Sweden’s electrification goals are stalling, with electricity consumption remaining at 1986 levels despite ambitious targets to more than double usage by 2045. This stagnation occurs as the nation faces a confluence of challenges – heightened global competition, geopolitical instability, and the urgent need to accelerate climate action – all of which necessitate increased electricity consumption.
Electrification Efforts Lag
Sweden aims to reach 300 terawatt-hours of electricity consumption by 2045, a significant increase from current levels, coinciding with its goal of achieving climate neutrality. Successful electrification is seen as crucial for bolstering the country’s competitiveness, enhancing energy security, and accelerating the transition to a low-carbon economy. However, current usage remains stubbornly low, representing the lowest level in four decades.
While improvements in energy efficiency have contributed to lower electricity consumption per unit of economic output, this doesn’t fully explain the lack of progress in overall electrification. The fundamental issue is a lack of demand driving investment in new electricity production capacity.
High Electricity Taxes Hinder Progress
One area where policymakers could enact swift and impactful change is through a reduction in electricity taxes. Currently, taxes constitute approximately one-third of the total electricity bill, and Sweden’s electricity tax rates are among the highest in Europe. This high tax burden directly contradicts the nation’s electrification and climate objectives.
A shift towards lower taxes on electricity is needed to incentivize both households and industries to increase their electricity consumption, thereby reducing reliance on fossil fuels. The EU Commission has recently urged member states to remove direct taxation and minimize VAT on electricity, a recommendation Sweden should heed.
“An area where politics could act both quickly and powerfully is the electricity tax.”
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A gradual reduction in the electricity tax over a five to ten-year period would provide a financially sustainable approach. The state currently collects over 30 billion Swedish kronor annually from electricity taxes, and as electrification increases, so too will these revenues.
Immediate tax relief could be targeted towards specific sectors. Over 1,200 megawatts of electric boiler capacity currently stands ready for use in district heating systems, but remains largely untapped due to the full taxation of electricity. Removing this tax would make the technology economically viable, enhancing the robustness of district heating systems and increasing the flexibility of the overall electricity grid. This would also address a significant waste of resources; currently, Sweden spills approximately ten terawatt-hours of electricity annually, equivalent to over seven percent of its total electricity consumption.
Biofuel Usage Could Be Reduced
Enabling the use of electric boilers in district heating networks would also conserve biofuels, a scarce and expensive resource currently used unnecessarily. Estimates suggest that the cost to the state of such a move would be 600 million kronor per year, a relatively small sum compared to the 30 billion kronor generated annually from electricity taxes.
The government proposed a 20% cut to the electricity tax in September 2025, expected to reduce state income by approximately 6 billion Swedish crowns ($639 million). This move came amid stalled economic growth, impacted by U.S. Tariffs and rate cuts, and was part of a broader strategy to support households and stimulate the economy. A temporary reduction in VAT on food was also proposed, effective from April 2026 to December 2027.
Despite promises made before the election, the government has instead raised the electricity tax. This year, the tax increased by SEK 0.015 per kWh, following a larger increase of SEK 0.045 per kWh last year, resulting in a 12% increase in the electricity tax over two years, and an estimated SEK 4 billion in increased costs for Swedish electricity customers. Energy and Industry Minister Ebba Busch claims the government is still striving to fulfill its election promise, but prioritizes investments in the “unstable” electricity system.
The increase in electricity tax counteracts electrification efforts, reducing the incentive to switch to plug-in vehicles and hindering the achievement of climate goals. According to Erik Thornström, head of taxes and policy instruments at energy companies, the tax shift – reducing taxes on fossil fuels while increasing those on electricity – is counterproductive.
Despite producing more electricity than it consumes, Sweden faces challenges related to power and capacity shortages. These shortages occur when demand exceeds supply in specific areas or at specific times, rather than a general lack of electricity generation. The risk of power shortages is increasing as demand grows.
Electrification is fundamental to Sweden’s future prosperity, security, and climate responsibility. It requires a clear path forward, characterized by pace, direction, and long-term vision. Electricity should be viewed not as a heavily taxed resource, but as the engine driving electrification and the broader economy.
