2. Infrastructure and accessibility

The chapter examines the current portfolio of infrastructure on Gotland and assesses the factors that affect its capacity to meet the needs of the island. Infrastructure is an important enabler of economic development and is critical in affecting the well-being of people. A sound set of infrastructure components can play a critical role in making a region both a more prosperous and satisfying place; conversely, weak infrastructure can limit a region’s attractiveness to firms and households. Islands face particular challenges in providing infrastructure because they cannot take advantage of links with neighbouring regions to pool the supply of particular forms of infrastructure; neither can they benefit from scale or network effects due to their physical separation from the mainland.

The chapter is divided into three main parts. The first is an assessment of the main elements of physical infrastructure on Gotland, organised by major type. The second is a general discussion of the role of infrastructure in terms of economic development. This section, while largely conceptual, is provided as a way to clarify the ways investments in specific forms of infrastructure might affect local economies. Discussions of Gotland’s development strategy should also take into consideration infrastructure investments to ensure that they fully support development efforts since alternative development strategies each require a different mix of infrastructure. Finally, the third part provides recommendations around potential areas of investment that could enhance economic growth and social well-being on the island.

This organisational structure was chosen because it provides a way to examine how alternative outcomes for key future development challenges can alter infrastructure investments. For example, it is clear that the fate of the local cement plant on Gotland will have large consequences for a significant part of future infrastructure investments. If the cement plant remains in operation with lower emissions, a new submarine cable will have to build to provide enough electricity to power the new carbon capture technology that will be adopted. If the local cement plant closes, alternative approaches to providing electricity may be viable, given the much lower level of electricity demand that will result. Gotland’s ambition to be an exporter of renewable energy also hinges on the existence of a new submarine cable. In addition to electricity, increased military presence on the island will likely offer new economic opportunities but may adversely affect water needs and land use possibilities. At this moment, how the future of these three challenges will evolve is uncertain, which makes it important for regional development strategies to investigate the implications of various combinations of outcomes and to develop plans that incorporate different scenarios. Depending on how the future evolves, Gotland could require a considerably different set of infrastructures.

The set of infrastructure on Gotland is provided in different ways (Table 2.1). What is striking about Gotland is the significant role of civil society, mostly in the form of local development organisations, in providing some forms of infrastructure that are typically the responsibility of local or regional governments, or the private sector in other OECD counties. While it is common for rural civil society to take up roles that are typically the responsibility of the local government or the private sector in urban areas, such as volunteer fire departments or transport services for the elderly, on Gotland and in other parts of Sweden, it also extends to providing water, energy or fibre optic infrastructure.

Gotland receives the bulk of its electricity via an undersea high voltage transmission cable that is operated by the Swedish National Grid Company and has no major generation facilities on the island. On the island, distribution of electricity is managed by a local company. Region Gotland holds only 25% of the shares in the local energy company Gotlands Energi AB (GEAB) and its grid company. Renewable electricity is mainly provided by small private operators, some of them owned by local development companies. The region maintains a small amount of fossil fuel generation capacity as a backup system in case of failure of the main transmission cable from the mainland. In order to increase the power capacity on Gotland, the existing 70 kilovolt (kV) electricity grid on the island is due to be strengthened and in parts upgraded to a higher-voltage (130kV) grid. Smart grid functions and the use of a flexible load market are planned to be part of new grid solutions. In 2020, around 180-megawatt (MW) capacity was installed. According to the local grid company, 235 MW (wind) and 200 MW (solar) are objectives for 2035 and hereafter (Region Gotland, 2021[1]).

The Swedish government has commissioned the Swedish Energy Agency to make Gotland a pilot area for Sweden’s transition to a sustainable energy system. In the spring of 2019, the Energipilot Gotland roadmap was launched. Gotland therewith became a pilot case for smart and renewable energy systems and was granted additional money for investments. The measures proposed in the plan aim to contribute to increased security of supply, competitiveness and ecological sustainability (Box 2.1).

Treated water is supplied by regional government-owned entities, particularly in Visby and other larger settlements. Raw water for these treatment plants is mainly groundwater but reservoirs are also employed. Like in many parts of rural Sweden, a large share of residents (40%) living in small communities or the countryside on Gotland continue to rely upon private wells for their water. The local cement plant operates a large water supply system based on reservoirs for its production process. Farms typically rely on wells for household water and on-farm reservoirs for irrigation and livestock production. In addition, there are examples of civil society distributing treated water to a local community for household consumption. Wastewater is managed through region-owned treatment facilities in most settlements and through septic systems on farms and other isolated homes. In addition, civil society is also playing a role in providing supplemental sewage treatment capacity in some smaller communities that are then used for irrigation purposes.

The total operating budget for water and sewage solutions for 2021 was SEK 275 million, the technical administration (Teknikförvaltningen) however only spent SEK 103 million. The difference can be explained by projects being cancelled or postponed due to limited personnel resources within the water department and the project department. Like in many other municipalities, the fact that budgeted money is not spent seems to be a pattern for a number of years now (Region Gotland, 2021[1]). Underspending for several years in a row can lead to important upkeep or new installations not being made in time. It would be important for Gotland to look into the consequences of potential underspending.

Region Gotland is responsible for investments in and maintenance of streets and roads of networks in Visby, about 220 km in total, and most of the streets in other urban areas (about 100 additional km of roadway). Funds for investments and maintenance are included in the regional budget. It is also possible to obtain co-financing for the region’s investments in measures that improve road safety for example, through state funds in the regional plan for regional transport infrastructure. Yet, most transport infrastructure is provided by the regional government. The Swedish national government is responsible for maintenance and investments in state roads, which are covered in the national infrastructure plan. Gotland has about 1 500 km of state road, operated by the Swedish Transport Administration (Trafikverket). The investments are financed via the regional plan for regional transport infrastructure. Funds for maintenance are included in a national infrastructure plan. Among other things, this plan includes investments in the railway system and the major roads. As Gotland does not have any major roads or railways, none of the region’s new investments in this domain are financed through the national plan.

In terms of planning, all regions produce plans for regional transport infrastructure every four years. This is part of state infrastructure planning. For Gotland, Region Gotland is responsible for establishing and deciding on the county/regional plan. The county plan contains investments in the state infrastructure and funds that go to co-finance traffic investments in the region. Trafikverket is responsible for implementing the plan through annual grants from the government. The planning periods extend over 12 years with ongoing revisions every 4 years. For Gotland, the plan covers SEK 273 million for the entire 2022-33 period (Region Gotland, 2021[1]).

The state became involved in ferry traffic to Gotland during the 1970s to secure ferry connections all year round to the island. Trafikverket is responsible for ferry traffic to Gotland. Within its assignment to procure interregional public transport, ferry traffic to Gotland is procured. Procurements are carried out every six to ten years. The current operator is Destination Gotland, which holds the rights from 2017 to 2027. As part of the agreement, the operator receives the revenue from ticket sales, among other things, as well as a fixed compensation per year from the state. Work is currently underway for the next procurement circle starting in 2027. Gotland’s Transport Council (Trafikrådet), consisting of representatives from organisations, authorities and associations, has defined how it wants air and ferry traffic to contribute to Gotland’s development. It is its understanding that Gotland’s position should be central to future procurement decisions of ferry traffic done by the national government. In summary, the regional Transport Council would like the traffic to and from Gotland to be:

  • available

  • long term

  • durable

  • good frequency

  • fast

  • reasonably priced.

Region Gotland owns 15 ports, a number of which consist of smaller leisure ports leased to local associations. The Swedish Maritime Administration (Sjöfartsverket) is responsible for the waterways; Region Gotland is responsible within the port boundary. The ports of Klintehamn and Visby are of national interest (riksintressen) and important traffic facilities also from a national perspective. Visby harbour, Klintehamn harbour and Slite harbour are the largest harbours. The port of Visby is the base for state-procured ferry traffic though Gotland lacks a reserve port for ferry traffic. Large parts of goods handling have been moved from Visby to the ports of Klintehamn and Slite but, in addition to the goods from procured traffic, the port of Visby also handles relatively large goods flows in the form of grain and oil, as well as special transport such as concrete elements for construction projects. Investments in the ports are financed by Region Gotland, which in turn charges port fees to those using the ports. Investments in ports can also be partly financed within the national plan for transport infrastructure. Since 2018, there has been a quay facility in Visby for docking cruise ships. The cruise ship quay is built and owned by Region Gotland, which leases it to CMP (Copenhagen Malmö Port) responsible for the operation of the quay for the next 20 years. There might also be a business opportunity around mooring fees for yachts on Gotland. Encouraging people to move their yachts to Gotland by offering lower harbour fees could help to cover the cost of harbour maintenance and benefit the local economy without putting stress on the housing market. People sailing to Gotland or keeping their boat there would spend their money in the island’s shops and restaurants and would be able to live/sleep on their yachts. Furthermore, local employment could be generated through the maintenance of the yachts and winter storage.

Visby Airport is operated by a state-owned company, Swedavia AB. The company operates and develops all of Sweden’s national basic airport infrastructure. The importance of air traffic for Gotland means that Visby Airport has a strategic role for the region. The airport is also an area of national interest (riksintresse), which makes it necessary for the airport to be available 24 hours a day for emergencies, just like the hospital helipad.

While not formally ascribed, many Swedish municipalities view broadband as a utility, where local authorities are responsible for providing a significant proportion of public services and infrastructure. Local governments view municipal fibre optic networks as a basic infrastructure for their communities. Most Swedish municipal networks provide retail “operator-neutral” network infrastructure based on fibre to the building (FTTB) or fibre to the home (FTTH). That is, their business model relies on open networks where they act as physical infrastructure providers offering wholesale access to retailers on a non-discriminatory basis. This has led to a notion of “open” municipal networks, which contrasts with other business models for backbone and backhaul fibre optic provision that rely on completely vertically integrated telecommunication operators present both in wholesale and retail markets (OECD, 2018[3]).

Almost a decade ago, Gotland was able to provide the possibility for most homes and businesses to connect to a fibre optic cable network that covers the island. The main backbone to communities was provided by existing private sector operators to each of the 92 parishes on the island but final connections to homes were provided by parish-based community organisations that carried out the digging of trenches and the final connections. As a result, Gotland has both a high rate of direct connectivity via fibre-based broadband but also the potential for an expanded wireless network, since cell towers can easily connect to the fibre optic backbone. However, the combination of low population density and a small number of people, which leads to low rates of return on investments, has impeded private investment in next-generation cell towers.

For the most part, there are three roles different stakeholders take in fibre optic networks in Sweden depending on the layer of broadband infrastructure and services: i) infrastructure provider (e.g. dark fibre); ii) network operator (e.g. manages and owns active network infrastructure, for example, bitstream access); iii) service provider (e.g. Internet or pay-TV service provider).

Gotland’s ability to meet its infrastructure needs is linked to the availability of funding and financing. Funding for infrastructure on the island primarily comes from Region Gotland, the national government, the EU and local citizens. Financing for infrastructure can come from private or public sources, including banks, infrastructure operators (e.g. telephone companies), European financing agencies (e.g. European Investment Bank) and municipal financing partnerships (e.g. Kommuninvest).

In 2020, Region Gotland had an annual revenue of SEK 7 279 million. The primary source of income is tax revenue, which accounted for 54% of total revenue, followed by 16% from a national equalisation grant, 8% from other grants, 7% from user charges and fees, and 15% from a mix of sales of business operations, contracts, rents, leases and other sources (Region Gotland, 2020[4])

Total expenditure in Region Gotland was SEK 7 124 million in 2020. The main expenditure items were on personnel (49%) and contracts (18%) (Region Gotland, 2020[4]).The total investment budget for 2020 was set at SEK 1 010 million out of a total budget of SEK 5 308 million. A large proportion of annual investment (77%, SEK 774 million) is conducted through the public works committee. The remaining investment in 2020 was forecast to be through the Regional Executive Board (SEK 129 million), the Childcare and Education Committee (SEK 11 million) and the Health and Medical Care Committee (SEK 72 million). These investments cover roads, public transport, education facilities and health facilities.

