 Have Zonal Electricity Prices in Sweden Caused Industrial (Re-)locations?Mara Bălașa and Michael G. Pollitt Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge Abstract: There is limited research investigating the impact of zonal electricity prices on industrial location decisions. This paper analyses the consequences of the Swedish 2011 electricity market reform which divided the country into four bidding zones. Such changes are often expected to lead to industrial relocations towards the cheaper electricity zones. We examine the macro and micro levels of this reconfiguration, using country - and firm-level data. Both levels of analysis show an initially limited impact of t he reform on industrial location choices, with only one relocation to the northern part of the country. However, we find that the electricity intensities of the existing and emerging industries are different. By distinguishing between these two types of industries, we identify that many up-and-coming ones such as low-carbon steel, green ammonia, green hydrogen, e-methanol as well as data centres are increasingly locating in the bidding zones with lower electricity prices. For these, the share of electricity costs in the total cost of production is much higher compared to the traditional, fossil -based heavy industries. However, even if they are energy -intensive, these industries are not job-intensive at all, such that the location choices of the new firms do not significantly impact the labour market, which also suffers from significant shortages in the northern region. These location decisions may, in time, reduce the electricity surplus in the north of the country, and thus exert upward pressure on the price in the long-term. The findings have implications for understanding industrial (re-)locations, electricity market reconfigurations, and industrial decarbonisation. Keywords: Electricity Market Reform; Industrial Decarbonisation; Industrial Policy; Industrial Relocation; Zonal Electricity Prices (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:2615 Access Statistics for this paper More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge |
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