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Sweden’s electricity challenge in a globalized market

Sweden is one of the world’s most electricity-intensive countries per capita. Its transition to a fossil-free energy system is crucial for achieving its 2045 climate neutrality goal. However, this shift poses significant challenges: demand is uncertain, electricity costs fluctuate, and market conditions are evolving rapidly. The report, published in the , emphasizes the difficulties of balancing affordability, sustainability, and reliability in the energy market.

One major issue is that Sweden’s electricity system is deeply connected to Europe’s broader energy network. Electricity flows freely between countries, meaning Sweden cannot operate in isolation. Although Sweden benefits from having some of the lowest electricity prices in Europe, it still depends on imports and exports to stabilize supply and demand.

The EU’s role in Sweden’s energy transition

The report emphasizes that the European Union plays a crucial role in ensuring a stable, well-regulated electricity market. EU policies provide the foundation for cross-border electricity trade, which helps balance fluctuations caused by renewable energy sources like wind and solar. Without strong European cooperation, electricity shortages or price volatility could undermine Sweden’s energy security.

The EU also sets the rules for interconnected energy networks, fostering fair competition among member states. This cooperation enables Sweden to benefit from surplus electricity when necessary, while exporting excess power to other countries.

Key research findings

• Sweden's electricity demand may rise by more than 50% due to industrial electrification and green energy initiatives.
  
  
• EU cooperation is crucial for balancing Sweden's electricity supply and stabilizing market prices.
  
  
• Onshore wind power is Sweden's most cost-effective renewable energy source, but price fluctuations and market challenges need to be addressed.

Implications of this research for the future of Sweden’s electricity market

The findings highlight the importance of the Single Electricity Market principle and consistent regulations. Sweden’s energy transition will require careful planning, particularly in integrating new renewable technologies while ensuring a reliable electricity supply. Future research should focus on optimizing energy storage, improving grid flexibility, and making certain that Swedish industries stay competitive in a shifting European energy landscape.

Meet the researchers

• Thomas P. Tangerås: Professor of Economics, Mälardalen University, and Senior Research Fellow, Research Institute of Industrial Economics (IFN).
• Pär Holmberg: Associate Professor of Economics and Senior Research Fellow, Research Institute of Industrial Economics (IFN).
• : Professor of Economics, University of Paris Panthéon-Assas, and Research Fellow, Stockholm Institute of Transition Economics (SITE), Stockholm School of Economics.

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