Great potential for green marine fuels in the north – but Sweden risks falling behind

Norrbotten, Sweden's northernmost county, is well placed to produce green fuels for the shipping industry. However, large and sustained price differences between fossil and renewable fuels, combined with a lack of clear policy instruments and infrastructure, risk slowing down this development. This is according to an analysis by IVL Swedish Environmental Research Institute, LTU Business and CLOSER.

It's unfortunate that Sweden still lacks a clear strategy for the expansion of renewable electricity and sustainable fuels. As neighbouring countries are increasing their investments, there's a clear risk that Sweden will fall behind in the transition, says Linda Styhre, expert in shipping and sustainability at IVL Swedish Environmental Research Institute.

The analysis shows that there are several obstacles preventing the market from growing at the required rate. Key among these is the high cost of renewable alternatives, which in the absence of long-term regulatory frameworks and support makes investment risky. Another obstacle is the interdependence between the production and use of renewable fuels.

In the market for electrofuels we see a classic chicken-and-egg dilemma. Uncertainty surrounding both supply and demand is holding back the significant investments needed for the market to develop, says Hanna Bach, a maritime expert at IVL.

To bridge the price difference between renewable and fossil fuels and to facilitate investment, there must be both clear political direction and concrete support mechanisms. This includes long-term regulatory frameworks as well as financial support and risk-sharing models that can reduce uncertainty. A national hydrogen strategy is presented as a key component in creating long-term stability.

Other challenges include inadequate port and distribution infrastructure, lengthy permit processes and capacity constraints in the electricity grid.

The market analysis was carried out to provide the Port of Luleå with the information it needs to make informed decisions regarding future investments in infrastructure for fossil-free fuels.

Analyses are needed to ensure that investment in renewable fuels keeps pace with market demand. They enable accurate assessments of the shipping industry’s need for fossil-free fuels, says Niklas Blind, a technical engineer at the Port of Luleå.

Download the report: Market analysis: Electrofuels in Norrbotten County, Sweden External link, opens in new window.

For more information, contact:
Linda Styhre, linda.styhre@ivl.se, tel. +46 (0)72-727 293 09

The market analysis was produced as part of the H2Derivatives@BSP project. In the Swedish part of the project, IVL Swedish Environmental Research Institute collaborates with LTU Business, CLOSER/Lindholmen Science Park, the Port of Luleå and the Port of Piteå. The project is funded by Interreg Baltic Sea Region and the Swedish Transport Administration. Read more at: Knowledge base for renewable fuels in shipping.