According to Kommuninvest, Region Gotland had the second-lowest level of investment in Sweden in 2019 at SEK 12 231 per inhabitant, compared to a national average of SEK 18 695 per inhabitant (Kommuninvest, 2020[5]). Investment by Region Gotland decreased by 25% between 2018 and 2019. In addition, depreciation and amortisation are significant and were approximately SEK 237 million in 2016, which indicates that a significant proportion of investment is related to upgrading or replacing existing infrastructure.

Total debt in Region Gotland in 2020 was SEK 570 million, with SEK 84 million allocated as long-term debt. The equity/assets ratio in 2020 was 41.9%, which is lower than Region Gotland’s target of 45%, indicating that a substantial proportion of assets are financed from external equity. The average equity/assets ratio according to the balance sheet for all Swedish municipalities in 2020 was 43%. For all Swedish regions, the corresponding average equity/assets ratio was 23%. The average equity/assets ratio for both municipalities and regions was 38%. Region Gotland includes the regional assignment and makes up approximately one-third of the business. The conclusion is that Gotland does not differ much from municipalities and is better located compared to regions.

Other major infrastructure investments in Gotland are made by national and European governments. In 2011, for example, the European Regional Development Fund contributed EUR 163 000 to support a EUR 4 million upgrade of Visby Port (EC, 2019[6]).

One particular funding and financing challenge for Gotland is that the population is ageing. An ageing population can increase the old-age dependency ratio, potentially resulting in lower tax revenues and increased expenditure on pensions and care for the elderly. This can potentially impact investment by lowering available funding, reducing the ability to access external financing and changing infrastructure needs.

Gotland faces several important infrastructure challenges, some of which reflect its island status, while others are related to the small size of the local population and the dominance of the seasonal tourism industry in the economy. Although infrastructure does not generally attract visitors to a location, it can contribute to their satisfaction with a place. Tourists generally expect that they will be able to carry on various aspects of daily life while on holiday unless, of course, they have intentionally chosen a place with limited facilities. While most of these challenges have been recognised for a considerable period of time, an increasingly important factor is climate change, which is both altering average climatic conditions and increasing variability in temperatures and precipitation.

Because the population of the island is much higher in the summer months than in the winter season, some infrastructure has to be sized to meet this peak demand. This leads to excess capacity for a significant portion of each year, and since tourism and seasonal home use are increasing over time, there is pressure to further expand infrastructure to meet the new demands. However, underutilised capacity still has to be paid for and, as a result, the unit costs for water, sanitation and other forms of infrastructure on Gotland are relatively high when compared to places with a more stable seasonal demand. Further, without sufficient increases in capacity, the attractiveness of Gotland might not be able to fulfil its full economic potential.

For regions that have adjoining neighbours, it can sometimes be possible to either construct joint infrastructure projects, such as solid waste disposal sites, or to purchase capacity from another region during periods of increased seasonal demand. Sharing capacity can reduce unit costs if there are scale economies in construction and operation while purchasing capacity from a neighbour to meet short-term peaks in demand can avoid having to construct too much internal capacity for normal demands. Like sparsely populated areas in the north of Sweden, for Gotland, sharing infrastructure is limited as an island distant from the mainland. Shared infrastructure at present includes the subsea electrical cable that provides the majority of Gotland’s electricity as well as medical service provision with Region Stockholm. A clear implication of Gotland’s island status is that it is not eligible for the majority of Sweden’s transport infrastructure funds. These funds target major roads and rail network improvements and, since Gotland has no major roads and no rail lines, it cannot access this large funding pool (Region Gotland, 2019[7]).

Because most forms of infrastructure are characterised by economies of scale, the small population of the island leads to constructing small capacity infrastructure systems that have high unit costs relative to those in more largely populated regions. Water and sewer pipes, and electricity distribution lines all have to run long distances with few connections per kilometre. While some forms of infrastructure can be provided by for-profit investors, such as telecommunications or even water and transport systems, Gotland faces challenges in meeting private firms’ investment criteria due to its small size, low-density and seasonal demand variability. The result is high construction costs for infrastructure that cannot be readily paid for by the local population through user fees or local taxes. This in turn makes being able to make investments in infrastructure dependent on funding being made available by the national state or the EU.

Climate change and the needs for environmental protection and climate adaptation make infrastructure challenges complex. Gotland’s most recent regional development plan, Our Gotland 2040, clearly identifies dealing with climate change as a crucial factor influencing future development actions for the region. Indeed, one of the five main societal challenges identified in the strategy is to move Gotland to higher rates of energy efficiency and increased sustainability. Hotter summer temperatures will make existing seasonal water shortages more serious. The summer season already experiences low rainfall and hotter temperatures are likely to increase evaporation rates from water storage. Hotter temperatures will also tend to increase water use by households and agriculture as well as the risk of fire, which in turn will increase the demand for water. Furthermore, while there is a need and will to generate more renewable energy through wind power (there are even proposals to export potential wind power), significant challenges involve finding suitable locations for wind turbines considering local biodiversity protection of white-tailed eagles and golden eagles as well as the expansion of the armed forces.

Climate change may also significantly alter travel modes to and from the island. In Our Gotland 2040, the region has set itself the challenge of having a climate-neutral energy supply by 2040. Consequently, ferry service and air service are currently preparing to undergo a significant transformation. Aiming to move away from fossil fuels, the Gotland Horizon project, a private sector-led initiative, seeks to establish Sweden’s first large hydrogen-powered vessel for passengers and freight. Similarly, airplanes are intended to become electric. A new aircraft-charging infrastructure at Visby Airport has set the foundation for future electric aviation from 2021 onwards. The shift to electricity-powered transport, on the road as in the air, as well as hydrogen-powered ferries might increase the demand for electricity on the island as well as the need for electric and hydrogen charging stations and other supporting infrastructure.

The military presence also plays a role in Gotland’s infrastructure decision. In 2018, the Gotland Regiment was reconstituted after being disbanded in 2005. While it currently has just over 300 personnel, including civilian support staff, there are expectations that the number of people will increase in the near term as Sweden reinvests in strengthening its military capacity. Because many of the facilities that used to house the regiment were disposed of when it was disbanded, there will be a new construction cycle to rebuild capacity. An immediate impact of reconstitution is on the current land use development plan for Gotland since land that was expected to be available for housing and other uses will now remain in military hands. In the near term, as the regiment expands, there will also be additional pressure on the moderate-income rental housing market, as incoming soldiers and other staff seek accommodation. Further, the regiment will increase the demand for water and sewage treatment and place some increased demands on social infrastructure, particularly medical care. As needs increase because of national security interests, Region Gotland should partner with the national government and military to ensure that whatever new infrastructure is built to meet the military’s needs can also meet the island’s wider needs: the financial burdens of this are shared.

The main source of electricity on Gotland is two high-voltage direct current undersea cables that supply power from the mainland. The first cable began operating in 1954 and a replacement cable was installed in 1983, with a supplemental parallel cable installed in 1987. The current link is now nearing the end of its expected life in 2035. The main purpose of the two current cables is to import electricity from the mainland to Gotland; but as wind power is expanding on a larger scale on Gotland, demands for export production from Gotland to the mainland when production exceeded consumption was also discussed. However, the ageing connection with mainland Sweden was not originally built for switching between import and export. Furthermore, the ageing of the cable seems to cause power failure across the whole of Gotland (Swedish Energy Agency, 2019[2]). Power to the cable is provided by the Swedish national grid operator and, on Gotland, the local power company operates the island distribution system.

All electricity produced on Gotland is today renewable with the exception of the electricity production that takes place for reserve power. Conditions for producing electricity from wind and solar are very good on Gotland (Swedish Energy Agency, 2019[2]; Region Gotland, 2019[8]). Wind power currently meets 40-45% of the yearly electricity demand on Gotland (1 000 gigawatt hours or GWh): with excellent wind speeds and its open position 90 km from the mainland, the resulting electricity generation though wind now often exceeds demand, offering possibilities to potentially export power. Alternatively, surplus wind capacity could be used to produce green hydrogen on the island. The hydrogen can then be used locally to fuel backup generators when wind speeds are low or even refill the planned hydrogen-powered ferry. In addition to wind power, a small amount of electricity is also produced today from solar cells and hydropower.

Gotland has set itself the challenge to have a fully renewable energy system by 2040. Before 2020, the objective was to meet 100% renewable energy supply for households and businesses on Gotland, except for industrial fuels for the cement and lime enterprises. After running a feasibility study, the Swedish government commissioned the Swedish Energy Agency to make Gotland a pilot area for Sweden’s transition to a sustainable energy system. In the spring of 2019, the Energipilot Gotland roadmap was launched. Gotland therewith became a pilot case for smart and renewable energy systems, where experiences from other national projects as well as projects on the island are being combined (Swedish Energy Agency, 2019[2]) (for more information on different projects and measures that exists on the island to advance the fully renewable energy transition, see also Box 2.2). While some projects are part of the roadmap, others are linked to private initiatives inspired by the political decision.

Only a small number of electricity users – the cement plant, dairy processing plant and abattoir – require significant amounts of power but these users, particularly the cement plant, account for a relatively large share of total electricity demand. Moreover, they provide a significant share of local income and employment either directly or indirectly in the communities in which they are located. While it may be possible for renewables to take on a larger role in electricity supply, their intermittent nature still poses a challenge for large commercial entities and some major government service providers, such as water and sewer companies. This suggests that replacing the existing cable or alternative solutions including identifying electricity storage options may be vital if the local economy is to retain its current degree of diversification and develop in a way that will triple the current electricity demand. Furthermore, an important prerequisite for being able to increase electricity production on Gotland is also the need to adapt and strengthen the regional and local electricity network (Swedish Energy Agency, 2019[2]).

Most measures of the Energipilot Gotland roadmap are intended to supplement existing transmission, while the existing cable remains in place. The need to eventually replace the cable is only discussed at the margins and understood as a given. More concretely, the notion of developing “flexible and robust electricity systems” covers the security policy dimension and Gotland as a central military importance and mentions previous disruptions and interruptions of energy supply. Measures around developing a flexible and robust electrical system involve the increased delivery and security of renewable electricity production, including storage and developing a local market for flexibility as well as study regulations and business models linked to flexibility. It is argued that Gotland will also need a link to the mainland in the longer term for its electricity supply, as an isolated system would require very large storage (Swedish Energy Agency, 2019[2]). The fact that energy needs could fundamentally change due to the cement plant’s decision is not discussed. Consequently, the energy roadmap and the discussion on the replacement of the energy cable seem somewhat disconnected. With changing conditions, for instance, energy needs from industry and the security situation in the Baltic, the measures of the energy roadmap would also benefit from an update and reconfiguration in relation to the latest developments.

The energy roadmap mentions that different instruments and measures defined should be followed up on and evaluated. Yet, there seems to be no overall evaluation of the measures and how far they achieved their respective goals or would need to be adjusted. It would be advisable for the Swedish Energy Agency and other stakeholders involved in the energy pilot to publish their evaluation findings and consequently adjust and update the measures defined in 2019. Such a general update could include considerations of what the cable would need to provide under different scenarios. This would greatly add to strengthening the roadmap’s goals and allow a better understanding of what consequences different choices will have on the future of Gotland. Overall, the evaluations should show how well the instrument or measure responds to the intended outcome and how it has contributed to achieving overall goals, and in part what other effects have arisen in the meantime and that may need reconsideration.

The cost of replacing the power cable is well beyond the capacity of the local economy and is a responsibility of the national government. While replacing the cable is a high priority for Gotland, it is less of a priority for the national power authority, which faces multiple demands for major investments, most of which serve a larger population than Gotland’s. Questions about the timing of a replacement cable may already be affecting investment decisions by larger power users on the island, particularly as power reliability becomes an issue as the existing cable ages.

