At Knowit, we believe true impact means shaping a more sustainable future. In that spirit, we’ve developed this white paper to explore how energy storage—especially battery solutions—can unlock the full potential of renewables and strengthen the resilience of Sweden’s energy system.

Battery Energy Storage Systems (BESS) are becoming essential to Sweden’s transition toward a fossil-free energy system. While the country leads in renewable adoption—reaching 98% fossil-free electricity in 2023—intermittency from wind and solar continues to cause major grid instability and price volatility.

These fluctuations not only stress the grid but also undermine the economic viability of renewable projects. To meet these challenges, energy storage systems (ESS)—including Pumped Hydroelectric Storage (PHS), Thermal Energy Storage (TES), Hydrogen Storage, and BESS—play a critical role in capturing surplus generation and releasing it when needed, ensuring a more stable and resilient energy supply.

This blog post presents key outtakes from our white paper Harnessing energy storage: A pillar for Sweden's renewable future, where we explore how BESS and other energy storage systems are tackling grid instability and price volatility, unlocking the full potential of wind and solar, enabling fequency regulation and energy arbitrage, and positioning Europe to compete in the global battery race. 

This white paper is the third in our CleanTech series, together forming a complete view of CleanTech's most critical levers. 

Sweden's energy landscape

Sweden is often seen as a front-runner in the renewable energy revolution, but even leaders face growing pains. In recent years, the country has grappled with a paradox: while striving to expand its renewable energy capacity, it has encountered an increasingly volatile electricity market, as shown in Figure 3. Prices have swung dramatically, both on hourly and monthly base—from historic highs of 851 öre/kWh for single hours in southern Sweden to negative prices of -69 öre/kWh during times of surplus generation. On a monthly average basis across the four bidding areas, Sweden saw record-high electricity prices of 256 öre/kWh in December 2022, see Figure 3. This volatility underscores a system straining to balance the opportunities and challenges of renewable energy.

Figure 3. Electricity prices and number of negative price hours in Swede in the past years [öre/kWh, hours]

1) Monthly weighted average prices across the 4 Swedish bidding areas; 2) Average number of hours per year with negative prices across the 4 Swedish bidding areas; 3) January-November

At the heart of this issue lies the dynamic nature of Sweden’s power grid. Since 2011, the country is divided into four electricity zones, each with varying capacities for generation and transmission. In the north, where renewable resources like wind and hydropower are abundant, supply often outpaces demand. Yet, the south, with its higher energy consumption and limited transmission capacity, sometimes depends on costly imports from Europe despite the availability of surplus power in the north.

Electricity price volatility

Price fluctuations in Sweden are not merely economic anomalies; they are emblematic of the broader challenges posed by transitioning to a renewable electricity grid. While the intermittency of renewable energy sources like solar and wind plays a role due to their dependency on weather conditions, the problem is more complex. A combination of seven key factors, as shown in Figure 4, spanning across system, demand and supply dynamics, contributes to this volatility. These factors underscore the need for comprehensive strategies to stabilize electricity prices while scaling renewable energy capacity.

Figure 4. Key demand and supply factors influencing electricity prices

1) Private and industrial, due to electrification trend e.g., adoption of EV; 2) Grid capacity limitation for long transport of low-cost renewable electricity; 3) Wind and solar are intermittent energy sources, since they are highly dependent on weather conditions. Their availability, along with that of stream hydro, fluctuates based on weather patterns and seasonal variations

The urgency of adaptation

For Sweden, these challenges are not insurmountable—they are opportunities in disguise. The solution lies in creating a grid that can flex with these dynamics, one capable of storing excess energy during periods of surplus and releasing it when demand surges.  Energy storage systems are set to become an increasingly vital part of the energy landscape, seamlessly integrating with the grid and renewable energy sources to balance electricity supply, bridging fluctuations between demand and generation, see Figure 5.

Figure 5. ESS roles in the energy system 

1) Energy Storage Systems; 2) Other small and niche storage technologies like compressed air, flywheels, superconducting magnets, etc.

Imagine a windy afternoon when turbines generate an abundance of electricity that exceeds immediate demand. Without energy storage, this surplus risks being wasted through curtailment—or worse, causing grid congestion due to overloaded transmission lines. Conversely, think of a calm winter night when demand peaks but generation falters. ESS ensures that energy captured during surplus times is available precisely when needed. It turns unpredictability into reliability and intermittent supply into a consistent resource.

ESS technologies come in a variety of forms, each designed to meet different challenges and opportunities within the energy landscape. Together, they form an important part of the toolkit for addressing Sweden’s power challenges.

