Today, the SNS Economic Policy Council 2025 presents its report on investing in electricity production in order to realize a sustainable energy transition. The authors conclude that the market is capable of achieving an energy transition that meets the Swedish climate targets. The main role of the state should be to create the right conditions for further developing the electricity market and to continue carrying out a substantial expansion of the electricity grid.
Uncertainties regarding future electricity consumption
The authors estimate that the energy transition will increase electricity consumption by between 50 and 150 percent compared to the current levels. Electrifying the industry and road transport will increase the annual consumption by 67 TWh (terawatt hours) to about 190 TWh. It should be noted that this is the case if economic activities continue at the current level. This represents a significant increase compared to the electricity consumption in 2023 at 124 TWh. An energy transition that meets the climate targets is still, according to the authors’ calculations, significantly below the government’s planned target of 300 TWh.
In particular, there is great uncertainty regarding the demand for electricity used for producing green hydrogen in order to make fossil-free steel and electrofuels. This means that a market-based expansion is preferable to a top-down increase in electricity production initiated by the state.
“The market is able to realize an energy transition that lives up to Sweden’s climate targets. The key is to carry on expanding renewable electricity production,” says Thomas Tangerås, chair of the SNS Economic Policy Council.
Cost-effective electricity production
According to the authors of this report, it is possible to carry out a cost-effective expansion of fossil-free electricity production to meet the increased demand for electricity linked to the climate transition at electricity prices that are more or less at the current level. This transition is based on large-scale new onshore wind power as well as some solar power. Offshore wind power is constantly being developed and may become profitable in the 2030s, especially in locations with the highest prices. The high costs linked to nuclear power mean that these kinds of plants should primarily be built in countries with significantly higher electricity prices.
The role of the state in the energy transition
The authors highlight that the state should prioritize further developing the electricity market and the regulatory framework in order to facilitate cost-effective investments by market actors. It should also remove bottlenecks in the current electricity grid that tend to limit the efficiency of the electricity market. Pär Holmberg, co-author in the SNS Economic Policy Council, says:
“Sweden needs to continue its significant expansion of the transmission network to ensure a cost-effective supply of electricity and to reduce regional differences and fluctuations in electricity prices. A high-capacity electricity grid enables market actors to efficiently trade in electricity.”
Collaboration in the EU aimed at increasing competitiveness
The authors highlight the importance of the European energy policy. Joint solutions at the EU level are crucial for managing both energy prices as well as the electricity supply. Chloé Le Coq, co-author in the SNS Economic Policy Council, comments:
“The Swedish energy policy cannot be designed in a vacuum. We depend on a well-functioning European electricity market to achieve not only the climate targets but also to strengthen the union’s competitiveness. Sweden should actively contribute to the EU’s efforts to integrate the electricity markets.”
About the SNS Economic Policy Council
Each year, SNS appoints a group of researchers who, referred to as the SNS Economic Policy Council, analyze how the Swedish economy operates over time in relation to key issues. Based on their conclusions, the researchers make recommendations to politicians and occasionally to other decision-makers as well.
The SNS Economic Policy Council has existed since 1974 and more than a hundred researchers have participated so far. The authors of these reports are responsible for analyses, conclusions and suggestions. SNS as an organization does not take a position in relation to these.
About the authors
Thomas Tangerås (chair), professor of economics at Mälardalen University and senior research fellow at the Research Institute of Industrial Economics (IFN)
Pär Holmberg, associate professor of economics, PhD in electric power engineering and a senior research fellow at the Research Institute of Industrial Economics (IFN)
Chloé Le Coq, professor of economics at the University of Paris Panthéon-Assas and research fellow at SITE at the Stockholm School of Economics