While developers in mature solar markets grapple with price competition and grid congestion amongst higher interest rates, the Nordic region is just beginning to tap into its solar potential.
Nearly 60% of Europe’s installed solar capacity is located in northern European countries, including the Nordic countries of Denmark, Finland, Iceland, Norway, and Sweden.
Sweden and Finland specifically (two countries with minimal utility-scale solar), have more than 1.5GW of solar projects under development, according to S&P data, indicating a significant growth opportunity for solar in the region.
Despite the Nordic region having fewer annual sunlight hours compared to countries closer to the equator, solar development in the region is being bolstered on multiple fronts. One of the key factors driving profitability for solar development is the low market penetration in the Nordic countries.
“There simply isn’t a lot of solar in the market in the Nordics. It’s not the same price cannibalization.” Warren Campbell, COO of Stockholm-based developer Alight AB told S&P. Alight is partnered with Neoen SA on Sweden’s largest solar farm, a 100MW project whose power is being sold to companies like fashion major H&M.
He cites pros like lower temperatures and cleaner air contributing to higher panel efficiency, meaning panels can generate more electricity from the sunlight available.
Think tank Aurora Energy Research also forecasts that solar generation in Sweden alone will reach 5TWh annually by 2030, doubling from current levels including both rooftop solar and utility-scale projects.
One of the key drivers behind the solar momentum in the Nordic region is the emergence of a liquid market for power purchase agreements (PPAs) where companies like Alight finance their solar projects.
While Nordic heavy industry is an established partner in PPAs for wind and hydro assets, there is increasing interest from less energy-intensive sectors, including food producers, tech companies, and even banks, according to Campbell. Solar PPAs are cheaper in Sweden than in most other European markets, even with rising prices over the past year.
The cost of solar equipment has also come down drastically in recent months, thanks to high imports of cheaper kit from China. This reduction in equipment costs has further supported the viability of Nordic solar projects.
There has also been an uptick in Nordic solar mergers and acquisitions (M&A) activity. CapMan, a Nordic investor, has observed a 20% increase in Nordic solar M&A deals compared to the previous year. Quicker permitting processes and a drop in the price of panels have contributed to the increased M&A activity.
With low market penetration, a liquid PPA market, affordable equipment, and an uptick in M&A activity, the Nordic solar market is poised for significant growth and investment going forward.
