Vertical integration in energy system modelling Understanding the effects of European energy trading on the Swedish energy system

Sammanfattning

Understanding a country’s future energy system requires modelling, yet national energysystem models typically treat countries as isolated systems, ignoring cross-border interdependencies.Fully resolving this limitation is computationally intractable, as adequatelyrepresenting neighbouring countries requires their neighbours in turn, rapidly producingmodels too large to solve.This project addresses this by developing a vertical integration methodology that couplesa national sub-model with a surrounding macro-level model. Cross-border tradeflows are extracted from the macro-level model and applied as boundary conditions in thesub-model, allowing the national system to respond to external energy market pressureswithout requiring a fully resolved continental model. The methodology is implementedwithin the GENeSYS-MOD framework and evaluated through a Swedish case study, usinga newly constructed dataset divided into Sweden’s four electricity bidding zones.The results demonstrate that vertical integration fundamentally reshapes Sweden’s optimalenergy configuration in ways an isolated model cannot capture. Hydrogen exportdemand to Finland emerges as the dominant driver, cascading through the power systemand redirecting electricity away from domestic industry, slowing its electrification. Accessto imported natural gas further reinforces this pattern, as fossil-fired heating becomesmore competitive than electric alternatives. Although net emissions remain comparablebetween the models, the vertically integrated model shifts toward a greater dependencyon carbon capture technologies rather than emissions reduction at source. The sub-modelalso exposed a spatial resolution mismatch: trade patterns optimised at the European levelcan produce infrastructure investments that are impractical at the national scale.The study highlights that what is optimal from a European perspective may not alignwith national climate goals, a tension that isolated national models cannot reveal. Addressingthis through more sophisticated vertical integration methodologies represents animportant direction for future research.