Sweden Aims for Industrial Dominance with Carbon-Free Power

Elon Musk has stated that AI power demands cannot be met on Earth and has proposed launching data centers into space. This highlights the growing importance of 'power' alongside 'semiconductors' in the AI supremacy race. However, one country has found answers not in space but on land: Sweden, which generates 99% of its electricity without fossil fuels (the EU average is 71%). Since introducing a carbon tax in 1991, Sweden has successfully balanced greenhouse gas reduction with economic growth. Amid rising global economic uncertainties due to tensions in the Strait of Hormuz, Sweden's central bank raised its growth forecast for this year from 2.2% to 2.8% on September 24, significantly exceeding the Eurozone's forecast of 0.9%. A new era has begun where clean electricity is directly linked to national economic security.

Big tech companies are already turning their attention to Sweden. Microsoft is expanding its AI data centers in the country, while Google is pursuing the acquisition of land for data centers with a capacity of up to 2GW. Northern Europe offers abundant carbon-free power and the potential for natural cooling of servers using outside air for up to 8,000 hours annually. Additionally, the waste heat from servers can be reused in district heating systems. Last year, the demand for power connections from data centers submitted to Sweden's transmission network was 5.6 times the total capacity of existing data centers. As the number of data centers increases, the need for power supply and cooling facilities also rises, boosting related markets such as generators, distribution equipment, cooling systems, and energy storage systems (ESS).

The manufacturing landscape is also changing. With the EU's Carbon Border Adjustment Mechanism (CBAM) costs starting to impact corporate accounting this year, EU companies are prioritizing the procurement of low-carbon raw materials in their supply chains. A leading company responding to this demand is Swedish steelmaker SSAB, which introduced hydrogen-reduced steel in 2021. SSAB is collaborating with global firms like Germany's Rheinmetall to supply green steel. The pressure from carbon costs is extending beyond raw materials to the transportation sector. As the EU plans to implement a carbon emissions trading system (ETS2) for road transport fuels starting in 2028, global logistics companies are seeking to secure Swedish electric commercial vehicles. The Volvo Group recently reported a 39% increase in orders for electric commercial vehicles over the past year, while Scania's deliveries of zero-emission commercial vehicles have more than doubled in the same period. The high entry barriers for electrification technology in large commercial vehicles make the growth of Sweden's eco-friendly commercial vehicle sector noteworthy. From raw materials to transportation, carbon costs are reshaping corporate choices.

In Sweden, carbon-free power is driving industry, and the increased demand is fostering a virtuous cycle of investment in electricity. The Swedish state-owned transmission system operator plans to invest approximately $7 billion in expanding the transmission network over the next three years starting in 2027. The door to nuclear power has also opened. The Swedish government is streamlining nuclear licensing procedures and introducing financial support packages, including contracts for difference (CfD) and government loans. As a result, two small modular reactor (SMR) projects totaling 2.6GW have progressed this year alone. There are also plans to extend the lifespan of six operating nuclear reactors by 20 years, with the Ringhals 3 and 4 reactors being of a type similar to South Korean reactors, making it promising for South Korean companies to enter the market. With the nuclear and transmission markets opening up, companies manufacturing nuclear and transmission equipment, as well as ESS manufacturers, should consider local entry. They need to assess the timing for entering various sectors based on the upcoming transmission network investment plans and the progress of nuclear projects.

Sweden led the global iron market in the 17th and 18th centuries with charcoal from its abundant forests but lost its dominance to Britain's coal-based steelmaking technology by the late 18th century. After being sidelined by fossil fuels for nearly 240 years, Sweden is now making a comeback by leveraging carbon-free power. While Musk looks to space to escape power shortages, Sweden is aiming for a new industrial supremacy, from AI to green steel, using its cold land and clean electricity as weapons. There are various sectors for South Korean companies to watch, including data centers, green steel, electric commercial vehicles, nuclear power, and transmission networks. In an era where carbon represents both cost and competitiveness, it is time to seek breakthroughs for South Korean manufacturing through business alliances with Sweden.