Reverse auctions could be Sweden's next tool for energy efficiency, according to a new pilot study

Today, March 11, the report "EnerAct – reverse auctions as a tool for greater energy efficiency" will be submitted to the government.

A new policy instrument can increase energy efficiency for every tax dollar spent through a method known as reverse auctions. This has been tested in a pilot study by RISE in collaboration with Fossil Free Sweden, Göteborg Energi, Innovatum Science Park, the City of Gothenburg, and the Västra Götaland Region. The method involves companies competing to offer the greatest energy savings per krona of support.

A new policy instrument can increase energy efficiency for every tax dollar spent through a method known as reverse auctions. This has been tested in a pilot study by RISE in collaboration with Fossil Free Sweden, Göteborg Energi, Innovatum Science Park, the City of Gothenburg, and the Västra Götaland region. The method involves companies competing to offer the greatest energy savings per dollar of support.

Reverse auctions are already used in Switzerland, Portugal, and the United States, among other countries.

How it works

• Companies and other players bid on how much efficiency they can deliver and at what cost.
• All projects must meet certain basic requirements in order to weed out unserious operators and ensure that projects are feasible.
• The projects that deliver the greatest energy efficiency gains per tax dollar win the auction and receive financial support to implement their projects.
• Measures with a repayment period of less than three years are excluded, which should ensure that aid is not granted to projects that would have been carried out anyway.

Meeting the EU's stricter requirements

If Sweden chooses to introduce reverse auctions on a broad scale, this could be an effective new policy instrument for accelerating the transition to a fossil-free society and meeting the EU's stricter requirements in the EPBD (Energy Performance of Buildings Directive) and EED (Energy Efficiency Directive). 

– In order for Sweden to meet its commitments under the EED and EPBD, the pace of energy efficiency improvements needs to increase. Reverse auctions are a new approach in Sweden, but experience from other countries shows that the model works well. Our pilot study also indicates that, if designed correctly, it should also work in Sweden. The hope is that the method will lead to more energy efficiency improvements happening faster, at a lower cost to the state, says Sara Bargi, project manager at RISE.

Increased cost efficiency

"This is a game changer. Finally, there is a concrete proposal for a powerful instrument for energy efficiency, which is often cheaper than producing new electricity. What's more, the proposal has been tried and tested in other countries. This is a golden opportunity for Sweden – so now we hope that the proposal will be taken up by the government, says Svante Axelsson, national coordinator at Fossil Free Sweden.

In the fall of 2025, a live test was conducted in which seven Swedish companies participated. The results showed that the auction element tended to increase both interest and cost-effectiveness. The pilot test indicates that the state's cost for a kilowatt hour released is around 19 öre/kWh.

"Industry and the business sector have great potential for energy efficiency improvements. With reverse auctions, companies that are ready to implement measures can receive support more quickly and in a more targeted manner, which both strengthens competitiveness and contributes to climate change mitigation," says Maria Olsson at Innovatum Science Park.

The project has shown that reverse auctions for energy efficiency could be appropriate to introduce in Sweden in order to achieve set climate and energy targets.

The study was funded by Vinnova. Read the report here: https://www.ri.se/sv/projekt/eneract-policylabb-auktioneringssystem-for-energieffektivisering