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Sustainable Energy Transition

Sustainable energy transition aims at drastically reducing fossil fuel consumption in society while simultaneously ensuring resource-efficient and reliable energy supply. In this research program, we use economic theory and econometric methods to analyze how markets function, and how to improve market designs and regulatory frameworks to achieve this sustainable energy transition.

Photo: Karl Gabor.

Ecologically sustainable energy supply requires that the world drastically reduces fossil fuel consumption. Increased electrification, for instance in transport and industrial processes, is a key part of the solution. At the same time, electricity generation and heating are the world’s largest sources of greenhouse gas emissions. To combat climate change, society must increase non-fossil electricity generation. In Sweden, the goal has been set to 100% renewable electricity generation by 2040.

Economically sustainable energy supply is resource-efficient and reliable. However, there is disagreement about the desirable properties of a sustainable energy system. Many countries phase-out nuclear power, whereas China and other countries with fast-growing electricity demand see nuclear power as a key component of future electricity supply. Important questions therefore revolve around the future of nuclear power.

Sweden is part of the integrated Nordic electricity market. This market consists of two main parts. One is the liberalized wholesale and retail market. The other is the regulated electricity network. The main argument for liberalization was the presumption that market-based generation and investment decisions would increase the efficiency of electricity supply.

This research program focuses on analyzing the electricity market in view of the objectives of a resource-efficient, reliable, and ecologically sustainable energy supply. Also, the incentives for energy-intensive sectors such as manufacturing and transportation to phase out fossil fuels are fundamental to achieve sustainable development. We apply theoretical analysis and econometric tools to investigate how the energy market and energy-intensive sectors function, and how market designs and regulatory frameworks can be improved to achieve sustainable energy transition.

Some of our research questions are:

- Which market reforms are required to achieve an efficient energy transition?

- Which factors determine investments in the electricity market?

- How efficient is the electricity market?

- How do conflicts between centrally imposed objectives and decentralized decisions the efficieny of the market?

The projects within the program are mainly financed by the Swedish Energy Agency.

The following researchers are working within the program:

Pär Holmberg, Erik Lundin, and Thomas Tangerås.