Headline: Hydrogen Strategy of Sweden: Unpacking the Multiple Drivers and Barriers to Hydrogen Development

This paper investigates the main elements, drivers and challenges of the hydrogen sector in Sweden. A particular focus is placed on the approach of the Swedish government to hydrogen development and its internal and external dimensions. The Swedish government has intensified its support for the decarbonization of the economy in recent years in a bid to meet its goals of reaching climate neutrality by 2045 and reducing transport emissions (excluding aviation) by 70% until 2030, relative to 2010. Climate Leap, introduced in 2015, and Industrial Leap, launched in 2018, are the two main government funding schemes for private and public investments in low-carbon technologies in Sweden. While the government has set ambitious long-term climate goals and put in place the corresponding funding programs, investment and technology decisions have been mainly left to the business actors. Although such a market-based and private sector-driven approach may have worked well in the past, the Swedish government will need to embrace a more coherent steering role in ensuring smooth decarbonization and successful integration of hydrogen in the energy system of the future. The domestic interest in hydrogen in Sweden has in the past been primarily focused on the decarbonization of hard-to-abate industrial sectors, in particular the steel industry. Given the current surplus of low-carbon electricity supply, which relies on hydropower, nuclear and increasingly wind power, the attention was solely directed towards domestic production and use of low-carbon hydrogen for the industry. With the growing importance of hydrogen at the EU level, accompanied by the introduction of an EU hydrogen strategy, investment funds and common standards, there has been a rapid increase in interest by business actors in various hydrogen sectors (e-fuels, green hydrogen, ammonia) in Sweden. Individual regions in Sweden have also taken the initiative and made use of EU funds to try position themselves in and benefit economically from the emerging hydrogen sectors. As most private investors aim to use green hydrogen produced by renewable energy sources, the demand for green electricity, particularly in onshore and offshore wind, is expected to skyrocket. The government, however, has so far failed to enact credible plans and policies detailing where and how new wind power projects will be built and which sectors may gain priority access to renewable electricity. There has also been a lack of effort in facilitating the realization of infrastructure for the potential transport of hydrogen through pipelines or Swedish ports. The draft of the national hydrogen strategy by the Swedish Energy Agency laid out the ambitious target of 5 GW of electrolyser capacity by 2030. Such a target has been formulated largely based on the expressed intentions of business actors and without a direct link to EU strategic hydrogen targets. In light of the growing interest in low-carbon hydrogen, the considerable industry know-how and the vast renewable energy potential in Sweden, there is a pressing need for a more comprehensive approach by the government and a stronger alignment with the efforts of the EU and other Member States.