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2023

Global Solar PV Market Report

Key Regional Markets

Sweden

Solar PV Capacity

2.6GW

GDP (Current Prices) USD (2022)

585.94bn

GDP Growth Forecast (constant prices) (2023-2027)
1.56%
Currency
Swedish Krona
Country Credit Rating (S&P)

AAA

Renewable Energy capacity (2022)
38.04GW
Solar PV Share in Renewables (2022)

7%

Renewable Energy Target
Source 65% of generation capacity from renewables by 2030 and 100% by 2040
GDP Source: IMF WEO, S&P and IRENA
Sweden is one of the key renewable markets in Europe. Its renewable sector has progressed primarily due to favourable government policies. In the long term, Sweden aims to source 65% of its generation capacity from renewables by 2030 compared to 23% presently, rising to 100% by 2040. It was the largest electricity exporter in Europe for the first three quarters of 2022, selling over 20% of its total generation to neighbouring countries. Huge, planned expansion of generation capacity will enable it to continue being a powerhouse for Europe, exporting clean and cheap power.

Pros

  • Gradual rise in subsidy-free merchant-based utility-scale capacities as developers are getting directly into power sales deals with consumers, thereby accelerating solar projects build out
  • Favourable tax incentives and grants reatly enhance the deployment of solar panels

Cons

  • Slowdown of solar deployment in the residential segment due to discontinuation of tax relief scheme
  • Unsubsidized solar capacity faces delays and cancellations in obtaining permits from local authorities

Renewable Energy Mix

Source: IRENA Renewable Capacity Statistics April 2023

The bulk of the renewable energy generation in Sweden is attributed to hydropower and wind, which cumulatively hold an  81% share. Despite holding a minor share in the mix, the solar sector has shown moderate growth over the years,  reaching 7% in 2022 from a mere 1.5% in 2018.

The country is tapping into solar energy to address power shortages in the energy market. Along with wind and hydropower, solar is filling the part of the void left by the closure of two nuclear reactors in southern Sweden, which houses the biggest cities and industries. The evident shift from nuclear to more renewable energy is opening a broad scope for potential investors and developers to explore. Additionally, there is a gradual rise in subsidy-free merchant-based utility-scale capacities as developers are getting directly into power sales deals with consumers, thereby accelerating solar projects build out.

Installed Capacity: Status and Trend

Trend in Installed Solar PV Capacity

Source: IRENA Renewable Capacity Statistics April 2023

Capacity additions have accelerated rapidly since 2018 because of strong government policies. in 2022, Sweden deployed 1GW of new solar PV capacity, marking its entry into Europe’s gigawatt scale market. By December 2022, Sweden’s PV capacity had reached 2.6GW. The growing interest in solar has also led to a 162% annual increase in requests for grid connection, with 94,700 applications in 2022 compared to 36,200 in 2021.

There have been numerous subsidy-free solar projects built across the country in the last few years. Furthermore, favourable tax incentives and grants have greatly enhanced the deployment of solar panels. Most of the capacity growth is attributed to small-scale systems deployed for residential and commercial/industrial consumer segments. The residential market currently accounts for about 50% of solar capacity installed, followed by the C&I segment at 35-40%, and the utility-scale market at 10-15%.

The hike in capacity additions can be directly related to government efforts, specifically the Superbonus 110 tax relief scheme which radically facilitated solar deployment in the residential segment. In 2022, Italy’s residential (PV systems below 12kW) deployment proved to be the major market driver with around 1,103MW of new capacity, representing 49% of the total PV installed capacity. Commercial and industrial (C&I) systems ranging in size from 20kW to 1MW accounted for 28%, or 678MW, while utility scale plants more than 1MW accounted for 23% or 571MW, representing a 467% increase on an annual basis.

Demand Drivers

The residential segment leads the market, with subsidies primarily directed towards residential solar. After the solar Rebate Scheme got closed for new applications in July 2020, homeowners can now take advantage of a tax    deduction policy that encourages the installation of solar panels. The investment cost for installation and material costs are reduced by 15% for PV installations, and by 50% for energy storage connected to PV and EV chargers. Also, for small prosumers there is a tax deduction of 60 öre/ kWh (5.5 EUR cents/kWh) for exported electricity, as a light version of net-metering. Starting from July 1, 2022, micro- producers are allowed to generate more electricity than they consume without getting charged for overproduction by the grid company, making it more profitable to install larger PV systems. This excess power is bought at attractive rates by various market participants.

