Battery storage market insights: Sweden

Sweden's battery storage market overview

Sweden has traditionally lagged behind continental Europe in Battery Energy Storage Systems (BESS) growth, but recent developments have propelled rapid expansion. Until 2022, only a few projects were launched, mainly supported by subsidies and specific storage needs. However, a second wave of growth emerged, driven by high prices in ancillary markets—particularly Frequency Containment Reserve for Disturbances (FCR-D).

Between early 2023 and late 2024, prequalified FCR-D capacity surged from under 10 MW to around 600 MW, a dramatic increase. However, as total demand for FCR-D remains below 550 MW and is not expected to rise, the market became saturated in 2024, leading to a significant drop in FCR-D market prices.

Future market strategies for BESS in Sweden

With FCR-D markets reaching saturation, Sweden’s BESS operators must adopt a multi-market strategy to optimise revenue. This includes:

• Participation in additional balancing markets like Manual Frequency Restoration Reserve (mFRR) and Automatic Frequency Restoration Reserve (aFRR).

• Active involvement in wholesale electricity markets, including day-ahead and intra-day trading.

• Leveraging algorithmic trading to execute high-frequency trades and capitalise on market fluctuations.

The impact of renewable energy growth on BESS

Sweden’s renewable energy sector continues to expand rapidly. In 2018, solar and wind energy accounted for just 13% of total electricity consumption, but this figure is projected to reach 40% by 2025. This shift significantly increases the value of energy flexibility, making BESS essential for balancing energy supply and demand.

Additional key trends benefiting BESS include:

• Rising occurrences of negative electricity prices, creating profitable opportunities for energy storage.

• Sweden's accelerating industrial electrification, which could double electricity demand over the next 20 years—from 140 TWh to over 250 TWh annually.

• Growing adoption of co-located BESS with wind and solar parks to enhance grid stability and optimise energy output.

Challenges in BESS deployment

Despite the strong growth potential, grid connection challenges remain a hurdle for new BESS installations. Some areas in Sweden face congestion issues, and connection costs can be prohibitively high, impacting return on investment (ROI).

Other risks include:

• Market price volatility, as seen with the sharp decline in FCR-D revenues in 2024.

• Regulatory uncertainties affecting market dynamics.

To mitigate risks, BESS owners must diversify revenue streams and qualify for multiple markets to maintain profitability.

Financial outlook for BESS in Sweden

As BESS capital costs continue to decline, ROI remains attractive. Estimates suggest a 1 MW/2MWh BESS can generate ~€100,000/MW/year in revenue, with higher earnings possible through intraday and balancing market participation. These levels position Sweden competitively against major European markets.

Market forecast: 2025-2030

Looking ahead, several factors will shape Sweden’s BESS market:

• Wholesale electricity markets will play a greater role - particularly in southern Sweden (SE3 and SE4), where price spreads are similar to Germany.

• mFRR market changes - such as the transition to 15-minute settlement periods and price-area-based pricing—will drive higher volatility and greater profit opportunities.

• BESS will increasingly be paired with renewable projects - boosting value creation and grid stability.

Sweden's BESS market is evolving rapidly, fueled by increasing renewable energy penetration, rising electricity demand, and changes in market structures. While challenges exist, diversification across multiple energy markets and leveraging advanced trading strategies will be critical for maximising BESS profitability. As a result, Sweden remains an attractive market for battery storage investment in the years ahead.