A Scandinavian Transition Towards a Carbon-Neutral Energy System

Abstract

This study demonstrates a cost-optimal transition towards a carbon neutral energy system in Scandinavia (Denmark, Norway and Sweden) in 2050 with no import of biofuels and no use of CO₂ storage. The Scandinavian electricity sector is already highly renewable and carbon neutrality requires extensive changes in other parts of the energy system, including the building, transport and industry sectors. The analysis is done with a stochastic TIMES model that considers the short-term uncertainty of renewable electricity generation and heat demand. In this study, a simplified deterministic approach gives significantly lower investments in wind power, PV and low-efficient electricity based heating in buildings compared to the stochastic analysis. This implies that an appropriate representation of short-term uncertainty is an important premise to provide reasonable policy recommendations from energy system models. Moreover, carbon neutrality requires significant decarbonization of the end-use sectors, especially the transport sector. Hydrogen is the dominant fuel used in the transport sector, and it is cost-optimal to invest in both inflexible hydrogen production and more capital intensive flexible hydrogen production. The results emphasise the importance of considering the entire energy system when designing policy to reach carbon neutrality. This is because the required investments in electricity capacity depend on the degree of electrification, and the future electricity consumption depends on the availability and competiveness of biofuels.