Electricity demand on the island is expected to increase due to the electrification of industrial sectors but also in part as a result of increased numbers of residents, particularly seasonal homeowners, and greater tourism numbers (Swedish Energy Agency, 2019[2]). Climate change adaptations and modern telecommunications will also play a role in increasing demand. Accommodating these changes will require additional outlays on improving the local electricity distribution system and on upgrading the internal electrical systems as well as energy efficiency in many buildings as is recognised in Our Gotland 2040.

How much electrical power the island will need in the future centres greatly depends on the viability of the major industrial power consumers. The cement plant is a major carbon emitter and, while it is a major source of cement in the Baltic region, its ongoing viability hinges on continued environmental permits, meeting emission requirements as well as on the provision of an upgraded cable (see also Chapter 1). Similarly, the dairy plant and abattoir exist because the dairy industry on the island remains a major agricultural activity. But, individual herd sizes are small, which leads to high costs of production and summer water constraints are already limiting feed availability. In the future, this could lead to too few cows to justify keeping the facilities open. If these major electricity consumers close, then power needs will be significantly smaller. In addition, requirements for more robust energy systems also need to be considered in relation to changing security policy situations and the increasing military regiment on the island.

There is considerable potential for greater wind production, both on-shore and off-shore, but challenges exist. The first is the potential biodiversity protection of white-tailed eagles and golden eagles and the military’s need to be able to operate in the airspace. For instance, an EU directive mandates more renewable energy investments but another directive mandates the protection of birds. Reconciling these two conflicting requirements has so far limited the ability to find places suitable for new wind investments. Second, wind remains an intermittent power source and because Gotland is an island, there will be a need for a major investment in backup power if the cable is not replaced. However, if the cable is replaced, the logic for more wind investment is weakened because the island will have a large and stable source of clean power unless there are options to export or concert into hydrogen.

Gotland could play an important role in combing various technologies into small-scale solutions that can be adapted to other more remote places that must rely on local energy sources. Smaller renewable energy investments may continue to make sense when they can be integrated into a more complex system. For example, there is already a demonstration project on Gotland that couples solar power with a small desalinisation plant that serves a remote community (Box 2.4). During the day, the sun powers the desalinisation process to produce water that can then be stored. In this context, the intermittent nature of solar is not an issue because sufficient water can be stored at low cost until the sun returns. Moreover, because the community is a long distance from a large water treatment facility and the cost of building a water supply system to the community is high, the reduced efficiencies of the local system become manageable.

On Gotland, the island’s distinctive geology and hydrology create special conditions and challenges regarding access to good quality water. The thin soils, impermeable rock and lack of reservoirs in the sedimentary bedrock for instance lead to limited reservoir capacity and much of the precipitation runs off to the Baltic Sea. Further, digging ditches to dry out swamps and lakes at the beginning of the late 19th century, to get more farming land, decreased the water supply. Before this, it is said that Gotland had a lot of swamps and lakes (träsk). While annual precipitation is currently considered adequate, storage capacity does not allow precipitation from the winter to be stored to satisfy needs in the summer (Dahlqvist et al., 2019[14]). According to the standards of the EU Water Framework Directive, Gotland has an unsatisfactory (ground) water status (Ebert, Ekstedt and Jarsjö, 2016[15]). In 2016, the situation was so severe that trucks carrying water were running daily between the town of Visby to different areas along the coasts. In an attempt to conserve water, the regional government on Gotland has since passed a watering ban, limiting the use of water in the summer months (Svergesradio, 2016[16]).

A key regional development challenge for Gotland is to find ways to increase the quantity of water and supply good quality water. Water demand almost doubles in six weeks from mid-summer (Region Gotland, 2021[17]). In addition to tourists, there are also increased needs by agriculture for irrigation and livestock consumption in the summer months. Future expansion of the key tourism and agriculture industries as well as the regionally set targets for population growth depend on providing additional amounts of water. In some areas of the island, water shortages have already hindered economic development due to strict regulations for the building of new houses and the start-up of new businesses that consume water. For instance, Region Gotland did not accept new connections to the water grid in southern Gotland (south of Tofta) for a number of years. This led to no new building permits being issued in areas with municipal water and sewage.

About 40% of households are supplied with water from their own wells and are not connected to the public water infrastructure. Most of these houses are outside the densely populated areas that are covered by public water facilities. The remaining residents are connected to the public water supply and receive water from water treatment plants run by the municipality (Region Gotland, 2021[17]). With an approximate connection rate of 60% to municipal water, Gotland is on the lower end in Sweden. For Sweden as a whole, the proportion of the population connected to the municipal network is about 87%, with large regional variations. The lowest degrees of connectivity are mainly found in the western parts of Värmland County, Jämtland County and the inland municipalities in Västerbotten County. Overall, only 4 of the country’s 290 municipalities have an accession rate of less than 50% of the population and the rate of connected households is constantly rising (Statistics Sweden, 2016[18]) . Around 65% of the public water supply system relies on groundwater. The remaining 35% of the water comes from lakes and desalination plants. There are 25 different water treatment plants on Gotland, of which 2 are desalination plants, 2 surface water plants, 1 treats water from a former stone quarry and the rest are groundwater treatment plants.

As importing water from other regions is generally difficult, and even more so for an island, water has been collected by the construction of reservoirs for irrigation. In addition, a small amount of water comes from desalinisation plants (see Box 2.4). While desalinisation can provide a vast amount of water, the costs are currently high. Desalination is 25 times more costly per cubic metre than groundwater extraction on Gotland (Sjöstrand, 2019[19]). Moreover, large-scale desalinisation would require a significant expansion of the electricity supply. On the industrial side, the major water user is the cement plant and the rest of the limestone industry, which provides most of its water needs directly through the use of exhausted limestone quarries that have been converted to reservoirs. The cement plant and other industry actors expand their internal storage capacity over time as they abandon working quarries but remain dependent on precipitation to fill them. While farmers largely manage their own water needs by creating dams and ponds to store water, their retention capacity is limited by topography and precipitation amounts.

Gotland is at present largely dependent on precipitation and ground water for its water supply. Yet, groundwater on Gotland has an unusually high concentration of boron, which exceeds the allowed concentrations in Sweden and needs to be treated, which in turn lowers water supply because water production is less efficient (Johansson, 2020[20]). Precipitation can be stored for future use but there are costs in creating reservoirs or other storage systems. More innovative circular solutions to water regeneration try to combine water retention, storage and desalination. For instance, a national-funded testbed is under development in southern Gotland, involving the IVL Swedish Environmental Research Institute and Region Gotland. The project is trying to address the challenge of rapid drainage where winter precipitation is not being collected and stored so it can be used in the summer when summer precipitation is scarce. Several technologies to increase water availability are being applied in the project. They include an integrated system for rainwater harvesting from drainage ditches, automatic hatches in large ditches and artificial surface water dams, artificial infiltration for groundwater, construction of groundwater dams for subsurface water storage, wastewater reuse and climate-neutral desalination based on solar energy. An important and critical part of the testbed project is communication and engagement activities with local stakeholders, such as farmers and citizens. The key to the project is also that options shall be both environmentally friendly and economically viable. Economically, the ambition of the project is to attract larger projects and companies wanting to develop sustainable systems for mitigating water scarcity, which is rapidly becoming an issue on a global scale. The project is funded by Vinnova and accompanied by a large consortium of public and private actors (Smart City Sweden, 2022[21]). If successful, this innovative approach could stimulate the sale of local expertise to regions in other countries.

Forecasts of water demand for Gotland estimate that the total water demand on the island will increase by more than 40% through 2045. In 2015, water use was at a total of 17.6 million cubic metres per year (Mm3/year) with the biggest uses by private industry, 6.1 Mm3/year, irrigation 5.0 Mm3/year and households (excluding tourism) 3.7 Mm3/year. By 2045, needs are estimated to rise to 27.4 Mm3/year largely due to significant increases in needs for irrigation, industry and animal keeping (County Administrative Board, 2018[22]). Climate change has the potential to worsen the current water imbalance. Looking at water availability (WA) as an indicator for water stress, changes in WA for the period 2021-50 compared to the reference period (1961-90), are projected to be -22.5% in spring and -17.5% in the summer, with an average decrease of -13.3% for Gotland. These projections are based on climate change occurring with very little climate change mitigation (or “business as usual”) (Johansson, 2020[20]). Furthermore, projections are that the weather will become hotter. Both of these changes imply a greater need for significantly more water storage on the island to offset higher evaporation rates from reservoirs and buffer shortfalls in precipitation.

The sea level rise of the Baltic Sea might also impact the water supply on Gotland and economic development options. The pace of sea level rise is increasing: according to the Intergovernmental Panel on Climate Change (IPCC), a global mean sea level rise of 0.63 m is likely to occur by the year 2100. Research shows that in the case of a 2 m sea level rise, 3% of the land area of Gotland, corresponding to 99 km2, will be flooded. The most strongly affected areas are of touristic or natural value, including camping places, shore meadows, sea stack areas and endangered plants and species habitats. Further, 231 out of 7 354 wells will be directly inundated and the number of wells in the high-risk zone for saltwater intrusion will increase considerably. Monitoring and planning are required to meet these climate-induced changes. They are likely to require considerable economic means and prioritisation (Ebert, Ekstedt and Jarsjö, 2016[15]).

Research has shown that the largest potential contributors to WA are irrigation dams on farms, which have the potential to meet the entire forecast irrigation requirements (see also Figure 2.1). On the municipal side, increased groundwater extraction and desalination offer the greatest WA potential yet, as mentioned, desalination is much more expensive, while increased groundwater extraction could harm aquifers. In particular, increased extraction of groundwater is problematic because it can lead to a drop in the water table that can allow an inflow of sea water from the Baltic that would make the aquifer unusable.

Better management of existing water retention and distribution systems offers the possibility of reducing waste and losses. Because the island is a closed system, with no potential for external supply, water losses due to evaporation, leakages into the subsurface or unnecessary outflows into the Baltic Sea reduce the amount of available water. The amount of precipitation cannot be altered but, by developing an expanded system of linked reservoirs, it should be possible to retain more precipitation for future use. A key step will be to reduce losses from reservoirs both from leakage and evaporation possibly by lining ponds and quarries and using more tanks and covered storage facilities. Efforts to reduce runoff from fields should be undertaken and creating more wetlands to improve aquifer recharge should be explored.

The future of the cement plant is significant in this consideration. While it largely manages its own water supply, it is both a major consumer of water and a major source of storage capacity. Continued operation of the cement plant offers considerable economic benefits to Gotland, both as a direct source of income and employment, as a source of tax revenue and in terms of diversifying an otherwise specialised economy.

Gotland has already introduced two desalinisation plants and more of these may provide a way to augment the water supply, especially in more remote communities where constructing water distribution pipelines is particularly expensive given the low level of demand (Box 2.3). If these plants are coupled with a renewable energy system, as is the case in the pilot village of Herrvik, there are opportunities to use inexpensive power for desalinisation and store water for times when solar or wind conditions are poor.

Enhanced wastewater recycling is a clear objective of the EU Water Framework Directive. Currently, little use is made of wastewater on Gotland and most sewage is treated and discharged into the Baltic Sea. Yet, some irrigation dams can be found in Hemse, Roma and Stånga. Reconfiguring water treatment plants to provide a higher level of treatment and the possibility for on-land use will be expensive but it can reduce the need for potentially equally expensive desalinisation or storage facilities as well as provide environmental benefits, especially when used over longer periods of time. Treated water can be used to enhance agricultural productivity, which is now limited by water shortages. This could allow farmers to diversify their operations by introducing more fruit and vegetables to supplement their dairy enterprises. Experiments with this are made in Roma, where wastewater is treated and then used by farmers.

