Sweden has ambitious energy goals and is in a promising position to achieve them. It already has a relatively low emissions energy system as well as favourable natural resource endowments, a broad political and public consensus on its net zero ambitions, and a clear strategy to meet its goals (primarily through electrification of end-use sectors). Its energy sector stands out in several ways, including its largely decarbonised power and buildings sectors and its leading efforts on low-carbon heavy industry. These and other factors can help it remain in the vanguard of clean energy transitions and maintain a competitive edge as an export-oriented economy. An important next step in Sweden’s energy transition will be to take a co-ordinated approach to aligning its policy and regulatory settings across different sectors of the economy. The IEA Energy Policy Review aims to provide practical, timely advice to Sweden as it advances its energy and climate strategy, including in two key focus areas: 1) accommodating electrification; and 2) expanding the role of fossil-free hydrogen.

Sweden’s legally binding 2045 net zero emissions target together with energy sector targets guide its energy policy. Net zero equates to an 85% cut in domestic greenhouse gas (GHG) emissions from 1990 levels (38% below 1990 levels in 2023), after allowing for expected absorptions. This target is supported by a robust policy framework that includes binding interim targets, a climate action plan to meet these targets (updated every four years), supportive climate legislation and a Climate Policy Council (that assesses Sweden’s climate policies yearly). Overall, this framework provides long-term clarity on goals, together with regular reflection and course-correction, and independent expert assessments and recommendations.

Leveraging and expanding Sweden’s low-carbon power sector to electrify the wider energy system is key to achieving the next stage of its transition. The combination of Sweden’s well-functioning, market-based electricity system and near zero-emissions power mix (relying primarily of hydropower, nuclear and wind) provides a strong foundation upon which to electrify the wider energy system. This will require a large buildout of new clean power generation capacity accompanied by broader reforms that enable end-use sectors to reap the benefits. Steps taken to open the investment environment to nuclear will help to ensure that future fossil-free generation choices are technology-neutral. A policy priority is to ensure that this is accompanied by an efficient licensing and financial risk-sharing model, if Sweden’s goal of 2.5 gigawatts (GW) of new nuclear power capacity by 2035 is to be realised. In parallel, there is a pressing need to debottleneck permitting roadblocks (a challenge common to many countries) – particularly for offshore and onshore wind – if clean energy generation capacity is to scale up at the pace needed in the near to medium term.

Sweden’s electricity system will be the cornerstone of its energy transition plans. However, sizeable uncertainties exist in the long-term forecasts, including the scale of industrial electricity demand in the north, offshore wind development in the south, and the outlook for existing and new nuclear power plants. In addition, current processes for planning and approving transmission lines can be lengthy, acting against the needs of a rapidly transitioning energy system. As the supply side grows to meet a potential doubling of electricity use in the decades ahead and adapts to the shifting demand patterns across the country, there is an imperative for broader system-level planning, as well as co-ordinated grid expansion, and actions to accelerate grid approvals, construction and connections (such as through an improved selection progress and enhanced flexibility mechanisms).

Favourable conditions in northern Sweden are shaping a green industrial transformation that will boost both economic prospects and energy demand. Sweden’s industrial transformation will draw heavily on electricity, resulting in sizeable new demand and in new demand locations, which the system will need to accommodate at the same time as managing the retirement of some existing generation assets. This places a renewed premium on system-wide energy planning and may prompt a need to rebalance electricity price variations across regions. An inquiry into Sweden’s electricity market development and regulation is underway. The findings are due by April 2025.

Leveraging access to fossil-free electricity, Sweden’s industrial sector is focused on low-emission hydrogen as a key decarbonisation pathway. Programmes like Industrial Leap have helped to support the development and deployment of emissions-reduction solutions in industry, including hydrogen. Sweden is pioneering the production of green steel based on fossil-free hydrogen, with investments planned or moving forward without heavy state planning or large subsidies. While encouraging, the sector would benefit from a hydrogen strategy that: clarifies the envisioned role for hydrogen in the energy system, includes scenarios for its geographic distribution, and maps out roles and responsibilities for system development. There is also a need to undertake co-ordinated analysis and planning that spans the development of the electricity and hydrogen systems.

Despite notable progress in deploying biofuels and electric vehicles (EVs), policy shifts will challenge Sweden meeting 2030 transport emissions targets. Thanks in part to a suite of supportive policies, Sweden has both a high share of biofuels in the transport fuel mix (25% in 2022) and a high share of EV sales (60% in 2023), helping to displace a significant volume of oil product demand. However, both areas saw significant policy reversals in 2023 that may have negative implications for achieving a 2030 transport emissions target already viewed as challenging (a 70% reduction relative to 2010 levels). If it is to meet this target, Sweden will need to consider additional policy actions, such as on charging infrastructure, transport-related taxation and encouraging modal shifts.

Sweden’s strategy for decarbonising its buildings sector is focused on renovations and fuel switching. It employs an array of policy tools to achieve this, including buildings regulations, energy performance certificates and support schemes to single-family homes to switch out of fossil heating. Though already low emissions, the buildings sector would benefit from an increased focus on policy measures that constrain expected electricity demand growth. More broadly, introducing sectoral energy intensity targets could help stimulate valuable new actions, such as the adoption of more efficient industrial processes. Overall, a greater focus on energy efficiency policy actions is needed to help Sweden meet targets under the updated European Union (EU) Energy Efficiency Directive.

Sweden’s transition will result in sizeable shifts in the workforce, necessitating a major expansion of clean energy skills across all education levels. Sweden has made progress mapping the skills needed for the transition, with the Swedish Energy Agency identifying 35 professions that are both critical to the electrification of society and have considerable skills shortages. It is already advancing several measures to improve the situation, such as through the development of a STEM (science, technology, engineering and mathematics) strategy and targeted investments to expand engineering education. Such actions must be built upon over a sustained period, together with others, such as vocational training and location-specific plans at the municipal level.