A new dawn for electricity?

Unpacking the role of changing EU and national governance

TENTATIVE...

Måns Nilsson, Stockholm Environment Institute w contributions from Lars J Nilsson, Lunds Universitet

Study Purpose • To understand the role of EU and domestic policy in on-going developments in the energy production sector* in Sweden.

A change in orientation? The first question • To what extent and in what ways can we

identify a reorientation towards electricity in the current development of the Swedish energy sector?

INVESTMENT ESTIMATES DURING NEXT TEN YEARS (Svensk Energi)

Investment boom • Current pipeline: • CHP forecast 13,2 TWH in 2007 up to 17,5 TWH in 2010. there are extensive existing plans for more CHP, both from biomass and waste incineration. (STEM, 2008) • Wind power forecast: – 1,4 TWH in 2007 and going up to 3,4 TWh in 2010 (STEM, 2008) • Plans add up to 300 billion SEK over 10 years (Swedish Energy)

Global investment in sustainable energy

Strong interest in Swedish export potential towards EU • Total 185 TWh • 100 TWh renewable • We ”import” more and more of the continental electricity prices (source Profu)

Electricity seen as solution to transport sector climate / mobility dilemma in Sweden • Political concerns on the sustainability and large-scale potential for liquid biofuels (Börjesson, Nilsson et al, 2008) • Plug in hybrids – 7 TWh per year (5% of total) takes us all the way to present climate targets in transport sector (Elforsk, 2008).

125

kortsiktig marginalel

100 75 50 25

dynamisk marginalel

0 EU's nybilssnitt 2006 Elbil kolkondensel Elbil - EU's elmix Elbil biokraftverk (EU) Elbil - svensk elmix Elbil - CO2-fri el

total

Heat Pumps

small (0-3 kW) medium-sized (3-10 kW) large (>10 kW) 60000 50000 40000 30000 20000 10000 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

More positive treatment as RES in EU proposal

More grid capacity planned

Reduced interest in heating?

• Efforts into more efficient houses leading to demand decrease • STEM forecasts stable or slightly downward trend in heating consumption up to 2010

MARKAL heat production with 202020

Something in the air?

• Bo Källstrand, former head of Swedenergy, sees:

“ a change of attitude – electricity used to be the bad guy, now it is often seen as an opportunity for climate-efficient energy), and the future roll of electricity as the saviour of

the transport-climate problem” (Interview)

New signals from politicians • Policies supporting CHP developments • Extension of certificate systems continue to drive prices up • Extension of nuclear capacity in present reactors • Statements and positions changing - rhetoric about bad electricity is gone • However Mr A Borg still enjoys raising electricity taxation...

Yes, there does seem to be an increasingly positive view on, and outlook for, electricity!

How to explain this reorientation? • 2nd and 3rd Research Questions: – To what extent has EU policy governed the sector’s

reorientation and to what extent is it a result of national political changes?

– Through what mechanisms do EU and national policies affect

the sector’s reorientation?

The basic framework • European policy • National policy • External factors Outcome in ”field” (incl. Investments etc) Governance Mechanisms Regulatory standard setting Market-based governance Cognitive-normative governance

EU policy

-climate and energy package

National policy

Taxation Permitting Certificates R&D etc

Mechanisms

-regulatory -market-based -cognitive normative

External factors

-oil prices, -economic growth

Reorientation of field

-investment -positions -analysis

1. The market mechanism

EU policies – Climate & Energy Package • CO2: -20% to 2020 – ETS sectors -21% from 2005 EU wide (35% av Swedish emissions; power&heat, refineries, coal, steel, minerals, paper&pulp – Non-trading sector: -17% from 2005 for Sweden ( 10% EU wide) (65% av Swedish emissions; housing, transport, waste, agriculture, some industries Domestic policies – Certificates

EU climate and energy package requires new investments in electricity • The RES target requires 25 TWh new wind, CHP or hydro • ETS increases electricity prices – strengthen incentives to invest • And: grid enhancements, green certificate extensions, concession easening, enhanced hydro

MARKAL results on 202020 (Profu) • Virtually all new power will be renewable • Sweden will become big exporter • ETS increases price, RES decreases it • Demand will first continue to go up and then go down (but when?) • Nuclear only feasible after 2030 (replacing the old ones)

Electricity use in Norden

CO2 emissions in Norden

Heat constrained by 202020? (MARKAL) Reference case 202020 case

Efficiency targets constrains use, heat pumps are pushed in.

GO trading – an opportunity lost?

Regulatory standard setting • Changes in permitting procedure • Energy efficiency standards • Instructions to Vattenfall

Cognitive-normative governance • RD&D funding and partnerships • Climate commitment strongly integrated in energy sector • Nuclear deliberations changing at EU and national levels • Renewed interest in broad debate eg BASEL, Krafttag.nu: (Resvik, Svenskt Näringsliv) • Sweden’s last ”weapon”... (Leif Johansson, CH Svanberg mfl DN debatt 25/10 • Other political signal