As an island, Gotland cannot rely on road or rail to move goods and people in or out of the region. This makes it reliant on ship and air travel for all of its physical connections to the rest of Sweden and other countries. Since most passenger and freight moves mainly by rail and road, Gotland faces an additional transhipment cost to connect to the rest of Sweden. Both ships and planes have fixed capacities and are subject to relatively high fixed costs. As a result, adding an additional passenger or item of cargo to an underutilised plane or ship adds little incremental cost until its capacity constraint is met. But conversely, operating a plane or ship that is significantly underutilised leads to considerable losses because fixed costs are not covered. This phenomenon makes it unlikely that either plane or ship operators will hold excess capacity in reserve and will try to operate their craft at as close to full capacity as possible.

Transport provides physical connectivity that allows the movement of people and goods between places. The essence of a network is that the more places a region has direct connections with, the better its connectivity. In this regard, Gotland has a limited network for off-island transport. Direct connections are essentially limited to the proximity of Stockholm and, while ferry and air connections can be increased as demand expands, a majority of passenger traffic still come through from Stockholm (75%) and Oskarshamn Stockholm (50%). A consequence of this is that Gotland can be perceived as a remote suburb of Stockholm in terms of the flows of people. This can be seen in a large number of visitors and second homeowners that come to Gotland from Stockholm and that international visitors must pass through Stockholm as they arrive and leave.

For Gotland, ferry service is the crucial element of transport infrastructure (see also Chapter 1). The ferry service has two components: terminals and ships. Terminals are the main fixed investment and must be designed with future capacity needs in mind both in terms of passenger numbers and the number of docks for vessels. Crucially, Region Gotland only controls the terminal structure on the island and must rely on capacity decisions by other jurisdictions for their end of the ferry route. If the corresponding terminal is inconveniently located for passengers or lacks sufficient capacity, this can reduce travel to Gotland. Both terminals and ships are configured to manage significant amounts of freight as well as passengers. By contrast, ships are flexible in both in terms of size and frequency of trips, subject to terminal capacity. In peak season, both larger ships and more frequent trips are scheduled to meet higher levels of demand.

A challenge for the ferry service is that procurements for this very service have been characterised by extremely limited competition among tenderers. On this basis, the government has commissioned the Swedish Transport Administration to investigate four models for the ownership and operation of ships. The findings of the report entitled Analysis of Alternative Models for Ferry Traffic to Gotland were published in 2021 and outline the four models. These include: i) coherent procurement of vessels and operations including possible guarantees; ii ) state-owned vessels and procured operations; iii) state-leased vessels and procured operations; iv) Gotland traffic entirely under state auspices. The study concludes that the second model (state-owned vessels and procured operation) would be the best choice, removing the competition constraining factors of ferry provision and breaking the long-standing trend of lack of competition. Yet, it also has major risks, including lack of acceptance and skills, as this has never been attempted before. As the proposed model, however, is not feasible to implement until 2027, the first model (currently in place) needs to be conducted to secure traffic after the current agreement expires (Swedish Transport Administration, 2021[25]).

In line with Gotland’s renewable energy ambitions, the current ferry operator is experimenting a project, Gotland Horizon, to develop a zero-emission vessel based on hydrogen fuel. The project is conducted in collaboration Rederi AB Gotland, Gotland Tech Development and Destination Gotland, together with various actors and involves research and technology projects to create the ships of the future (Gotland Horizon, n.d.[26]). Overall, the impact of climate goals on the Gotland ferry traffic is still largely unclear. Estimates indicate that, if traffic continues as such (i.e. with the same energy consumption but replaced by alternative fuels), the prices would double by 2045. Yet, the cost of future energy processes, especially for renewable, is very difficult to estimate. Further, alternative modes of changing speeds, routes or frequency of routes could play a role.

The Swedish Transport Administration considers that the climate goals are most likely achieved through a combination of reduced energy use and renewable fuels. As there is great uncertainty about fuel costs, there are strong incentives to reduce energy consumption in order to keep down the risk of cost increases for traffic. No matter what they include, all changes to ferry traffic are likely to have some socio-economic implications on Gotland. For instance, they could impact affordability of travel, the influx of visitors (it is assumed that hospitality industries have been driven by increased ferry accessibility) and transport times for goods, especially affecting time-critical goods. Consequently, public concerns on Gotland about changes in traffic are high. While it is too early to provide concrete answers to what effects and consequences changes would entail, implementing changes, in the long run, requires preparation, dialogue and foresight to enable adjustment and reduce the risk of negative consequences for Gotland as a region (Swedish Transport Administration, 2021[25]).

Gotland has a regularly scheduled air service that expands in terms of flight availability in the summer season. However, virtually all flights are to Stockholm area airports. If air travel to Gotland is to expand beyond a two-way flow to Stockholm, it will be important to add other connections, if only during the main tourist season. Better flight connections are particularly important for international tourists, who may be reluctant to change airports to get a flight to Gotland or who may not wish to spend time in Stockholm.

While air travel is far more expensive than ferry travel, it is by far quicker. The fast train from Stockholm’s main airport makes the connection to the city centre a rapid process. For business travel to and from Gotland, this can be a considerable advantage. In preparation for future sustainability needs, electric airfare is being considered on Gotland. Visby Airport is equipped with three charging stations for electric aircraft preparing for the uptake of electric aviation in 2030 nationally. The project is a collaboration between Swedavia, the business association Tillväxt Gotland, Region Gotland and the regional tourism industry association Gotland’s Besöksnäring (Swedavia Airports, 2021[27]).

Improving connectivity to Stockholm through a more frequent or faster ferry service and more flights would make it easier for people to move between the two regions. Typically, improved connectivity increases integration between markets and consequently Gotland could expect to become more specialised in providing hospitality and leisure services to Stockholm. This would likely increase the number of seasonal residents and retirees, which would have implications for the housing stock in Visby and other communities. Greater integration would also make Gotland more dependent on decisions and actions by people who have a weak relationship with the island. While there are benefits in stronger integration, possible consequences such as a more limited job market in terms of types of careers and a greater focus on low-wage service jobs in the leisure and hospitality sector and retail are also possible. Expansion of the military presence will increase the demand for transport infrastructure. While the military may use its own ships and planes for some of its transport needs, it will require increased access to ports and airfields.

The road network on the island is extensive. Roads are typically narrow and many have no shoulder. Bicycles are increasingly popular with visitors and residents and the road network is not adequate in many rural areas for both vehicles and bicycles. While Gotland is extending its network of bicycle paths to parallel many of the main roads, the grid of bicycle paths is currently more developed in the southern and northern parts of the island. With the development of e-bikes, the potential for longer bicycle trips has increased, as has the interest in activities for tourism that are bicycle-based. For example, the Bergman Museum on Faro now offers day trips by bicycle to various sites where Bergman filmed scenes on the island.

The public transit system on Gotland is extensive but service on rural routes can be infrequent which makes it less useful for some users. Increasing the frequency of the scheduled bus service is not feasible given the relatively low ridership on many routes. This is a common problem in rural areas across the OECD. Many rural regions have developed alternatives to conventional bus routes by introducing transit on-demand systems that make use of taxis, small vans or other vehicles that respond to travellers’ requests through a dispatch system. Examples include: the 100-won taxi in Korea (Sang-Hun, 2021[28]), JustGo in North Lincolnshire, UK (North Lincolnshire Council, 2022[29]), and BRATS in Baldwin County Georgia, (Baldwin County, 2022[30]). Each of these systems uses a mobile-phone-based request and dispatch system to connect riders with a small bus or taxi.

As Sweden promotes the conversion of vehicles to electric power, a significant increase in charging capacity will be required. Because the number of vehicles on Gotland increases significantly in the summer period a major investment in public rapid charging systems will be important to accommodate visitors. Gotland has already embarked on a demonstration project to introduce wireless charging on the major road that connects Visby and the airport as a potential way to address the problem of building a large number of charging stations (Nhede, 2019[31]). The precommercial demonstration project has the purpose of building knowledge on wireless charging of electric trucks and buses on public roads. The 4-km road stretch, of which 1.6 km is electrified (800 m in both directions), connects the airport with the town of Visby.

Gotland’s sustainability ambition is also visible in transport projects. Between 2018 and 2021, the three-year collaborative project between the county administrative board (CAB) of Gotland and Region Gotland promoted sustainable transport and sustainable travel through:

  • Knowledge-enhancing and supportive efforts against transport companies to promote the transition to more sustainable transport.

  • Promoting knowledge and sustainability requirements in orders and procurement of transport and mobility services.

  • Efforts to increase knowledge and promote sustainable travel among the inhabitants of Gotland, mainly in commuting, and with a special focus on public transport in the form of bus travel (CAB Gotland, n.d.[11]).

While a longstanding major factor in economic development, connectivity, especially digital connectivity, is increasingly important. Because digital infrastructure provides more timely information, those with better access can make better decisions that give them a competitive advantage. This is true for nations, regions, local governments, firms and individuals.

COVID-19 has accelerated the digitalisation of working and social interactions. Global travel restrictions and social distancing measures to contain the pandemic have forced firms and workers to perform a wide range of daily functions through virtual means and, in turn, have accelerated the uptake and acceptance of remote working, which will likely remain in its hybrid form after the pandemic. Remote working has already revealed a number of benefits to our lives including reduced transport-related GHG emissions, greater flexibility of working and potential cost savings for firms. Remote working may also create new job opportunities for people who would not have otherwise joined the labour market, particularly people seeking to work part-time and people with certain disabilities. Hence, a more hybrid form of remote working is likely to be one of the lasting legacies of the pandemic (OECD, 2021[32]).

Remote working opens up new opportunities for regions outside large cities to attract new residents, boost economic activities and revitalise communities. Attracting new workers and firms that embrace remote working offers rural areas the possibility to revitalise regions. People with the potential to work remotely could be attracted to relocate to regions offering a high quality of life, for instance through better access to environmental amenities. Firms paying high-location costs in cities could also find it profitable to change their real estate strategy, either by downscaling or by relocating part or indeed all of their headquarters (OECD, 2021[32]). While there might be some risk for the reduction of knowledge and higher skills in local firms and organisations, as employment opportunities can be more attractive in mainland-based organisations, Gotland would still benefit from people living and thus consuming on the island. Overall, the long-term effects of remote working on demographic and/or commuting patterns and implications for rural development still need to be better understood. In particular, understanding how high-skilled people teleworking in rural communities can contribute to local economic development is an area of interest for many regional policy makers.

Gotland has made a major effort in building a strong foundation for its digital infrastructure. In 2020, 88% of the population/households had access to the fibre optic network. Almost 92% of the permanent population/households have access to the network and just over 60% of all properties with holiday homes. Their action was recognised as a good practice example by the European Broadband Awards 2017 competition, highlighting the effort of local parish organisations and a model that increased the interest of the local market and attracted the main telecommunications actors to compete for parish projects (Box 2.4). Also, in terms of connectivity speeds, the island compares extremely well, performing better than the remote regions and island benchmark (see also Chapter 1). Download speeds are increasingly important because online services require higher data transmission rates. Low transmission capability and speed severely limit access to content-dense applications and websites. As a result, fast stable Internet access has become a necessity for those wishing to benefit from the full economic potential of the Internet (Ibrahim and Bohlin, 2012[33]).

In the last decade, digital infrastructure has seen the rapid growth of wireless networks. In the process, fibre optic remains the backbone for a much more elaborate set of services that can be accessed wherever the user has a connection through the wireless spectrum. In the future, the Internet of Things (IoT) represents the next step in a convergence between information and communication technology (ICT) and economies and societies on an unprecedented scale. It holds the promise of substantially contributing to further innovation, growth and social prosperity and as with any such development, policy makers and other stakeholders need evidence to inform the decisions they will take in the coming years on digital infrastructure.

Sweden has been at the forefront of this market development, especially in terms of machine-to-machine (M2M) communications. M2M connected devices are a small subset of the IoT as, increasingly, IoT-connected devices are becoming Internet Protocol (IP)-based and platform-agnostic (i.e. operating on mobile, fixed and other networks). M2M devices are characterised by autonomous data communication with little or no human interaction (OECD, 2018[3]).

