Sweden has a number of targets that make up its pathway to net zero emissions by 2045. These include EU targets for sectoral emissions reductions, renewables and energy efficiency as well a domestic 2030 emissions reduction target for transport and a target of 100% fossil-free electricity by 2040. While the targets provide clear guidance on ultimate goals, the pathway to meeting those targets still faces some uncertainty. Though Sweden takes a market-led approach to energy sector development, in several cases the scarcity of sectoral strategies and limited policy levers creates challenges to realistically meeting the targets. This is evident across sectors, in buildings, transport, industry and electricity. Operationalising sectoral roadmaps created by Fossil Free Sweden would be a good place to start. Moreover, while Sweden’s consultative approach to governance is commendable, the volume of inquiries into various policy settings for the energy sector are creating near-term uncertainty for investors and impeding faster progress on energy transition investments that are urgently needed to meet the scale of the emissions reduction and electrification challenge. This is especially true for 2030 targets, where even one-to two-year delays from inquiries will make reaching the targets more difficult and more expensive. Sweden should quickly transition to an implementation stage and prevent ongoing inquiries from resulting in delays to project advancement. The government should also avoid narrow terms of references for inquiries to ensure that new ideas are able to emerge from the investigations. 

As a northern country with a cold climate and a sizeable energy-intensive industry sector, Sweden’s energy intensity of GDP is relatively high compared to other IEA countries, both economy-wide (11th highest for total energy supply in 2023) and on a sectoral basis (4th highest for industry and 14th highest for residential buildings in 2022). However, to date, Sweden does not appear to apply the energy efficiency first principle to its energy policy framework. Effective support programmes as well as enforcement and implementation of existing requirements (such as buildings certifications) seems to be limited. The buildings sector, in particular, would benefit from additional measures to support energy efficiency. While historically affordable electricity and highly decarbonised electricity and heating sectors do not always encourage energy efficiency measures from an affordability or carbon emissions perspective, lowering energy consumption should still be prioritised in its own right, as the cheapest energy is that which is not used. In a similar vein, energy efficiency improvements lead to overall cost reductions for consumers and improved competitiveness. Moreover, in light of the considerable additional demand for electricity that the energy transition will bring through electrification of end-use sectors (notably industry and transport), electricity savings achieved through energy efficiency can play a critical role in directing increasingly scarce electricity supply to the most pressing and economically efficient uses. Current market prices do not reflect these future demands on the electricity system. A greater focus on energy efficiency will also help Sweden meet targets under the updated EU Energy Efficiency Directive, while introducing energy-intensity sectoral targets would help accommodate new, efficient energy-intensive industrial processes. 

From a sectoral perspective, Sweden’s transport sector presents the greatest challenge to meeting climate targets, especially the sectoral target of 70% emissions reductions by 2030. The transport challenge is not uncommon across countries, but Sweden’s emissions trajectory in the sector is, in fact, poised to increase in the near term (by 5.1 Mt CO2-eq to 8.4 Mt CO2-eq by 2030, putting the country on a pathway to achieve 39-53% reductions by 2030). Sweden has made impressive progress on EV penetration in passenger vehicles, supported by tax benefits for low emissions vehicles, and EVs are poised for additional growth in the coming years as costs continue to come down. Additional policies may be necessary to accelerate uptake, including reconsidering a bonus for purchases in certain market segments, supporting charging points in multi-family buildings and offering a tax reduction on electricity used for charging. The government could also reconsider its relaxation of diesel taxes, which erodes the competitiveness of zero-emissions vehicles.

Notwithstanding EV progress, a large driver for the increase is a previous decision to retract the biofuels mandate, which was among the most ambitious in the world and had proven successful in displacing oil consumption in transport since it was first put in place in 2018. The policy reversal was motivated by the 2022 energy crisis, which saw fuel prices spike, and the relaxation of the biofuels mandate (along with lowering diesel taxes) has coincided with price relief at the pump. More recently, the government’s decision to increase the blending mandate from 6% to 10% over 2025‑30 is a welcome development and could help meet 2030 EU Effort Sharing Regulation targets. Nonetheless, the new obligation is still significantly lower than the previous mandate and it is unclear to what extent electricity will push out biofuels from the system. The government should, therefore, consider a stronger biofuels policy from an emissions reduction perspective (especially in the period over which EVs ramp up), instead addressing affordability issues through more targeted support for low-income consumers. Complementary to a biofuels policy, the government should also consider alternative measures such as promoting modal shifts from road to rail and expanding the blending mandate to include other low emissions fuels such as renewable electricity and hydrogen. Moreover, policy U-turns such as the biofuels shift create investor uncertainty for certain sectors (in this case the domestic refining and biofuels production sectors) and undermine the overarching narrative for the energy transition imperative at a time when strong public messaging for emissions reduction policies is needed to accelerate action to meet targets.