• Pumped Hydroelectric Storage (PHS) - A proven giant in grid-scale storage, PHS uses gravity to store energy by pumping water uphill during low demand and releasing it to generate power during peaks. While highly efficient (70–85%) and capable of long-term storage, it requires specific terrain and significant investment—though innovations like underground and seawater PHS are expanding its potential.
• Thermal Energy Storage (TES) - TES stores surplus energy as heat or cold using water, molten salts, or advanced phase-change materials. It’s ideal for industrial processes and district heating, and works well to smooth renewable intermittency. Despite challenges like heat loss and infrastructure needs, TES is evolving through hybrid systems and AI-driven optimization.
• Hydrogen Storage - Hydrogen acts as a long-duration storage solution and a gateway to decarbonizing hard-to-abate sectors. By converting renewable electricity into hydrogen via electrolysis, it bridges energy with transport and industry. While current costs and infrastructure gaps are hurdles, green hydrogen tech is progressing rapidly.
• Battery Energy Storage Systems (BESS) - Fast, flexible, and scalable, BESS stabilizes the grid in milliseconds and pairs seamlessly with solar and wind. With high efficiency (80–95%), BESS suits both urban and off-grid setups. Key challenges include material supply and battery lifespan, but innovation in solid-state and second-life batteries is unlocking new potential.

Energy storage systems 

Tackling grid intermittency with key functions

ESS offer the transformative ability to act as a buffer between generation and consumption, and ensures that energy flows seamlessly, stabilizing the grid even in the face of unpredictable supply and demand. But ESS is not a one-size-fits-all solution—it achieves this balance through a range of specialized functions that collectively tackle grid intermittency and limitations, see Figure 6.

Figure 6. Key functions of Energy Storage Systems 

1) Provide reliable energy for critical infrastructure, replacing traditional solutions like diesel generators;  2) Adjust electricity consumption to match supply and price fluctuations; 3) ESS stores surplus energy from solar and wind, ensuring a steady electricity flow even during low generation periods and benefiting spot price arbitrage; 4) Maintain grid stability by dynamically charging and discharging to support a stable 50 Hz frequency

• Back-up energy - During outages or crises, ESS provides clean and uninterrupted backup power to critical infrastructure—like hospitals, data centers, and transit systems—replacing traditional diesel generators and enhancing energy security in a renewable future.
• Peak shaving & flexibility - As electricity demand spikes—especially with growing EV use and industrial electrification—ESS smooths consumption by discharging during peak hours and charging during lows. This reduces grid stress and optimizes energy use across the day.
• Balancing renewable intermittency - ESS captures surplus solar or wind energy when production is high and releases it when output drops. This helps maintain a steady power flow and enables energy arbitrage, letting users benefit from price fluctuations while stabilizing the grid.
• Frequency regulation - Grid frequency must remain at a steady 50 Hz. BESS can respond in milliseconds to correct imbalances, dynamically charging or discharging to maintain stability and avoid costly disruptions.

Through these critical functions, different types of ESS can support the transformation of Sweden’s renewable energy strategy into a reliable and resilient system. By providing backup power, smoothing demand peaks, balancing intermittent sources, and regulating grid frequency, ESS tackles the challenges of intermittency head-on. This convergence of technological innovation and strategic application positions Sweden not only to overcome its energy challenges but also to lead the way in building a stable, sustainable future powered by renewables.

Strategic actions for BESS success 

The increasing focus on CleanTech and battery energy storage in Europe and the Nordics presents significant opportunities for companies and investors looking to enter or expand in this space. With a growing demand for batteries, both for the accelerating EV transition and energy storage systems, investment interest is at an all-time high. However, while there is a strong vision for Europe to establish itself as a leader in battery storage technology, efforts remain fragmented, and uncoordinated investments pose challenges to long-term success. Despite the enthusiasm, not all BESS ventures will thrive. The challenges faced by Northvolt serve as a cautionary tale about the risks of stretching across the full battery value chain and competing directly with China’s highly integrated, cost-efficient industry.

To successfully navigate this competitive landscape, businesses and investors must make informed decisions and develop strategies that ensure long-term viability.

Figure 11. Key factors for investors and companies interest in investing in the BESS space should consider

1) Potential areas could be advanced materials manufacturing, recycling, or high-performance battery technologies; 2) Highlighting the risks of undertaking large scale investment across the entire battery value chain; 3) Energy Management Systems; 4) Capitalize on European incentives like the EU Innovation Fund, Horizon Europe, the Green Deal Industrial Plan

Europe’s CleanTech and battery storage industries are at a turning point. While the region has the ambition to lead in energy storage, turning vision into reality requires a coordinated approach, strategic decision-making, and investments that align with long-term market needs. Companies and investors that focus on securing the right market niche, selecting optimal technologies, integrating value-added services, strengthening collaboration, building supply chain resilience, and leveraging regulatory incentives will be best positioned to compete in this rapidly evolving market. By making informed and strategic moves, European and Nordic players can establish themselves as global leaders in battery energy storage, ensuring both economic success and a more resilient, sustainable energy future.

Ready to Dive Deeper?

The path to a resilient, renewable energy future is filled with both complexity and opportunity. Explore our full white paper for a deep dive into the technologies, strategies, and collaborations shaping the next era of energy storage.