Rules (2026)):

Participation is high and trending up: about 25 participants per auction; monthly contracts the most popular.
Price formation is good, but tactical bidding persists: the long implicit tails are at a persistently high level, read by Svk as participants prioritising allocation over price accuracy. Bid-to-cover for SE2/SE3 stays close to SE3/SE4 and fell in the quarter.
Prices move with the zone spread: the SE2–SE4 spread on Cal-27 contracts fell early in the quarter and rose in March, which Svk connects in time to the war in Iran and higher LNG prices.
Earlier signals: the council heard in 2024 that 22,000 GWh had been supplied through the auctions in 2023 with a growing number of participants (Source - Elmarknadsrådet Meetings 1 and 2 2024 (Feb-May)), and that EPAD premiums rose after flow-based capacity calculation went live on 29 October 2024, most visibly for the December SE3 contract (Source - Elmarknadsrådet Meetings 3 and 4 2024 (Sep-Nov); see Flow-Based Capacity Calculation). An SE-LT methodology proposal was submitted in November 2024 and a Finland solution was in progress.

Why it matters now

The zone analysis: Svk’s analysis of alternative bidding-zone divisions, due 29 January 2027, includes the function of the financial electricity market, with a planned survey of financial-market actors and later dialogue on financial hedging. Svk notes that many actors have longer price-hedging contracts, so a new division changes their conditions (Source - Svk Aktörsmöte Elområdesanalys (2025-11-05), Bidding Areas).
The hedging assignment: in June 2026 the government asked Ei and Svk to propose measures to improve long-term price hedging on the electricity market (Source - Regeringsuppdrag Prissäkring Elmarknaden (2026)).
The hedging problem the auctions address: with no liquid forward market at node level, financial hedging is hard, raising investment risk for generators and industrial customers (Bidding Areas).

Flaskhalsinkomster — congestion income that funds the auctions
Bidding Areas — the zones the contracts refer to and the ongoing zone analysis
Flow-Based Capacity Calculation — the capacity-calculation change whose go-live moved EPAD premiums
Elmarknadsrådet — where the programme was reported
Svenska kraftnät — the auctioneer

Sources

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