In the future, different M2M applications are likely to generate very different usage patterns. Environmental sensors, for example, may only generate very small amounts of data relative to connected bicycles and robots, right up to perhaps the largest amounts in the case of autonomous vehicles. As an M2M leader and likely to be one of the first countries to deploy 5G, as well as having leading automobile and telecommunication equipment manufacturers, Sweden is in a front runner position in terms of digital innovations.

Because of its solid fibre optic network, Gotland has an advantage in comparison to many other rural places that lag fibre optic connections. 5G wireless connectivity promises faster connections but, to get the most out of it, the towers/base stations for 5G signals need to be connected to fibre optic. In some areas, there is a concern that the growth of 5G will aggravate existing rural-urban disparities since urban areas that already have fibre optic will be well placed to get the most out of 5G, while rural areas that lack fibre optic will be left behind. This is not the case for Gotland. Given that many of the most interesting applications for the IoT are rural, for example, to boost productivity and automation in the agricultural sector, and that most rural places are not yet sufficiently connected to make proper use of these technologies, there may be an opportunity for Gotland to become a testbed for emerging rural applications of 5G-connected technologies not just in agricultural applications but potentially also in water, electrical systems and others.

In the last decade, Gotland has experienced a rapid increase in the share of housing stock that is being used as seasonal homes and a related increase in the average price of housing. Between 2010 and 2020, 2 184 building permits were granted, of which 1 277 or 58% were for second or holiday homes. Overall, approximately 40% of the total amount of housing is second homes. This is twice as much as the national average (OECD, 2020[35]). The lasting popularity of the island with second home owners has impacted the housing market and has fuelled the rise in housing prices (for both purchase and rent). In 2020, Gotland was the fourth most expensive county in Sweden. The average monthly rent per square metre was SEK 1 128 on Gotland and SEK 1 120 for the Swedish average. In addition, prices have increased significantly in the past years, leaving the municipality to rank 5th among the 290 Swedish municipalities in the country with the highest price increase (CAB Gotland, 2021[36]). Seasonal homes now dominate new housing since they are the most profitable form of new construction and the share of moderate-income housing, particularly rental housing, is not on par with population increase, making it hard for lower-income households to find and afford a place to live (Chapter 1).

The regional government has tried to provide incentives to developers to build moderate-income and rental housing but, to date, they have largely been unsuccessful because they offset the higher returns from building seasonal homes for high-income households. For instance, land allocation agreements with building companies sometimes clearly state requirements to build rental apartments. Penalties of double the price paid for land are invoked if the rules are not followed. Still, some companies would rather pay the fee and make a profit by selling apartments instead (Helagotland, 2018[37]). A few rural municipalities have embarked on projects to build small apartment buildings they will hold and rent to households who move into the area either on a short-term or longer-term basis. For instance, the local development company Virudden Utveckling AB in south-eastern Gotland owns and manages two apartment portfolios in När for rent. This includes 6 apartments in the former Parish hall and 16 ground floor apartments at Mickelgårds, a former warehouse (Virudden Utveckling, n.d.[38]). While this approach helps the community, it is not widespread or large enough to have a major impact on the island and does not address the problem in Visby where the mismatch is largest. Visby’s rental market also offers limited competition as the two main private landlords own more than half of the town’s buildings.

Gotland’s economy is highly reliant on agriculture and tourism, with the public sector also playing a significant role (Chapter 1). Agriculture and tourism are both largely low- to moderate-wage sectors and are seasonal in nature with the summer months offering the largest number of jobs. This results in a seasonal peak in the demand for short-term housing to accommodate an influx of workers from the mainland and other places. Many of these jobs are in the immediate vicinity of Visby where the stock of affordable housing is most scarce, as this is where the demand for tourist housing is the greatest. In response, Visby hotels are already converting their meeting spaces into dormitories for their summer workers in an effort to attract enough workers to meet the summer tourism boom. Other businesses, such as restaurants and gift shops lack this possibility and face increasing difficulties in finding enough summer workers. With insufficient workers, businesses are unable to adequately serve customers. Away from Visby, some farms and small communities have similar problems, although the scale of the problem in these places is less.

Contributing to the housing mismatch on Gotland is the presence of a growing university and, more recently, the return of the military. The lack of availability of rental housing for incoming permanent residents is acute. In some cases, schools have had difficulty in hiring new teachers because there was no suitable place for them to rent. While it is yet unclear how large the revived Gotland regiment will be, it will clearly impact the demand for housing. Soldiers and their families will place additional demand on moderate-income housing. Further, an expanded military presence will have additional multiplier effects on housing demand because businesses that serve the military will need additional workers. Finally, the return of the military will further constrain the amount of land that can be converted from its current use to new housing, which will likely stimulate further increases in the cost of land for building new housing and reduce the incentive of private developers in building moderate-income housing.

University students are a significant factor in the population of Visby and most live in rental units off-campus as the university has no student housing, while increasing its student population. Many students live in seasonal homes that are rented for ten months of the year but are forced to move out in the summer, leaving no opportunity to stay for a summer job or an internship on the island. The lack of summer housing for students and the general shortage of rental housing has two additional adverse effects. The first is that students might naturally be a source of summer workers but lack a place to live, leading to few staying on Gotland for the summer. Second, when they graduate, they tend to leave the island, even though Gotland is trying to attract younger workers. With poor prospects for finding permanent rental housing and a failure to develop a relationship with the island that could have come from summer work, it is not surprising that most graduates return to the mainland. Further, the COVID-19 pandemic has increased the number of people using their seasonal homes a larger part of the year, which has reduced the stock of homes for rent even further during parts of the year. As a first step to improve the situation, the regional government has recently signed an agreement with a real estate company to build 150 student apartments.

Given the dynamics of the economy on Gotland, there is likely to be continued growth in demand for second homes and short-stay tourism, as well as a need for workers for these activities. Evidence from similar places suggests that direct engagement by the public sector in providing a stable supply of affordable housing may be necessary to ensure that housing options exist for both seasonal homeowners as well as hospitality workers and university students.

Part of ensuring housing options is the drafting of municipal land use plans that can ensure an adequate supply of land for development. Municipalities have considerable authority to acquire land, zone land for specific uses and directly construct rental housing, whilst also facilitating sustainable development. Gotland faces another challenge in this regard as limited land is available around Visby, where pressures for housing are the strongest. This is because the Baltic Sea, the airport and land reserved by the military create barriers to development. Before the arrival of the military south of Visby, the region had expected a large block of land controlled by the military to become available for development, which would have relieved some of the pressure on housing availability. However, the return of the military to Gotland means this land will not be available and new land has to be found.

Infrastructure benefits individuals and society in two ways. The first is by providing useful services directly to people in the form of safe drinking water or roads on which to travel. This improves the quality of life of individuals and society. The second function is the provision of a platform or foundation for economic activity (Glaeser and Poterba, 2020[39]; Advisory Council on Economic Growth, 2016[40]). Transport infrastructure allows the physical integration of markets and ICT infrastructure further integrates markets by allowing rapid communication across space.

Historically, infrastructure has been thought of as the means for providing essential services, such as: water and sanitation systems; roads, bridges, canals, rail lines and ports that allow transportation to occur; or electricity distribution systems. For these elements, infrastructure is the means of conveying the product consumers want from its place of origin to its place of use. Consumers require electricity in their homes or business but delivering electricity requires the construction of a shared transmission and distribution system that serves all users and whose cost is a major factor in electricity prices. Over time the number and type of elements that are considered to be infrastructure have increased. Hospitals, schools, fire stations and emergency services are increasingly seen as part of (social) infrastructure. Most recently, broadband and all of the technology that supports it are considered to be another form of digital infrastructure. The broadening nature of what is considered to be infrastructure reflects both changes in technology and in the types of services society chooses to make generally available to its members. As the set of elements that comprise infrastructure expands, it has become increasingly important to integrate infrastructure planning into broader economic development strategies

The appropriate mix of infrastructure in a region depends on a number of factors including broad societal norms that condition the appropriate level of public services that all citizens should have access to: including, education, healthcare and emergency services. Infrastructure investments are generally seen as: augmenting the competitiveness of a region by reducing the transportation costs of goods; reducing costs of production; improving basic infrastructure, such as water or electricity supply, to deliver more or better service; or, in the case of social infrastructure, enhancing the quality of labour, as a result of better education and training programmes. This is generally thought to be true for the region receiving the investments, even if the return to the nation would have been higher had the funds been spent in another region. However, under some circumstances, improving infrastructure in a region can lead to a worse local situation, for instance in the case where lower transport costs allow for a more efficient external producer to capture the local market. If the external competitor can take advantage of economies of scale or other cost savings, they may be able to undercut local producers once transport costs fall (McCann, 2013[41]). Hence, decisions on infrastructure investments need to be carefully evaluated.

There are clear benefits if the infrastructure in one region can be connected to infrastructure in another. These include network effects but also potential resilience benefits if interconnections among regions allow a region to access another region’s capacity when its own is unavailable. Similarly, there may also be cost savings if regions are interconnected, because instead of building enough capacity to meet their individual maximum needs, they may be able to use spare capacity in an adjoining region to meet peak demand in another region. While most small population regions have more limited connections and less internal capacity in terms of infrastructure, only islands are physically isolated in the sense they have no land border with another region, which precludes most forms of connectivity.

The lack of a land border for islands means that either interconnections are impossible, in the case of rail, roads and water systems, or far more expensive in the case of electricity, gas lines or fibre optic cable. For a small-island region, the low level of demand can limit either the region’s ability to pay for a subsea interconnection or the willingness of a national government to subsidise the construction and maintenance costs of a connection. Islands do have the benefit of ship-based transport, which only requires infrastructure investments at the terminal ends of a journey and offers complete flexibility in terms of routes among ports. However, compared to road or rail transport, ship travel has high fixed costs and slow travel time, making it less valuable for frequent, shorter and smaller loads than rail or road.

On the upside, an island does not have to integrate its infrastructure into neighbouring jurisdictions, which provides more flexibility on the timing of infrastructure investments, the specific design and characteristics of infrastructure investments and the siting and other locational attributes of infrastructure investments. This can allow an island to tailor its infrastructure to suit its particular needs and develop it in the sequence that best suits its capabilities.

Typically, infrastructure projects are seen as being subject to scale economies: unit costs fall as capacity increases. This means that a single large project has lower costs than multiple costs in terms of the service it provides. Thus, a large water treatment facility has a lower cost per unit of treated water than a smaller one, or a large wind turbine has a lower cost per unit of power generated than a smaller one. This is seen as an argument for constructing a small number of large providers rather than more numerous small ones. However, the focus on cost at the facility ignores the important associated cost of linking the facility to its ultimate users. For a wind turbine, this is the cost of grid connections to the firm or home. For a water treatment facility, it is the cost of wastewater pipes from the customers to the plant.

Where the number of customers is large and concentrated in a small area, the additional connectivity cost of a large project can be small relative to the cost savings from economies of scale. In addition, large projects can benefit from stronger network effects if they allow a large number of users to be connected. In the case of an electrical power system, a larger group of users may provide a more stable load profile that allows the generating facility to operate at its optimum level. Similarly, for a transport network, having more nodes provides a greater of interconnected places and a wider range of potential routes.

However, in rural areas, where there is a small population to be served and the population is spread over a large area, the costs of connectivity can be very large and overwhelm any benefits from economies of scale. This means that, for small-scale infrastructure projects, higher costs at the plant may be a better solution once the full cost is considered. For example, a large fire station can house a variety of fire trucks and specialised staff, which in turn provides better fire protection. But if the fire occurs a long way from the station, the benefits of better firefighting capability can be overwhelmed by the delay in arriving. Consequently, a network of small volunteer fire stations spread over the area may be a better solution, even though they have less capability.

