Sweden’s green industrial revolution hits speed bumps

Greetings from Rotterdam, where I am at the World Energy Congress, which draws together thousands of people from the global energy industry every three years.

On day one, everyone wanted to talk about how rich countries, which can afford to subsidise clean energy for their populations, are not helping the rest of the world make the same jump.

“We need to support the Global South,” said Amin Nasser, chief executive of the world’s largest oil producer, Saudi Aramco. “Ninety-five per cent of what we globally spend on renewables is happening in the Global North and only 5 per cent is happening in the Global South,” he noted, adding that China should be praised, rather than castigated, for bringing down the cost of solar power.

He said it was wrong for banks to deny finance to developing countries if they want to exploit oil and gas reserves. “That’s not acceptable,” he said. “They do not have their basic energy needs met. That’s not acceptable.”

Another senior energy executive told me investors from the US and EU make pledges to save the world but tend not to invest in developing countries, because of either compliance issues or fears that rating agencies will discount cash flows from the Global South compared to those from OECD countries.

But as today’s report from our Nordic and Baltic correspondent Richard Milne shows, it is not just developing countries that are asking questions about balancing economic growth and climate targets. Even Sweden, despite being blessed with abundant green power, is facing bumps in the road.

Thanks for reading — Malcolm

Green boom in Sweden’s north faces hiccups

Northern Sweden was long a backwater, steadily losing people to the richer, warmer south of the country.

But in recent years, a group of entrepreneurs has seized on one attribute where the area around the Arctic Circle is leading in Europe: a surplus of power.

Abundant hydroelectric power as well as large wind farms generated an annual surplus of about 50 terawatt hours in the two regions of northern Sweden last year, roughly equivalent to the annual electricity consumption of countries such as Portugal, Greece or Romania.

That has led to something akin to a gold rush up north, but where the precious material is electricity.

In 2021, battery group Northvolt built Europe’s first homegrown cell in a gigafactory in Skellefteå. A joint venture between iron-ore miner LKAB, steelmaker SSAB and power group Vattenfall has also unveiled plans for “green” steel free of fossil fuel; as did the start-up H2 Green Steel, founded by the same investors as those behind Northvolt.

However, recent months have brought storm clouds on the horizon of perhaps Europe’s leading region for green industrialisation.

Infrastructure is a big problem. One reason the businesses have been able to exploit northern Sweden’s surplus is that transmission links to the country’s south — home to most existing industry such as Stockholm’s Atlas Copco and Sandvik or Gothenburg’s Volvo — are poor.

Housing has been an issue for Northvolt in the sudden boomtown of Skellefteå, where rents have skyrocketed and some people have been sleeping in converted shipping containers. Its factory in the middle of the deep sub-Arctic forest is vast and will eventually make 60GWh of batteries a year, enough to power about 1mn electric cars.

But bottlenecks on housing and labour mean that even if there is a power surplus, another gigafactory there is unlikely (instead Northvolt is building in Gothenburg, Germany and Canada).

LKAB’s dependence on a single-track railway from its main mine of Kiruna in the frozen north to the Norwegian port of Narvik has been exposed recently by two separate derailments, which closed the line for 76 days in total. The state-owned miner has warned its move towards carbon-free sponge iron — crucial for making green steel — could be threatened if the line is not urgently upgraded. Its plan to exploit a large rare earths find, known as the Per Geijer deposit, could also be complicated.

H2 Green Steel, which will need 10TWh of electricity to produce 2.5mn tonnes of green steel at its plant in Boden from 2025-26, is also keen on improving the railway to double track to boost its iron ore sourcing possibilities.

There is also a growing controversy in Sweden about the wisdom of using so much electricity on heavily-subsidised projects such as green steel and batteries. LKAB alone has estimated it would need 70TWh by 2050, wiping out today’s surplus (although more capacity, especially from wind farms, is likely to come online before then).

The debate raises profound questions that all countries involved in the green transition will face: how do you allocate finite energy resources wisely and equitably? Some in northern Sweden question whether IT data centres, which bring with them few jobs, are worth the huge amount of power they consume. In neighbouring Norway, a defence company was unable initially to expand its main factory; a data centre for TikTok, the Chinese-owned social media platform, had taken the region’s remaining power surplus.

The rush of capital and talent to northern Sweden is real. But the questions the region is facing on energy use and infrastructure show how the green transition is bound to be a bumpy ride, even for regions blessed with a natural advantage. (Richard Milne)

Power Points

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu and Tom Wilson, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.