Renewable energy in Sweden

Renewable energy sources such as hydropower, wind, solar and biomass are those that are used the most in Sweden. The energy policy in Sweden is to a great extent based on the legislation established within the EU. However, this is combined with domestic legislation based on a history of nature preservation that started in the 1960s.

On 14 July 2021 the European Commission adopted the 'fit for 55' package, which adapts existing climate and energy legislation to meet the new EU objective of a minimum 55 percent reduction in greenhouse gas (GHG) emissions by 2030. The 'fit for 55' package is part of the European Green Deal, which aims to put the EU firmly on the path towards climate neutrality by 2050. A key element in the 'fit for 55' package is the revision of the Renewable Energy Directive (RED III), to help the EU deliver the new 55 percent GHG target. Under RED III, the EU Member States are obliged to collectively endeavour to increase the share of energy from renewable sources in the Union’s gross final consumption of energy in 2030 to 45 percent. The revised directive (RED III) was published in the EU Official Journal on 31 October 2023 and entered into force on 20 November 2023.

As stated before, the energy policy in Sweden is to a great extent based on the legislation established within the EU and the renewable directive has been implemented in Swedish legislation. In addition, there are several obligations and aims to procure in a way that promotes sustainability. Sweden has implemented a climate policy framework, the Climate act (Klimatlagen). By virtue of the act, the government is required to adopt policies and commitments towards renewable energy. The Swedish energy policy, set out by the government, aims to secure access to electricity and energy sources on competitive terms both short- and long-term. The energy policy shall create the conditions for efficient and sustainable energy use. 

Furthermore, a cost-effective Swedish energy supply with low negative impact on health, environment and climate is strived for. The policy shall also facilitate the transition to an ecologically sustainable society. Generation, transmission and distribution of electricity is to a great extent regulated in the Electricity Act (Ellagen). Furthermore, there are additional laws, regulations and decrees from agencies that specify certain provisions in the Electricity Act. These are in most cases not specific to renewable energy. In parallel, the Environmental Code (Miljöbalken) is covering most activities that relates to the construction and operation of energy-facilities. The purpose of the Environmental Code is to promote a sustainable development and it concerns all types of measures that may be relevant for achieving that purpose. In Chapter 2 of the Environmental Code it is explicitly stated that everyone that conducts an activity covered by the code shall primarily use energy from renewable sources.

Hydropower contributes the most to the share of electricity from renewable energy sources in Sweden. Wind power has increased significantly in recent decades and is the second-largest contributor to electricity from renewable energy sources after hydropower, then followed by biofuels. Solar power contribution is so far small but growing rapidly. Sweden's energy target is 100 percent electricity production from renewable energy sources by 2040 (however, this does not involve stopping of nuclear power). The government has proposed 1 In the Government Bill 2022/23:99. (Spring Amending Budget for 2023).  that the goal for the composition of electricity production in 2040 is 100 percent fossil-free electricity production. The difference between the goals is that the latter, fossil-free, includes nuclear power. The share of fossil-free electricity production was 98.2 percent in 2021. Electricity production from fossil fuels accounted for 1.8 percent (including other fossil fuels). The total share of fossil-free electricity production has remained largely the same since 1990, but production from nuclear power, and to some extent, hydropower, has decreased in proportion and been replaced by wind power. Nuclear power, which is neither of renewable nor fossil origin, accounted for 30 percent of the total electricity production in 2021. The decrease in nuclear power production in recent years can be explained by the fact that several reactors have been taken out of operation.

The production of electricity from renewable energy sources has increased over time, which has several different explanations. Policies such as the electricity certificate system and the previous solar panel support (as of January 1, 2021, support is provided through the tax reduction for green technology that has been introduced instead) are one reason for the increase. At the same time, cost reductions and technological developments for both wind and solar power have contributed to an increased expansion. Energy and carbon taxation have helped strengthen the competitiveness of biofuels by gradually raising taxes on fossil fuels. Increased incineration of waste in combined heat and power plants during the 2000s is another contributing factor to the increase in electricity production from biofuels, as approximately 52 percent of household waste is considered biogenic and thus renewable.

