1. EXECUTIVE SUMMARY AND KEY RECOMMENDATIONS

Active policy has succeeded in transforming the DH supply from oil dominance in the 1970s to using mostly biomass fuels and waste today. The CO2 taxation is a main driver of this transformation.

In Sweden, DH competes with other heating technologies such as heat pumps. Producing DH at co-generation1 plants is overall more efficient than producing it at heatonly plants. However, the low wholesale prices of electricity, which are challenging this model across the Nordic market area, have implications for the electricity system. As the share of variable renewable power (mainly wind) in electricity supply increases, the power system would benefit from more, not less, controllable backup power, such as biomass-fuelled co-generation. The government should closely monitor this situation to avoid undesired developments for the available power generation capacity. On the positive side, the technological development of DH systems can benefit both resource efficiency and system integration. Low-temperature heat use in fourth-generation DH networks is a good example.

Ensuring oil and gas security

Sweden fulfils its IEA and EU obligations to hold emergency stocks of crude oil and/or petroleum products. As oil use is set to decline, meeting these obligations will require gradually diminishing efforts. However, securing stocks of biofuels for transport is an emerging area for which the government needs to define its long-term policies and measures.

Sweden has by far the highest share of biofuels in the transport sector among IEA member countries, and the new emissions reduction obligation will drive further growth. Of the biofuels used today, most is imported biodiesel. Sweden should assess what implications these increasing imports have on the security of supply for transport fuels. To allow for a continuous increase, the government should also consider producing a greater quantity of sustainable biofuels domestically.

Natural gas has limited importance in the Swedish energy system and, in the government’s long-term projections, its supply gradually declines as biogas production increases. However, in the south-west of the country, where natural gas is mainly available, it provides around 20% of the TPES. It is mostly imported from the Tyra field in Denmark, which will be closed for maintenance between December 2019 and March 2022. In that period, the Swedish market will depend on natural gas supply from Germany through one route only. The government should monitor to ensure that ample supplies are available to Sweden during the Tyra closure.