The trade-off between scale and connectivity costs is particularly important when a major shift in infrastructure is being contemplated, which can make any existing connections less useful. Historically, the electrical grid was optimised for a small number of power generation stations that served a large area. Where fossil fuels were used, these power stations were constructed near large load centres to minimise transmission and distribution costs. With the growth of renewables, there are fewer economies of scale and generation has to take place where wind and solar resources are strongest. This is requiring a large realignment of transmission grids to link generation to end users and to provide redundancy when renewable energy sources are interrupted.

Similarly, as digital infrastructure emerged, the existing network of telephone cables quickly became inadequate and fibre optic cable was required to make full use of the Internet. In urban areas, the transition was fairly rapid because there were both a large number of users and in close physical proximity. In rural areas, cable had to be laid over long distances with no customers and, even in settled areas, the number of users in a community was too small to meet the profitability targets of most private companies providing the service.

The same type of problem exists for public services, such as education and healthcare. For both schools and hospitals, economies of scale exist in the form of lower unit costs or better service capability. These scale effects argue for a small number of large facilities and this works well in large urban areas. However, in low-density rural areas where many small communities are spread over a large area with limited transportation infrastructure, the travel costs associated with reaching a large regional school or hospital are high. These can be built into the education of health budget in the form of school buses or ambulances, or they can be shifted to families if they are responsible for getting their child to school or an ill person to the hospital. In either case, the public benefits of the larger facility are considerably smaller once connectivity costs are incorporated.

While Gotland is administered as a single municipality, it consists of two distinct entities in terms of service delivery. Visby is large and compact enough to satisfy some scale effects for infrastructure provision but the island’s average settlements are very small and widely dispersed. Improving connectivity between Visby and smaller settlements can enable people in smaller communities to benefit from “better facilities” in Visby and augment the level of use of these facilities. This is an argument for improving the road network and for investments in public transit, but not for expanding the conventional bus service.

These distinct differences suggest that the regional/municipal government should address local infrastructure provision in different ways. This is already the case for fire protection, where in Visby a professional fire service exists, while volunteer fire stations are relied upon in other parts of Gotland. But as renewable energy becomes more common and ongoing water shortages must be addressed, the opportunities for new infrastructure investments will differ between Visby and other settlements. Visby will continue to require a centralised water supply and wastewater treatment system due to its population size and high density. On the rest of the island, small settlements with growth potential already face limits on their available water and sewage treatment capacity. If new housing is to be constructed to address the current shortages, more water and sewage capacity will first be required.

One option is to rely on centralised systems but this will involve major investments in trunk lines to move water and sewage to and from communities and facilities. Alternatively, small places can rely on solutions that do not scale well and use different technologies to meet their water and wastewater needs. Small community water supply needs can be met from local wells or reservoirs coupled with a local treatment facility. Similarly, there are a number of technologies for treating wastewater that rely on a combination of lagoons and structured wetlands that can provide fully treated water. This water then has the potential to augment the irrigation needs of nearby farms. Several exist on Gotland, for instance in Roma.

Adopting this broader perspective on providing infrastructure will require a shift in focus away from the best available technology and the lowest cost of treatment to one that focuses on appropriate technology and reducing the full cost of delivering the service. In addition, smaller-scale technologies can be more sustainable in the sense that they are able to employ processes that make use of nature instead of chemical treatment. A clear challenge is meeting regulatory standards that typically focus on large-scale facilities and are not flexible enough to allow alternative processes that deliver the same outcomes. In addition, funding for infrastructure often comes, at least in part, from national or EU sources and these too may not be flexible enough to deal with uncommon approaches.

Gotland has a generally well-developed infrastructure but, as the economy evolves, local society changes and adapting to the effects of climate change becomes more critical; important modifications to the existing stock will be required. As noted in the introduction, Gotland faces three major challenges that will shape both its future development path and its specific infrastructure needs. These are: managing the effects of climate change, responding to either the closure or the upgrading of the local cement plant, and adjusting to the return of the military to a more insecure Baltic Sea environment.

Five more specific infrastructure considerations that address recognised needs on Gotland should be reflected on in the context of various scenarios for the three challenges. Most of these involve investments that have already been addressed by the region in some form in one or more of its development plans. They are:

  • Assuring sufficient energy supply, for instance by replacing the current submarine cable that supplies the vast majority of the electricity for the island but which is nearing the end of its planned life as well as adapting the various components of infrastructure to increase the use of renewable electricity and other “non-fossil fuels”, to improve sustainability and mitigate climate effects.

  • Augmenting the supply of water to deal with increasing seasonal shortages in summer that are adversely affecting development.

  • Expanding transport links, particularly ferries, to improve access to and from other parts of the Baltic region.

  • Upgrading to 5G to launch connected technologies and making the most of teleworking opportunities.

  • Exploring ways to increase the supply of the housing stock for permanent residential use on the island along with support schemes to address the chronic shortage of rental housing.

The next section is divided into two parallel scenarios to consider regarding the future existence of the local cement plant. It looks at how existence or non-existence of the cement plant is significantly affecting choices as regards aspects of climate change mitigation or relating infrastructure on Gotland. This reflects the reality that one specific development path may require a different set of infrastructure from another. Aside from that, other investment priorities are largely unchanged by the fate of the local cement plant but may be altered by other external factors including climate change or military presence. The first scenario assumes that the local cement plant remains in operation and is able to meet its commitment to eliminate the vast majority of GHG emissions by developing an effective carbon capture technology. Two important consequences for Gotland’s infrastructure follow on from this. The first is that a new submarine electrical cable to the mainland will be required and it will have to be considerably larger in capacity than the current cable to provide the additional electricity to operate the local cement plant carbon capture process. A second consequence is that the local cement plant will continue to require a considerable amount of water storage capacity for its own operations and the limestone quarries used by the local cement plant will not be available for water storage for other uses. This means that additional methods for augmenting water storage will be required.

Conversely, if the local cement plant closes in a few years, which is the second scenario, there will be a significant decrease in the electricity requirements for Gotland from current levels. While the current cable is reaching the end of its planned life, with a smaller need for electricity, there may be less interest by the national government in replacing the cable. Expanding alternative sources of electricity, particularly wind and solar, may be seen as a more cost-effective option. And, if the local cement plant closes, its existing quarries could be repurposed to serve as reservoirs for the island and this would provide a large increase in water storage capacity, especially if they were modified to reduce leakage and evaporation.

The industrial sector is the largest user of electricity on the island, corresponding to approximately 0.4 terawatt hours (TWh). In the event of possible electrification of the cement plant processes and having the planned carbon capture and sequestration process in place, electricity use would increase significantly and lead to a large increase in total power demand. Power consumption is estimated to increase by approximately 260 MW according to the feasibility study (Wilhemsson et al., 2018[42]). This can be compared with Gotland’s normal total power consumption of around 120-130 MW. In order to handle this, an increased transmission capacity from the mainland is most likely required. Larger electricity production on the island together with energy storage can also be part of the solution.

The new submarine cable significantly decreases the need for on-island electricity generation but also offers the potential for exporting renewable energy. The new cable should have the capacity to meet all current and future electricity needs for the island. While there is already good wind power and the best solar power infrastructure in place compared to other places in Sweden, expanding both of these generation methods involves challenges. The onshore wind is located in coastal areas but these coasts are highly valued locations for increasingly expensive summer homes, which creates a significant conflict of interest. Similarly, larger-scale solar panel locations must also compete for a relatively scarce land base that also has competing uses. While off-shore wind may be possible, many of the better locations are also home to a significant number of birds that are protected under an EU directive.

Given the cable, it therefore seems likely that there will be less local support for significant expansion of renewable electricity than there would be under the second scenario where it becomes the only alternative. While renewable energy producers may potentially have the opportunity to export excess local power to the mainland, the viability of exports would crucially depend on the charge for accessing the transmission line and the cost of production relative to those of mainland renewable energy producers.

Under any scenario, Gotland will have to make significant investments in upgrading the local electricity distribution system as part of the shift away from fossil fuels. Investments will be required to realise this.

If the local cement plant closes, the underlying economic rationale for a new submarine cable becomes more difficult. Electricity demand on Gotland drops significantly and becomes less stable with greater daily and seasonal fluctuations. With a far smaller base load and a relatively higher peak load, the payback period for the cable is extended. This could lead to a search for alternative ways of providing electricity on the island. While there is already a good quantity of wind power and some solar power in place, expanding both of these generation methods will become more important even though they are problematic. Without the cable, finding ways to site new renewable energy facilities will be a major challenge that will have to be addressed and managed by the regional government.

Community ownership and participation in benefits and decision-making support the deployment of renewable energy. Across many OECD countries, there has been resistance to the siting of renewable energy developments in rural areas. Reasons for these are varied and include biodiversity loss, competition for land use (such as agriculture) as well as visual impact. Loss of view or increased noise might reduce property values or opportunities for the tourism industry (Phillips, 2019[43]; Poggi, Firmino and Amado, 2018[44]). To address these issues, two aspects are important: i) procedural fairness, i.e. the ways in which communities are involved in the decision-making about renewable energy development leading to implementation; ii) distributional fairness, i.e. fairness in the benefits communities receive from installation as well costs and risks (González et al., 2016[45]).

Trust has been highlighted as one of the most important factors needed to gain the acceptance of renewable energy development by communities (González et al., 2016[45]). Trust can be increased if residents feel the information is handled with transparency and accuracy throughout all stages of the project and their concerns are reflected in prospected operations. Communities that perceive that decisions are made to benefit all, as opposed to only a few also display more trust. Options to improve trust include setting in place inclusive and sufficient mechanisms for dialogue and consultation as well as ensuring concerns are taken into account in decision-making (Moffat and Zhang, 2014[46]). This trust, however, is often lacking because of unbalanced power relations, limited community capacity and funds (rural communities often have small administrations and tight budgets in comparison to large energy companies) and missing guidance or legal frameworks.

Regional and national policy makers are responsible for clarifying planning and permission processes and acting as mediators. The state of North Rhine-Westphalia, Germany, for instance, has set up state wind energy dialogues and mediation on renewable energy projects at the local level. The process includes information, consultation and expert advice as well as round table discussions and an interactive website with information on planning and permission processes, conducted by an independent agency to ensure neutrality and unbiased support. Mediations include targeted problem-solving within municipalities and helpe negotiate positions, ideas and interests directly. Other German state governments have established similar platforms. Between them, they exchange ideas, latest developments and experiences (The Climate Group, 2016[47]).

Furthermore, developing renewable energy projects to the advantage of rural development is not straightforward. Evidence is mixed on whether construction, operation and maintenance activities from renewable energy projects actually support long-term rural development (Clausen and Rudolph, 2020[48]; OECD, 2012[49]). While there is an indication that renewable energy creates jobs, for instance from the operation and maintenance of equipment, studies suggest that the largest potential for employment is rather indirect and can develop along the value chains, through innovation or by making other production activities possible, including food processing, storage and transport (European Court of Auditors, 2018[50]; OECD, 2012[49]). Overall key factors for successfully linking renewable energy to rural development are summarised in Box 2.5.

On Gotland, because renewable energy projects are intermittent power producers, investments in storage technologies will be required, as will investments in backup generation. Other places that have weak or non-existent grid connections face the same challenges and some are trying to make themselves testbeds for alternative electricity production systems. For example, the island of Bornholm has a strategy of acting as a demonstration site for sustainable energy systems (Nordregio, 2021[51]). Similarly, several of the Scottish islands are developing innovative ways to expand the use of renewable energy (Dickie, 2022[52]). Gotland has some advantages in this process of adaptation in that it is a relatively small island with a predictable demand pattern for electricity and a high cost for conventional electricity transmission systems. This could make it a desirable location for testing hybrid electricity generation systems at a larger than pilot scale.

