Energy Transition: Challenges in the Energy Innovation System – and Solutions

On April 27th, representatives from startups, scaleups, investors, and the innovation ecosystem gathered to discuss concrete solutions to the energy transition’s current challenges. Our recent workshop series identified these challenges, including interviews and insights from investors, startups, scaleups, government representatives, and academia.

The challenges:

1. Sweden’s energy innovation system is complex, fragmented, and rigid, with regulations that hinder testing and scaling. Fragmented governance, conservative structures, and inflexible regulations make it difficult for startups to gain traction.
2. Energy innovators struggle to bridge the “valley of death” between development and scale-up, due to a lack of funding.
3. Current regulations hinder energy sharing, local production, and the development of new business models.
4. There is a low level of system understanding among citizens and decision-makers, with actors lacking a shared language and often working in silos.
5. There is a lack of shared infrastructure for testing and scaling energy solutions within the energy innovation system.

At the PowerLink Energy Forum, participants identified both long-term and short-term solutions to address these challenges in the energy innovation system.

Challenge 1: Rigidity and complexity. Sweden’s energy innovation system is complex, with regulations hindering testing and scaling.

Participants suggested:

1. Local Regulatory Sandboxes: Simplify rules in designated areas to test new solutions.
2. Temporary Permits: Allow short-term permits to support real-world trials.
3. Reduce Bureaucracy: Streamline processes for faster deployment of test facilities.
4. Grid Access for Innovations: Facilitate connection of innovative solutions to the grid.

Challenge 2: Financing. Energy innovations struggle to bridge the “valley of death” between development and scale-up.

Participants suggest:

1. Cluster Creation: Create clusters with shared interests to attract funding.
2. Corporate Venture Capital: Facilitate capital flow from corporate VCs to energy innovation.
3. Tap into Foundations: Leverage resources from foundations (including Danish ones) to support innovation.
4. Accelerator Programs: Establish programs guiding startups to become “VC-ready” with necessary data and infrastructure.
5. Use Existing Competence: Build on expertise from regions like Ludvika to enhance local capabilities.

Challenge 3: Regulations. Current regulations hinder energy sharing, local production, and new business models.

Participants suggest:

1. Push for New Legislation: Enable local energy sharing and innovative business models.
2. Innovation-Friendly Procurement: Develop public procurement practices that encourage innovation.
3. Experimentation Zones: Create regulatory “sandbox” regions for piloting new approaches.
4. Open the Grid: Implement regulations to allow easier grid access and flexibility.
5. Lobbying & Influencing of Policy Makers: Build alliances to advocate for policy changes within the energy sector. Create awareness on hindrances.
6. Financial Incentives: Consider quotas or dedicated funding streams for startups in the energy sector.

Challenge 4. The Knowledge Gaps. There is low system understanding among citizens and decision-makers, with actors lacking a shared language, often working in silos.

Participants suggest:

1. Knowledge Platform: Develop an accessible platform to share information.
2. Non-Profit Neutral Forum: Facilitate discussions with no commercial interests to drive collaboration and solutions.
3. Comprehensible Language: Use clear, easy-to-understand language to engage all levels of society.

Challenge 5: Infrastructure for Testing. The innovation system lacks shared infrastructure for testing and scaling energy solutions.

Participants suggest:

1. One Website for All Testbeds: Centralize information about available testbeds, showing current projects and results.
2. Prioritize Specialized Testbeds: Focus on testbeds addressing specific challenges, considering digital twins as a preparatory step.
3. Energy Utility Collaboration: Explore creating testbeds involving energy utilities.
4. SE4 Energy Day: Highlight initiatives like “SE4 Energy Day” powered by major players (e.g., Uniper, E.ON, Kraftnät, Ö-Kraft).

When the participants voted for actions among the presented suggestions, the most popular actions turned out to be:

1. An SE4 Energy Day – Collaboration platform for energy stakeholders (16+ votes)
2. One Website for All Testbeds – Centralizing information on available and ongoing testbed projects (8+ dots)
3. Prioritize Specialized Testbeds – Tailored testing environments for specific challenges (6+)
4. Sandbox Experimentation Zones – Regulatory flexibility for innovation (6)
5. Public Affairs & Policy Lobbying – Advocacy for regulatory changes (6+)