Developers are queuing up to build offshore wind projects in Sweden, but the slow pace of permitting is an issue and offtake agreements need careful consideration
Like its neighbours Finland and Norway, Sweden was late to the offshore wind game, only has 192 MW today and has built nothing since 2013. For many years, onshore wind was regarded as a cost-efficient alternative to offshore wind, but a raft of big announcements suggests there will be rapid growth in offshore wind in Sweden in the second half of the decade.
Driven by the need for green power for industry, Sweden has quickly emerged as an exciting offshore wind province and the country’s open-door policy – one of only a very few in the European and Scandinavian markets – has proved especially attractive to developers. The size of some of projects being proposed is also impressive: in January 2024, Ingka Investments, the investment arm of Ingka Group – the biggest IKEA retailer – and developer OX2 submitted a permit application to construct the 3.1-GW Neptunus offshore windfarm off the coast of Blekinge, in the south of Sweden. A month earlier, developer Eolus submitted an application for a 1.7-GW windfarm in the Bothnian Sea.
Swedish Wind Energy Association head of offshore wind Lina Kinning tells OWJ an ‘industrial transition’ is taking place in Sweden for which huge amounts of green power will be required. Interest is also growing rapidly in green hydrogen produced using electricity from offshore wind, and in e-fuels produced in like fashion.
“Swedish industry needs around 70 terawatt hours (TWh) of additional, green electricity,” she explains. “That compares with around 140 TWh the country requires now.”
The open-door policy has attracted scores of potential projects, but Ms Kinning explains, in the long-term, for several reasons, the Swedish government is looking at introducing a centralised system that would replace the open-door policy. A centralised system would be more predictable and be easier to manage at national level, she says, and would also enable the government to better manage potential conflicts with other sectors – such as defence and aquaculture. But introducing a centrally managed approach to the development of the sector would be a challenge, not least for the many projects that have been proposed, many of which are at different stages of the approval process, several of which will be under construction by the time any changes are made.
To date, Ms Kinning explains, four projects have secured permits, but there are many more also seeking them. “We believe another 16 are seeking permits at the moment,” she tells OWJ, “and there are so many projects altogether that, if they were all realised, they would produce as much electricity as Sweden generates today.” Hence, she says, the description of the Swedish market by some as a modern day goldrush.
The open-door policy and significant demand for green electricity and green hydrogen sound like a developer’s dream, but this is not to say developing offshore wind at scale in Sweden is likely to be straightforward. Ms Kinning says co-existence with Sweden’s defence forces is one of the biggest challenges the industry faces, especially at a time of high-level tensions with Russia. Another challenge is, despite evidence from other countries such as the UK, France and Finland about the enormous costs involved in developing new nuclear power – and the seeming inability of project owners to bring nuclear power online without long delays – the Swedish government is very pro-nuclear.
“At least in the short term, there is no likelihood of a financial support mechanism for offshore wind like the one the government is proposing for nuclear,” she explains. “Unless a centralised system is introduced, there is no chance Swedish offshore windfarms will be supported by a contract for difference or any similar mechanism. The type of offtake mechanisms Swedish offshore windfarms will use isn’t clear yet, but not having auctions clearly isn’t a limiting factor. You only need to look at the level of developer interest to see that is not the case.”
For the time being at least, few developers have declared their hands when it comes to offtake mechanisms for the projects, although there have been some notable exceptions, such as Volvo Cars, which has signed a letter of intent with developer Eolus to collaborate on the Västvind offshore wind project off the coast of Gothenburg.
Corporate power purchase agreements (PPAs) have become a preferred mechanism in the onshore wind market, but well-publicised problems with fixed-price PPAs in Nordic countries, which have seen producers stuck with baseload PPAs struck at levels often well below current electricity prices – have made this potential approach to financing more problematic than it might have seemed until recently.
Apart from potential conflicts with Sweden’s defence forces and other users of the sea, another big issue that needs to be addressed is permitting. “The system just doesn’t deliver the permits that are needed,” Ms Kinning says. “With such a high level of interest and so many projects, being held up by permitting is a big issue. And if you don’t have a permit, you can’t get an agreement with the transmission system operator for a grid connection; you can’t agree an offtake mechanism such as a PPA; and you can’t take a final investment decision. Permitting really is a problem that needs to be addressed.”
Another challenge, one that is being addressed, is marine spatial planning. The Swedish government adopted an initial marine spatial plan in 2022, but has sought revised proposals by 31 December 2024, aiming to significantly increase the areas available for offshore wind.
New areas for potential development are important, because several projects proposed by developers overlap one another, which makes securing exclusivity an issue. To date, Ms Kinning explains, when faced with competing projects that overlap, the government has applied societal criteria to distinguish between them, but it is not clear exactly what the criteria are and how the legislation might work in future.
Given all the above, Sweden’s offshore wind market might appear more challenging than it first seems, but Ms Kinning and her colleagues at the Swedish Wind Energy Association are quietly confident FIDs for some of the many projects developers want to build will be taken in 2025. “If that happens, it’s not out of the question that some of the many projects developers want to build will begin producing power in the 2028/29 timeframe,” she concludes.
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