Gotland will also have to make significant investments in upgrading the local electricity distribution system as part of the shift away from fossil fuels. Investments will be required to provide a system of charging stations for electric vehicles, both for residents and visitors. While, new electric cars typically offer ranges of 400 km or higher, the lack of charging stations can pose barriers to rapid elective vehicle adoption. Most governments continue to provide financial incentives to increase demand rather than invest in charging infrastructure (ITF, 2019[53]). In rural regions, the dispersed nature of residences and infrastructure requires recharge points to be placed strategically, for instance at supermarkets and schools. Governments also need to consider increasing demands for total electricity with increasing penetration of elective vehicles, which calls for more co-ordinated charging and local reinforcements of grids. A leading example of investments in electric vehicle infrastructure can be found in southern Alberta, Canada. In the province, civil society groups, local businesses and local and regional governments collectively invest in electric vehicle charging infrastructure to facilitate emissions reductions, economic development and tourism. The project has installed 22 charging stations, powered using renewable energy sourced from the region (peakstoprairies, 2019[54]).

Gotland currently faces seasonal water shortages that are projected to worsen as climate change effects strengthen and demand for water increases in the summer months due to an increasing seasonal population. Water-conserving technologies for firms and households are increasingly common and can reduce the demand for water and are increasingly required by EU and Swedish policy; they can be especially useful on Gotland because the water supply cannot be augmented from external sources.

Currently, water retention efforts on the island are not systematic and offer considerable opportunities to augment the summer water supply. It is possible to improve storage capacity to retain more water from other seasons and modify demands. Larger reservoirs may be a useful option for storing water and it may be possible to work with the local cement plant to develop new reservoirs as part of the company’s quarrying process. Infiltration rates could be improved on farms by fully adopting cultivation practices that leave post-harvest crop residues in place. Farms could also restore areas that were once marshy to wetland status to further enhance retention, as is noted in Our Gotland 2040. On-farm ponds are commonly used but could also be increased in number and capacity. If climate change effects increase in severity, agriculture may require additional water for supplemental irrigation and maintaining livestock. The Green Centre is well positioned to act as a vehicle to disseminate improved farming practices to producers and as a site for demonstration projects that can help encourage farm management practices that increase water retention. Similarly, it should be possible for even small communities to increase the use of reservoirs to capture more winter precipitation. While these water supplies may not be a good source of potable water, they can be used for other types of water needs.

Desalinisation remains an expensive technology but the costs are falling and, in some cases, may be a means of supplementing local water supplies. Since the Baltic Sea is only moderately brackish, desalinisation may be a more interesting option for Gotland than in other places. The small community of Herrvik has a small pilot project that combines a local solar energy site with a desalinisation plant linked to the local water storage facility (Region Gotland, 2017[55]). The desalinisation plant uses electricity produced in non-peak periods to treat water and does not operate in peak electricity demand times. This type of project may be most applicable in more remote communities where the cost of extending water lines may be high enough to make creating a local supply more attractive.

Recycling wastewater is encouraged in the EU Water Framework Directive and has considerable potential on Gotland. For example, the community of Ostergarn recently invested in constructing a local wastewater treatment facility that supplies two storage lagoons that are used by a nearby farm for irrigation purposes. The treatment facility removed new construction constraints that allowed the community to add more housing, which improved its development prospects and created a new source of local government income. The treated water provides the farm with needed irrigation water that allows more consistent crop production. A clear opportunity is in Visby where the existing wastewater treatment plant now pipes its treated water into the Baltic Sea. Using this water for other purposes would require additional treatment steps and a reconfiguration of the treatment facility to pipe water inland which is costly, but doing so presents an opportunity to improve sustainability.

Another potential approach could be a greater effort to recharge existing aquifers. During winter months precipitation on Gotland exceeds water demand but a large amount of this water now flows into the Baltic Sea. Increasing the current natural rate of infiltration can be accomplished by: altering field management practices to leave more crop residue after harvest and adopting no-till or minimal till cultivation; reintroducing wetlands to retain water; and increasing the size of buffer strips along existing streams and ditches, and other farm management methods. Wooded areas slow the rate of runoff and allow greater infiltration as well as providing wildlife habitat and environmental benefits. In addition, there is also the possibility of direct recharge of aquifers (US EPA, 2022[56]). Recharge can provide an alternative to constructing new water storage facilities by ensuring that existing aquifers are brought to a high level of storage before peak demand begins. Currently, the agricultural sector only uses on-farm surface water storage for irrigation. However, climate change and the declining role of the dairy sector suggest that an expanded crop production sector may require better access to irrigation water in the future. If Gotland aspires to a higher-value agricultural sector, including increased production of fruits and vegetables, it will be necessary to ensure that additional water for irrigation is available.

Because Gotland is a sparsely populated island with a large number of dispersed small communities, the region should explore finding distributed solutions tailored to local municipality conditions as a way to provide basic infrastructure instead of the more common centralised system. Visby is the only community on the island where the central system may be desirable and, even in Visby, implementation may be challenging because so much of the city is difficult to serve. Local community groups are already demonstrating the power of a distributed approach, for example, where one group is adding floating solar panels to a previously constructed wastewater treatment lagoon that already serves as a source of irrigation water or another community group that is powering a small-scale desalination plant with photovoltaic panels. Finally, the area around Storsudret is undertaking a circular water solution project with EU findings that combines rainwater harvesting, membrane treatment of wastewater and desalinisation (Smart City Sweden, 2022[21]).

All of the options discussed for enhancing and stabilising the water supply on Gotland under the alternative where the local cement plant remains in operation continue to be applicable if the local cement plant closes, and these options will not be repeated. However, the cement plant currently operates a large reservoir in Slite for its own use and the currently active quarries that provide limestone would cease operation if the cement plant closes. This would create a large amount of water storage capacity that could be used to meet local demands and potentially moved to other parts of the island.

To date, these innovative infrastructure solutions have been mainly funded with EU grants but the actions community organisations are taking are actually in areas that are a core responsibility of the regional government. Even a small amount of support from the regional government might stimulate significantly more community effort to identify locally appropriate and innovative infrastructure solutions. If Gotland can develop a reasonable number of innovative solutions to small community infrastructure problems, it may be able to create a niche market by providing small-scale technologies to other places with similar needs. This could create opportunities for consulting services and perhaps small-scale manufacturing firms that provide the means to couple several off-the-shelf technologies into a new functional form.

The main means for moving people and materials between Gotland and the mainland is the ferry system. Currently, Gotland has very good connections to the Stockholm region through the port of Nynashamn with modern ships that carry both people and vehicles. There are also connections to the southern coast of Sweden at the port of Oskarshamn and less frequent connections at the port of Vastervik. There is also a new ferry service between Rostock, Germany, and Nynashamn, with interest in including Visby as a stop for some of the trips.

More direct connections to Visby are important if Gotland is to expand its attractiveness to international tourists, as are finding ways to reduce the complexity of transfers. While the existing ferries are relatively fast for ships that carry people and vehicles, they are somewhat inconvenient for passengers, particularly tourists. Getting to Nynashamn from Stockholm involves either a bus or train trip from Stockholm Central Station, which is both large and challenging to navigate. Adding small quick passenger-only ferries in peak travel periods that operate from the Stockholm Värtahamnen ferry terminal could expand the number of trips by international visitors and reduce commuting time for business travel. This connection would also facilitate transfers to and from the main Baltic ferry system. Yet, the long and dense archipelago outside Värtahamnen is a challenge and might increase travel times. In addition, there may be opportunities for direct ferry connections to Gdansk, Poland, or Riga, Latvia, if there is the belief that a sufficient volume of traffic would sustain the connection. Both of these cities would offer the benefit of providing good internal road connections to places further south and east.

Air links to Stockholm are already frequent and the number of flights expands to accommodate seasonal peaks. Other domestic connections are to Gothenburg and Malmö, Sweden. Currently, the only non-Swedish scheduled flight is to Helsinki, Finland, which provides connections to Finnair routes. While flying is a relatively expensive travel option, it is far quicker than ship travel and, because Gotland is an island, other travel methods are not available. This suggests that enhancing air and ferry connections is crucial for improving connectivity and their importance may justify some form of subsidy.

Diversifying connectivity will involve developing ferry and/or air routes to other places. This is a more difficult option because private ferry and air operators would question the viability of new routes and require significant guarantees of sufficient use. Other regions have undertaken similar efforts, such as Umeå in Sweden and Oulu in Finland, which jointly supported direct air flights during an initial period to persuade the carrier to offer the service. For Gotland to break into new economic activities, it may be necessary to identify places and functions that it can serve and then ensure that transport links to those places are adequate to support the new trade relationships. Initially, this may require subsidies or some other form of revenue guarantee to transport providers to ensure they commit to a long enough service period to allow a trade to develop.

Gotland provides a useful demonstration suite for identifying ways to integrate different elements of infrastructure so that they work more efficiently. One existing example is the interconnected wind turbine and desalinisation plant in the community of Herrvik. This type of small-scale project is effective in many rural areas of OECD countries where the cost of installing and maintaining the transmission wires or water distribution pipes over long distances from a large central provider makes installing distributed systems even though they may have relatively high local production costs a better solution. Once again, because it is a somewhat remote island with high interconnection costs, self-supply of a new technology that is complementary to wind and solar power could be viable on Gotland long before it is cost-competitive on the mainland.

Other examples of integrated forms of infrastructure already exist on the island in rural communities that have co-located a number of public and private services in a common location as a way to reduce costs and facilitate easier access by users (Box 2.6). Similarly, small-scale wastewater treatment plants in rural municipalities can be directly connected to nearby farms that can use the water for irrigation. Assured access to a supply of irrigation water will allow these farms to shift to producing higher-value crops, such as fruit and vegetables that can augment an already thriving focus on high-value farm products. Integration of different modes is possible for public transport. For remote places, “on-demand” public transport can provide a way of connecting people in smaller municipalities to points where regular bus service is available. All of these integration opportunities are more viable on Gotland than in many other regions because the island already has an excellent fibre optic network that provides Internet access to all parishes. Integration of various types of infrastructure can only take place where the Internet provides the required connectivity.

On Gotland, seasonal homes now dominate new housing since they are the most profitable form of new construction and the share of moderate-income housing, particularly rental housing, is not on par with population increase. This makes it difficult for lower- or mid- income households to find an affordable2 place to live. One reason for this is that building homes is increasingly expensive. An inelastic housing supply, resulting from a scarcity of developable land or regulatory policies that make it harder and more costly to build, can make housing less affordable. Also, rising construction costs have contributed to declining housing affordability in many countries. In the OECD-EU area, construction costs for new residential buildings increased by over 70% between 2000 and 2019, of which labour costs alone increased by more than 110% (OECD, 2021[58]).

The high demand for seasonal homes combined with relatively high new construction costs and restrictions on the amount of land that is available for new development provides little incentive for markets to provide new moderate-income housing for sale and even less so for rent. This is because, in Sweden, rents are controlled through yearly negotiations between house owners and the local ”union” that represents the people who are renting. They agree on a maximum rental cost per square metre per year. Increased building prices make it very difficult for developers to build within the cost limit for the set rental income.

Current regional efforts by the regional government to deal with shortages, to link building permits for developers constructing new higher-priced homes with the construction of moderate price/rental homes, have met with little success, perhaps because the scale of new housing projects on Gotland is small and profit margins are too low. Moreover, as the university expands and as Gotland tries to increase the number of visitors in the summer – a season which requires more seasonal workers – the need for short-term housing is increasing.

Furthermore, housing challenges can be distinguished as follows on Gotland:

  • In Visby, the increasing numbers of university students during the semester in combination with more people who chose to occupy their seasonal homes for a larger part of the year (increased even more with the COVID-19 pandemic) has reduced the number of homes for rent. In summer, the short-term rental market is even tighter as an influx of seasonal workers for the hospitality sector increases demand just as owners of seasonal homes remove them from the rental market.

  • In rural parishes near the coast, the existing housing stock is steadily being converted to seasonal housing and most new construction is for seasonal homes. The result is a shortage of accommodation for people who would accept employment in rural areas if they could find a place to live, either to rent or to buy at a medium-income rate. This hinders efforts to attract new teachers, nurses and other people with needed skills who have to be recruited from places off the island.

