Surge of offshore wind energy companies faces hurdles in Sweden due to inflation and permitting challenges

There is a surge of wind energy companies intending to establish offshore wind farms along the Swedish coast. However, these companies are beginning to express concerns due to rampant inflation and high interest rates, which have driven up the costs of many projects. Additionally, the lengthy permitting processes have been a persistent source of frustration.

Sweden lags behind several other countries, such as Denmark, Germany, the Netherlands, and the United Kingdom, which have constructed significantly more offshore wind farms. These countries benefit from more organized regulations, including state involvement and risk-sharing measures, which Sweden lacks.

The German energy company RWE advocates for the implementation of a similar risk-sharing system in Sweden. They argue that without state backing, the construction of new wind farms may not happen. Swedish company Vattenfall, which has secured one of the few government permits to build a larger park at Kriegers flak, just south of Trelleborg, recently decided to halt or at least pause the project. Vattenfall requires government funding to build the necessary offshore cables to make the project profitable.

RWE’s Nordic head, Matilda Machacek, echoed these sentiments and underlined the necessity of a support system like Contracts for Difference (CFD), which can help mitigate risks similar to those proposed for nuclear energy. Even if RWE receives a government permit to commence building the Södra Victoria project south of Öland, it remains uncertain if the construction will proceed without such support.

Currently, around 100 gigawatts of offshore wind capacity is under development in Sweden, with an additional 42 gigawatts in preliminary stages. The Swedish government is reviewing how risk-sharing can be implemented in future renewable energy projects, with findings expected by April 2025. Additionally, a parallel investigation is assessing the introduction of an auction system for allocating offshore wind projects, due by November 2024.