Integrating renewable energy resources in electricity distribution systems—A firm-level efficiency analysis for Sweden controlling for weather conditions

Sweden is at the forefront of the transition of its energy sector to low-carbon technologies with profound consequences for both energy generation and its distribution. However, the impact of this transition on the performance of Electricity Distribution System Operators (DSOs) has not been thoroughly studied. The article addresses this gap by using a novel approach and detailed georeferenced firm-level, weather, and regional data in Sweden from 2014 to 2019. Our findings indicate that (i) an increase in the number of small-scale feeders and (ii) a higher degree of decentralized energy production (decentralization) both improve DSOs’ cost efficiencies. Additionally, we demonstrate that DSOs have adapted well to long-term weather variability. These results have significant implications for the effective implementation of renewable energy policies.