Several opportunities exist for public sector involvement to address the housing challenge:

  • The first focuses on providing dedicated short-term housing units for use by students in the school season and by seasonal workers in the summer. For the university to expand and further contribute to the regional economy, more student housing will be required (probably also acceding existing plans for additional 150 student apartments). Most of this housing will likely not be occupied in the summer season. A partnership between the university, the regional government and a developer could construct residences that serve both students and summer workers. In the summer, when the student population declines, these units could be made available for summer workers. One approach to this could be for the region to provide land for the project under a long-term lease and collect rental income, with the developer constructing the building and operating it under guidelines agreed to by the university and the region. A second approach would have the foundation Uppsala Akademiförvaltning, which owns the land that the university is renting, providing land and operating the student housing.

  • The second opportunity is changing the zoning regulations on Gotland. Relaxing zoning can be helpful to allow for more apartments to be built where space is limited. It has been shown several times that zoning restrictions, such as limits on the height and density of buildings, are generally associated with increases in the cost of living (Glaeser and Gyourko, 2018[59]; Brueckner and Sridhar, 2012[60]; Chengri, 2013[61]). Specifically, loosening hight restrictions can be an opportunity for Gotland to make more of the land. The drawback to this is that certain aesthetic amenities of an area might considerably change. Like land use regulations, building height restrictions have costs and benefits. It is important to assess if regulatory costs outweigh the benefits. Spatial development should always be organised in ways that minimise costs and negative impacts of regulations.

Other incentives for building can relate to a possible tax deduction for developers if they agree to provide a certain type of housing. One example of such a programme in the United States is the Low-Income Housing Tax Credit (LIHTC). Established in 1986, the programme has become an integral component of federal housing policy designed to ensure affordable housing. Between 1987-2008, it covered 21% of all multifamily developments. In the programme, federal tax credits are allocated to states on the basis of population. These credits are then granted by state authorities to developers of qualified projects. Developers then sell these credits to investors to raise equity capital for their projects and reduce the amount of capital they would otherwise have to borrow. Investors receive a dollar-for-dollar credit against their federal tax obligation for 10 years, on the condition that the property continues to comply with all programme guidelines (Rebecca and McQuade, 2019[62]). While Gotland would need to rely on the national Swedish government to provide a tax credit to incentivise a specific type of housing, this might be a consideration worth taking.

Another option relates to increasing the incentives to construct moderate-income or rental housing by requiring some units in larger developments to be made available for rent or at a lower price for receiving development permission. The current fine for not abiding by building rules seems to be too low to make comply. Consequently, Region Gotland could think about increasing the fine, while making sure it does not disincentive building at all. This approach however is likely to only be more successful when a single development produces a large number of housing units, which allows the costs of subsidising the moderately priced units to be spread across a large number of homes. An alternative to this is that the region could zone some of the land it owns for development and lease it for housing development. In cases where developers do not build for rent or at a lower price despite having agreed to do so the lease for the land would be increased. A challenge to this is that Region Gotland only owns about 1.5% of the island’s total area (47 million m² in total).

Lastly, there are different needs across Gotland, while no rural community on Gotland needs a large number of units, most settlements need some. Some communities are already building small apartment units for this purpose as they see it as essential to be able to attract new teachers, replace retiring ones or attract other people with needed skills. For this to happen on a larger scale, the region needs to strategically support these development projects. If priced appropriately, the apartments can be self-financing so they serve both a public purpose and augment local revenue. To support this financially, Gotland could develop a rural housing fund specifically targeted at small communities. A similar project is currently being developed by the Scottish Government.

As part of the Scottish Government’s Housing to 2040 plan, the island of Colonsay has started to build affordable housing. Colonsay is a community with a need for affordable homes and homes for key workers and essential services. The majority of the land is in private ownership and 42% of homes are second homes or holiday lets. Colonsay Community Development Company (CCDC) was successful in obtaining funding from the Scottish Land Fund to buy a site in the village of Scalasaig. Working with the Communities Housing Trust to deliver affordable homes, grant funding of GBP 1 205 888 has been awarded through the Scottish Government’s Rural and Islands Housing Fund (RIHF) for the development of 6 affordable homes, 4 for social rent and 2 for low-cost ownership. This is part of a larger project involving a local employer who has worked in partnership with the CCDC and contributed GBP 1.2 million to deliver infrastructure works and a further 3 homes for rent for its workers. The CCDC will also provide three serviced plots to deliver affordable self-build opportunities on the island. In addition, it has secured grant funding of GBP 335 000 from the Scottish Government’s Regeneration Capital Grant Fund to develop business units to support economic development.

Providing broadband access across all of a country’s territory is now a widely adopted national policy within OECD countries. Gotland embraced this philosophy earlier than many regions and established a strong fibre optic network across the island. Increasingly the main advances in digital communication and technology are taking place in the wireless domain. Autonomous farming equipment, smart home systems and various connected devices are the most evident examples of this change. Because Gotland invested early in an extensive fibre optic network, it already has an important part of the needed digital infrastructure to complete the rollout to 5G wireless.

Upgrading to 5G constitutes an opportunity for Gotland, allowing the region to advance faster than other regions on connected technologies. Many rural places are not set up for this development but on Gotland, it constitutes a development opportunity, allowing the region to position itself as a testbed for emerging technologies in connected technologies. Advancing on connected technologies can also help with other infrastructure challenges such as water shortages. For instance, Smart Water Management systems can use agri-tech solutions to allow for climate-smart farming practices. Modern technologies ensure minimal water use to irrigate crops and reduce the potential leaching and overuse of groundwater. Furthermore, where different infrastructure elements are connected, such as a renewable power sources that intermittently provide power to a water desalinisation plant when electricity demand is low, high-speed digital connections are vital for efficient operations.

Furthermore, the value of strong wireless digital infrastructure across the island should not be underestimated as a factor that is important to tourists, especially if the technology is used to provide updated traffic information and smart public transport systems that rely on a mobile phone application to provide an initial portal and subsequent information to the user and transport provider.

Given the integrated nature of wireless communications infrastructure and its reliance on proprietary technology, it might be a challenge for Gotland to replicate the locally based installation approach that worked so well for fibre optic connections. Much of the technology is specific to a particular service provider and there is a strong bundling of hardware and software that leads to only a small number of firms having the capacity to provide the core infrastructure. For Gotland, many of these decisions will be made by the Swedish authorities but it will be important to ensure that the deciding authorities recognise the unique situation of Gotland. To a certain extent, the increased presence of the military on the island may make is it a stronger candidate for faster installation of 5G infrastructure to serve the needs of defence forces and there may be opportunities to co-ordinate some parts of the cell tower network with military needs.

Apart from digital infrastructure improvements, there is an opportunity for Gotland to make more use of its existing digital infrastructure. The island could promote itself more strategically as a remote working hub for people working on the mainland and living on the island but also for firms considering relocating to the island and offering remote working from the mainland. Developing this further would include the need to conduct information campaigns and guidelines to best deal with remote working as well as the provision of other infrastructure such as in-kind facilities for co-working such as industrial parks or co-working spaces. For example, the Schleswig-Holstein region in Germany launched a pilot initiative, called CoWorkLand, which rezoned empty buildings in rural areas to create co-working spaces as a new solution for workers (OECD, 2021[32]).

Other support elements can include promoting the concept of the “workation” (work and vacation) as a way to encourage longer-term stays among visitors and travellers, while contributing to a more sustainable regional revitalisation model. Regions like Nishi-awa (Tokushima) or Urabandai (Fukushima) in Japan both offer plans for remote workers that include working facilities and organised touristic tours. For more permanent relocation, initiatives to facilitate the relocation process can also be beneficial. This can take the form of establishing networks with local actors that support independent entrepreneurs who wish to settle in the region by discussing in advance practicalities and needs (access to trains and planes or childcare and education), offering meetings with other workers already in place and sharing the experience of their families (OECD, 2021[32]).

To continue to support economic development and improvements to well-being, Gotland will continue to need new infrastructure investments, which could require additional funding and financing. Given the relatively low level of current public investment and that Region Gotland is close to reaching its aim for equity/assets, the region may need to identify additional funding and financing sources to support additional infrastructure investment.

The OECD has identified a range of funding and financing approaches that regional and city governments can use to unlock funding and financing (OECD, 2021[64]). Funding opportunities can arise from better use of existing infrastructure assets, harnessing grant and subsidy programmes, identifying tax revenue opportunities, user charges and fees, land value capture and leveraging income from existing assets. Financing opportunities can include expanded use of loans, bonds and equity, and diversifying investors in infrastructure (Figure 2.3).

Given that Region Gotland already harnesses financing for infrastructure and is near its desired equity/assets ratio, the main opportunity for increasing investment will arise from looking for new funding opportunities. Region Gotland already has a relatively high reliance on taxation and grants from the national government. In addition, taxation pressures will likely arise from an ageing population over the coming years. This may mean that there is a lower ability to leverage taxes and grants to increase investment levels, so alternate options should be considered.

One opportunity could exist in improving the use and management of existing infrastructure and budget resources. This can maximise the whole-of-life value provided by infrastructure, reduce lifetime infrastructure expenditure and avoid a need for new revenue sources to be introduced. Opportunities for better using existing assets include harnessing data to better identify asset management priorities, involving communities in identifying infrastructure needs, increasing the value provided by assets and, in some cases, improving the management of assets through the use of subnational state-owned enterprises (SOEs). In Ontario, Canada, for example, the provincial government implemented the Rebuilding Ontario plan in 2019. Key elements of the plan include the collection of quality data, increased integrated land use and infrastructure planning, improved planning and procurement, and improved asset management. The plan establishes an interdisciplinary team to share asset management practices, improve data collection and apply advanced analytics to asset portfolios. This improved infrastructure asset management has the potential to lower future funding needs.

Another option could be to look at introducing additional user charges and fees, where appropriate. These charges and fees can strengthen the link between the beneficiaries of infrastructure and the payment for that infrastructure. Given the higher infrastructure needs that are created by summer visitors, it could be appropriate to adopt fees and charges that distribute costs in line with the higher infrastructure needs that these visitors create. For example, empty vacation homes are still often connected to electricity, water and digital infrastructure so these users should pay an appropriate “connection fee” to maintain their access, even when not in use.

Land value capture provides another opportunity to increase funding to support infrastructure investment. Land value capture can help to capture windfall gains arising from infrastructure investments or land use changes in a geographic area. In particular, developer obligations can be used to ensure that new properties pay for the additional infrastructure required in relation to their property. A charge to developers can be either in cash or in kind (where the developer directly funds complementary infrastructure) and is linked to obtaining approval to develop or build on a land parcel. The contribution is designed to compensate for the impact of new development on existing infrastructure or help pay for the cost of additional infrastructure and service provision due to new developments. Developer contributions might be channelled into a dedicated local development fund.

Finally, there may be an opportunity to better leverage income from existing infrastructure assets. Regional governments can be large owners of infrastructure, land and building assets. Often, however, these assets are underutilised by the subnational government. There may be opportunities to rent these assets at a market rate to gain additional income that can support new infrastructure investment.


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← 1. The term ‘LEADER’ originally came from the French acronym for "Liaison Entre Actions de Développement de l'Économie Rurale", meaning 'Links between the rural economy and development actions'. LEADER is implemented under the national and regional Rural Development Programmes (RDPs) of each EU Member State, co-financed from the European Agricultural Fund for Rural Development.

← 2. Housing affordability can be broadly defined as the ability of households to buy or rent adequate housing, without impairing their ability to meet basic living costs. Over the past two decades, as housing prices have risen in most OECD countries, households are, on average, spending a large and increasing share of their budget on housing. While households across the income distribution – particularly the middle class – increasingly face challenges to pay for high housing costs, low-income and vulnerable households have long faced obstacles in the housing market and continue to struggle (OECD, 2021[58]).

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