Sweden takes a market-led approach to electricity sector development. However, as it looks towards a doubling of electricity consumption in the coming decades, the scale of the challenge requires a more co-ordinated approach to system planning, led by the electricity TSO Svenska kraftnät. The government’s 300 TWh planning target for electricity demand by 2045 is not underpinned by concrete planning for the sources of generation, locational needs and grid infrastructure to support it. Without clarity on future energy infrastructure, companies are likely to postpone projects or develop them in suboptimal locations. The TSO’s grid development plan is a solid starting point. The power system (including both the transmission and distribution levels) should be optimised to accommodate mass electrification, so mapping of grid connection needs and availability will help support project advancement (both generation and consumption). In particular, the government could direct the TSO and DSOs to identify and communicate geographic areas suitable for different generation types against load needs as well as flexibility needs across the system. It should likewise incorporate forthcoming changes to distribution grids, such as growth in behind-the-meter consumption and electric vehicle charging. Such system planning
is not uncommon in other market-based economies, as it can provide clarity and help guide investments to areas where they are most needed (see also Recommendation 10). 

As in most countries facing large-scale electrification as part of energy transitions, Sweden is facing a surge in grid connection requests from generation facilities and large industrial users (as well as data centres). Many projects are geographically overlapping and not all projects will come to fruition. Therefore, a traditional approach to grid connections on a first-come, first-served basis is no longer appropriate. The government and Svenska kraftnät have recognised that reforms to the grid access process are needed. The TSO has already implemented some changes to offer grid access based on project maturity and is in the process of implementing additional reforms to limit reserved but unused grid capacity. All these steps are welcome developments and offer a good starting point. However, additional efforts are likely warranted to quickly unlock a pipeline of over 20 GW of capacity. Developers would likely accept some degree of partial grid access, which should be considered. The TSO could likewise place connection requirements on grid users to enhance flexibility and limit the need for additional infrastructure. Moreover, as the grid connection process shifts away from a first-come, first-served model, ensuring full transparency and predictability of the new selection process will be critical to preserving investor confidence. One important option is to incentivise more flexibility solutions to optimise the use of the existing grid, which will be underpinned by increased digitalisation. The regulator could allow flexibility-focused operating expenses and investments in research, innovation and digitalisation to be recovered through tariffs rather than only new grid lines with long development timelines. At the same time, the government should promote the continued development and scaling up of successful local flexibility platforms. It should likewise remove barriers to participation from small users and aggregators and help expand the penetration of locational signals for grid users through differentiated grid tariffs.  

Sweden’s growing electricity needs in line with electrification goals will necessitate a major buildout of new generation capacity in the coming years and decades. No single generation type will meet all these needs, highlighting the need for different generation sources spanning the time horizon to 2045. In this regard, the government’s focus on new nuclear builds has its merits, and its extension of the electricity target to include all “fossil-free” generation sources is, in principle, welcome to avoid disadvantaging nuclear in the future energy mix. However, a singular policy focus on nuclear should not undermine the case for other forms of generation, especially where policy interventions to remove roadblocks may be needed. Notably, realistic timelines for new nuclear make it a more suitable option to meet longer term load needs, while other sources of generation offer shorter term capacity solutions, notably onshore and offshore wind. The government should ensure that its policy focus on nuclear does not impede strong growth potential in wind generation capacity. A perceived rivalry between nuclear and wind is counterproductive to the overarching objective to achieve a diversified and secure fossil-free electricity system, where all clean energy sources will have a role to play in achieving net zero targets. 

Wind projects are already economical to build without additional government support. The main impediment to wind projects is a municipal veto that is used unpredictably across the permitting process. In the current system, municipalities cannot directly benefit from revenues related to energy infrastructure projects. For example, property taxes paid by wind developers are channelled directly to the state budget. While most notably impacting wind projects today, future investments in transmission lines, solar photovoltaics, hydrogen pipelines and nuclear power projects might also face the same local acceptance challenges. Options could include a policy change to direct local taxes to municipalities to minimise the exercise of municipal vetoes on energy-related infrastructure projects as well as the creation of community benefit funds paid for by project developers. Moreover, the government could also consider limiting the exercise of municipal vetoes to the early stages of a project’s permitting process as currently a veto can come at any point during the development time frame (and without clear justification), including after preliminary approvals have already been granted. The creation of a “one-stop shop” for permitting, as required under the EU Renewable Energy Directive, would also support a more streamlined and systematic approach to permitting.