Swedish homeowners have been at the fore front in embracing energy transition. So far nearly 140,000  Swedish small house owners have invested over SEK 8 billion in green technologies. With the help of the government’s green deduction grant, they have received almost 2 billion in tax deductions for investing in charging boxes, batteries, and solar systems. Approximately 49% of the deduction went to the installation of charging boxes, while 43% went to solar PV installations.

The closure of nuclear plants, combined with rising energy import prices in Europe due to the Ukraine war, has raised concerns related to energy security and thus has necessitated the need for new power generation facilities. In this regard, energy storage has become crucial and there has been a gradual rise in combining storage to new solar PV powerplants. For example, in December 2022, Alight and Tekniska Verken added 2MW/2MWh battery storage to a 12MW solar park in Sweden making the site the largest solar- plus-storage plant in Sweden. Grants are being provided to standalone storage projects as well. For example, the Swedish Energy Agency granted SEK 2.8 million to a project by Dalarna University, Halmstad University, and Absolicon, for a seasonal storage facility that can store energy from summer to winter. Notably, Elevio Energy Solutions is building Sweden’s biggest Energy Storage System (BESS) of 10MW.

PPA-linked large-scale solar PV projects are gradually gaining traction. Stakeholders and organizations are now advocating a rapid expansion of large-scale solar PV farms, especially  in  Sweden’s  southern  region.  A  10-year  PPA was signed by Centrica and re:cap global investors for two solar parks in Sweden developed by SunSpark, with a total installed capacity of 9.2MW. In another agreement, Alight and Neoen signed the largest PPA in Sweden selling power to H&M from a 90MW solar project, which is expected to be commercialized by 2025.

Market Opportunity

Investment in the Swedish renewable sector is steadily increasing both from foreign and domestic players due to favourable market dynamics. The merchant power segment is also slowly finding traction. Recently, UK solar company Eco Energy World Limited (EEW) sold its first 42MWdc project to a large Swedish developer. In Sweden, EEW has a pipeline of more than 1GW of solar and battery energy storage systems. Furthermore, Danish developer European Energy plans to build a 128.5MW solar park in Svedberga, southern Sweden. This facility will be capable of producing 175GWh annually when completed in 2023.

A growing number of startups are also contributing to the generation of solar power. They are actively participating in fund raising rounds to intensify organizational expansion and accelerate energy transition nationwide. Swedish startup SunRoof raised €13.5 million in new investment to bring solar power to homeowners in domestic and international markets.

Accelerated deployment of solar PV parks, coupled with the massive influx of energy-intensive establishments, ranging from data centres to steel manufacturing, has created an urgent need for expansion of the electricity grid. In this regard, the Swedish power grids have budgeted SEK 14 billion investment to increase electricity transmission. The entire project, including the decommissioning of old lines   is projected to be completed by 2036.

Outlook

Source: BNEF Global PV Market Outlook
Note: The above data, as sourced from BNEF, are based on a ‘low’ investment scenario

In the absence of any favourable support mechanism for the utility scale segment, the outlook of the solar PV market of Sweden will be shaped by the rooftop solar systems installed in the commercial and residential sector. The rooftop solar or distributed generation segment is likely to continue to benefit from financial incentives. On the other hand, the fate of the utility scale segment will be decided by the opportunities in the merchant power market. The rise of unsubsidized solar capacity is, therefore, essential for expanding the large-scale project pipeline.

The unsubsidized solar capacity is yet to pick momentum mainly due to multiple challenges, most notable among which is delays and cancellations in obtaining permits from local authorities. For instance, local officials refused the application for Sweden’s largest solar park, claiming the property would be better used to preserve the country’s food supply. Such uncertainties make it difficult to prepare a financially viable business case that can attract investors. Moreover, the predominance of other renewable sources like wind and hydropower has limited the scope for solar PV in terms of long-term opportunity.

Nevertheless, a number of measures have been proposed by the Swedish government to boost Sweden’s renewable electricity production, including investments in solar cells, which will prove to be crucial in the long-term development of the solar PV sector. Additionally, the success of ongoing measures to enhance grid capacity will be a game changer in terms of accommodating new solar PV generation capacities and mitigating the permission bottleneck for the ones under development.

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