On 1 May 2003, Sweden introduced a market-based support system for renewable electricity production based on electricity certificates. The system aimed to cost-effectively achieve the national goal for renewable electricity production. For every produced MWh of electricity from renewable energy sources, the electricity producer receives an electricity certificate. These certificates can then be sold, providing the electricity producer with an additional income for electricity production, in addition to the electricity price. Demand for electricity certificates is created as electricity suppliers and certain electricity users are legally obliged to purchase electricity certificates corresponding to a specific share (quota) of their electricity sales or consumption. This creates a market and value for electricity certificates. The quota level, i.e., the share of electricity certificates to be purchased, is regulated in the Electricity Certificate Ordinance (Förordning om elcertifikat) and varies from year to year. The quota levels are set until 2035. Ultimately, it is the electricity consumer who pays for the expansion of renewable electricity production, as the cost of electricity certificates is included as part of the electricity bill. The electricity certificate system's goal of 46.4 TWh of electricity production from renewable energy sources was already surpassed in early 2021, nine years and nine months ahead of schedule.

On 1 January 2021, a change to the Electricity Certificate Act (Ellagen) came into effect, which meant that the electricity certificate system will end in 2035, and the deadline for new facilities in Sweden was 31 December 2021, the same as in Norway. No facilities brought into operation after the deadline are eligible for the allocation of electricity certificates. The time limit intended to avoid additional costs and to avoid distorting competition in the market by supporting commercially viable production. Within the common market between Sweden and Norway, the objective is to increase renewable electricity production by a total of 46.4 TWh in both countries from 2012 to 2030, to contribute to their goals in accordance with the EU's Renewable Energy Directive. The target for the electricity certificate system was already achieved in early 2021.

Sweden's high proportion of electricity production from renewable energy sources is attributable to a substantial portion of the electricity being generated from hydropower, as well as an increasingly larger share from wind power. The higher costs of offshore wind power and the conflicts of interest that exist at sea have historically resulted in lower interest in offshore wind power compared to onshore wind power. However, rapid technological advancement and decreasing costs, coupled with the increasing need for new electricity production and the growing challenges associated with further expanding onshore wind power, have generated significant expectations for offshore wind power in Sweden.  The interest in developing offshore wind farms has also increased significantly, and active project development is underway.

In 2021, the Swedish Energy Agency and the Swedish Environmental Protection Agency formulated a national strategy for sustainable development of wind power. This strategy focuses on an improved planning process for wind power. In February 2022, marine spatial plans were adopted, which include offshore energy areas. According to the Swedish Energy Agency's previous estimate, the marine spatial plans could enable an annual wind power production of 20-30 TWh. Alongside the adoption of the marine spatial plans, the Swedish Energy Agency was also tasked, in collaboration with other relevant authorities, to designate suitable areas to facilitate an additional 90 TWh of offshore electricity production. This assignment was reported to the government on 31 March 2023, and will serve as a crucial foundation for the ongoing marine spatial planning process aimed at proposing updated marine spatial plans that align with this objective, incorporating new energy areas. Based on proposals from the Swedish Energy Agency and other authorities, the Swedish Agency for Marine and Water Management will submit a proposal to revise marine spatial plans to the government no later than 31 December 2024.

Energy taxation encompasses excise duties on fuels and electricity. There are several taxes and subsidies that affect Swedish electricity and heat production. In general, small-scale wind and solar electricity production receive subsidies and tax benefits, while large-scale conventional electricity production is subject to various taxes and fees.

