Sweden to lower solar subsidy, scrap tax breaks for electricity micro-production

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Sweden’s Ministry of Finance plans to lower the subsidy rate for solar installations to 15%. It also plans to scrap the tax reduction for the micro-production of renewable electricity.

The ministry said in a statement on the government’s website that installations have increased sharply, which is why there is no longer a need to subsidize solar cells.

“Solar power should to a greater extent be built on market-based foundations, and price signals from the electricity market should have a greater impact, so that in the long term the power generation can contribute more to Sweden's security of supply, in accordance with the long-term direction of energy policy,” it said. 

The proposals form part of the Ministry of Finance’s fall budget, which was submitted to the government on Sept. 19. If agreed upon, the reduced subsidy for solar cells would come into force on July 1, 2025, while the removal of the micro-production tax reduction would occur at the start of 2026.

The ministry said the policy changes will help to increase tax revenue by up to SEK 880 million ($86.7 million) in 2026.

Svensk Solenergi, Sweden’s main solar industry association, said it is “strongly critical” of the proposals. “The support systems that the government is attacking are and have been important for accelerating the electrification of households and small businesses,” it added in a statement.

The Swedish government raised its subsidy for solar cell installations from 15% to 20% in January 2023. Svensk Solenergi said the “jerky nature” of changing energy policy again “creates poor conditions” for PV companies.

“Support systems should be long-term and predictable,” added Svensk Solenergi CEO Anna Werner. “Constantly changing the subsidy levels creates uncertainty and discourages both homeowners and companies from investing in renewable electricity production.”

The income tax reduction for households and businesses that micro-produce renewable energy was introduced in 2015, with a maximum SEK 18,000 available per year. Deductions can be made up to the number of kilowatt-hours that a prosumer buys. Svensk Solenergi said it has been a cheap way to increase local electricity production.

“It promotes the expansion of small-scale electricity production that increases Swedes' self-sufficiency,” Werner said. “This makes the whole country less vulnerable in the event of future energy crises.”

Statistics indicate that Sweden deployed 460 MW of solar in the first half of this year. The results point to a slowdown in the nation's solar market, after a record 1.6 GW of PV capacity was deployed in 2023.

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