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Swedish government says no to new power cable to Germany

FILE PHOTO: German Economy Minister Robert Habeck visits Stockholm

STOCKHOLM (Reuters) - The Swedish government has turned down an application to build a new subsea power connection between Sweden and Germany, the 700 megawatts Hansa PowerBridge project, because the German market is not efficient enough, it said on Friday.

"We can't connect southern Sweden, which has a large deficit in electricity production, with Germany, where the electricity market today does not function efficiently," Energy Minister Ebba Busch said in a statement.

"That would risk leading to higher prices and a more unstable electricity market in Sweden," she said.

Grid operators Svenska Kraftnat and 50Hertz had aimed for the project to allow more renewable power to be sent from the Nordics to Germany, while imports from Germany would contribute to a more secure electricity supply in southern Sweden.

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Germany's 50Hertz is majority-owned by Belgium's Elia.

Germany is a single power market zone, with a unified wholesale price. However, congestion on its grid, which lacks connections to move power from the wind-rich north to consumption centres in the south, has increased calls for a split into at least two zones.

Germany opposes such a move, which it fears could increase prices in the south and impact industrial activity.

By comparison, Sweden is divided into four power price zones.

"The German power market doesn't function in a way that gives correct price signals to power market players, mainly because Germany, unlike Sweden, isn't divided into electricity areas in a way that corresponds to the significant bottlenecks," the Swedish government said.

A 50Hertz spokesperson said the rejection meant an opportunity had been missed to strengthen Europe's internal electricity market.

However, the person added: "The Swedish government's decision has no impact on the future security of supply and system stability in the 50Hertz network area."

(Reporting by Anna Ringstrom; Additional reporting by Nora Buli and Riham Alkousaa in Berlin; Editing by Stine Jacobsen and Mark Potter)