The Energy Tax Act (Lag om skatt på energi) governs energy, carbon dioxide, and sulfur taxes. Energy tax is applicable to most fuels and is calculated based on factors including energy content. Carbon dioxide tax is levied per kilogram of emitted carbon dioxide for all fuels except biofuels and peat. In Sweden, electricity production is exempted from energy and carbon dioxide taxes (although the fuel used for production is subject to taxation). Conversely, tax is imposed on electricity consumption, with the amount varying depending on the location and usage of the electricity. In the past two years, the tax on diesel and gasoline has been reduced relatively significantly. The manufacturing industry outside the EU Emission Trading System (EU ETS), as well as the greenhouse industry, agriculture, forestry, and water management, pay 100 percent of the carbon dioxide tax. In addition, after 2021, they no longer receive reimbursement of the energy tax on fuel used for heating or operating stationary engines. The manufacturing industry within the EU ETS does not pay carbon dioxide tax, while the same rules for energy tax apply as for the manufacturing industry outside the EU ETS.

On 1 January 2023, the carbon dioxide tax was reduced from 91 percent to 0 percent of the general tax level for fossil heat production in stand-alone cogeneration plants. However, the energy tax remains at 100 percent. This applies to facilities included in the EU ETS.

A significant difference between electricity and heat is that electricity is taxed when it is used, whereas heat is taxed when it is produced.

The legal framework for Sweden's renewable energy sector is evolving to accommodate developments and changes. The renewables sector in Sweden is still growing as well as the ongoing transformation of the energy system.

The number of electric vehicles in the vehicle fleet increased by 46 percent from 2021 to 2022, although at a slower rate than in previous years. The proportion of electric vehicles in the vehicle fleet was 9 percent in 2022, compared to 6 percent in 2021. Further, the expansion of grid-connected solar panels is growing rapidly in Sweden, but it started from a relatively low level. In 2022, the installed capacity reached 2,384 MW, representing a 50 percent increase from the previous year.

The trend of increasing the share of electricity production from renewable energy sources in relation to total electricity production continues, with 68 percent in 2021. The use and production of renewable energy continue to increase. In 2021, the total share of renewable energy reached 63 percent (according to the renewable energy directive's calculation method), compared to 60 percent in 2020. Further, the trend of reduced energy intensity continues. In 2021, energy intensity, expressed as energy input relative to GDP, decreased by 33 percent compared to 2005. The development depends, among other factors, on the proportion of nuclear power used in the electricity mix, as losses are included in the energy input.

The update of the Renewable Energy Directive involves an increased share of 45 percent of renewable energy in the EU's final energy consumption by 2030. The purpose is to align existing climate and energy legislation with the EU's new goal of reducing greenhouse gas emissions by 55 percent by 2030. The directive review was introduced as part of the REpowerEU package, aiming to reduce the EU's dependence on fossil fuel imports from Russia. The law introduces new rules to streamline the approval process for the expansion of renewable energy sources, such as solar panels and wind turbines. National authorities have a maximum of twelve months to approve new renewable energy facilities if they are located in so-called focus areas for renewable energy production. Further, there is an active project development focused on expanding offshore wind power capacity.

Currently, projects such as a national strategy for sustainable wind power expansion, marine spatial plans, and offshore grid are considered for enhancing a sustainable wind power expansion. The projects are designed to identify suitable locations for energy extraction within the marine spatial plans. These findings will provide a foundation for the ongoing marine spatial planning process, which aims to propose revised plans aligned with designated focus areas for renewable energy production.

The transition of the energy system in Sweden is progressing towards the established goals. However, Sweden is advancing the climate policy goals until 2045, aiming for no net greenhouse gas emissions into the atmosphere, followed by negative emissions. This means that emissions from Swedish territory should be at least 85 percent lower by 2045 than in 1990. Achieving the remaining emissions reductions to zero can be accomplished through supplementary measures. These supplementary measures include carbon uptake in forests and soil due to additional actions that are beyond what is already being done, emissions reductions achieved outside Sweden's borders, and carbon capture and storage (CCS) from the combustion of biofuels, known as bio-CCS.

Sweden’s target to reach a domestic goal of 100 % production of electricity from renewable energy sources by year 2040 is a driver for change. An electrical system totally based on production from renewable energy sources is a step forward to a sustainable future. However, this also increase the need of renewable energy sources such as biogas, wind and solar which need to be balanced with spatial planning, more environmental permits and expertise. The commitment to transit to a fully renewable production means investments in research, economic instruments, dissemination of knowledge and other promotion measures.