Likewise, the development of an offshore wind sector has been stifled by vetoes from competing interests, notably the Swedish Armed Forces. While national defence interests are undoubtedly critical, the government could support sectoral development by creating a forum for dialogue between all regional interests. Such dialogues should support finding a middle ground between additional electricity generation requirements and national security interests, with an eye towards issuing more conditional approvals that allow project advancement if certain conditions are met. Efforts in other countries to streamline stakeholder engagement, address competing interests through strategic spatial planning and priority zoning, and increase predictability around project approvals could offer lessons for the Swedish context. 

Both the industry and energy agencies acknowledge that in the mid- to long term, nuclear power, as a dispatchable baseload source, will be important to maintaining a stable and competitive decarbonised electricity system, which is expected to nearly double by 2045. The government’s vision for this nuclear new-build programme is that it will be private sector-driven, while the state’s role is to create the enabling conditions for it to materialise in an efficient, timely and competitive manner. It is essential that forthcoming financing model(s) and related policy decisions provide: 1) predictability and stability in licensing, public consultation and authorisation processes; 2) economic viability for all parties (ensuring competitive electricity prices, fair risks and benefits allocations); and 3) support a long-term national consensus on the role of nuclear power, in conjunction with other carbon-free sources, in achieving the country’s net zero ambitions in the most efficient and timely way. Such a framework is a prerequisite to ensure investment in new nuclear capacity in a timely fashion. To support this effort, financing and project management best practices should be identified among recent and ongoing new build projects in OECD countries. Importantly, Sweden should co-ordinate nuclear support programmes with broader electricity market design developments to ensure that these measures in aggregate make the overall system more efficient and flexible.  

Sweden has not developed a dedicated hydrogen strategy, though it has included guiding principles for hydrogen in its latest energy bill focused on the electricity system. The development of a hydrogen market would benefit from a more detailed strategy that clarifies the role hydrogen will play in the future energy system and the infrastructure required to support it. A hydrogen strategy does not necessarily need to include long-term supply targets for hydrogen or electrolyser capacity, but it is useful to outline what decisions the government will take when and based on which information. The government should also assess the costs and competitiveness implications of hydrogen projects and consider whether additional support mechanisms are needed. The clarification of a system planning entity for the hydrogen sector along with delineating roles and responsibilities for regulation and oversight of the sector is lacking, creating uncertainty for investors. Likewise, the absence of a defined risk-sharing model and tariff structures for hydrogen infrastructure are also impeding investments. Currently, the regulatory framework for hydrogen is expected to be developed gradually, in line with the updated EU Gas Directive, by 2033. In the meanwhile, the regulation is planned to track market development rather than the other way around. In practice, however, it is unclear how that will work; it is unlikely that industrial companies will make the necessary, irreversible decarbonisation decisions without clarity on the regulatory framework for hydrogen. Such a regulatory framework can be incrementally optimised as projects are developed. It is also important to ensure from the outset that hydrogen projects and infrastructure do not face the same public acceptance challenges that wind projects currently face, highlighting a role for the government to clearly make a public case for hydrogen development as a core pillar of industrial competitiveness under a hydrogen strategy. The hydrogen strategy should also quantify the workforce and skills needed to realise its hydrogen ambitions. 

It is clear that the main driver for hydrogen sector development will be the growth of low-carbon industries, notably the steel and iron industries. At the same time, industrial decarbonisation plans along with electrolysers for hydrogen production are expected to be the overwhelming driver for electricity demand growth on the pathway to net zero (up to 100 TWh is expected to come from hydrogen by 2045). Therefore, a joined-up planning approach across the electricity and hydrogen sectors (as well as natural gas, where it exists in the system) is justified, underpinned by detailed analysis on system needs and constraints. Hydrogen storage might increasingly also play an important role in electricity system balancing. The electricity, gas and potential hydrogen TSOs are among the key stakeholders to lead this analysis. The outcomes of the analysis could inform a system-wide planning process across all relevant sectors to ensure that the development of the hydrogen sector is aligned with that of overall energy system development, towards the achievement of net zero emissions. The government’s June 2024 decision to task the electricity TSO with co-planning hydrogen and electricity infrastructure in northern Sweden is, therefore, a welcome step in this direction.