Norway (2013)

Source: REEEP Policy Database (contributed by SERN for REEEP)

This policy & regulatory overview is not updated anymore since 2015. We decided to keep it online due to high demand but would like to make you aware of the fact that it might be outdated.

Energy sources

The Norwegian electricity system is dominated by renewable hydroelectricity, itself a clean and cheap energy source. In the period from the end of WWII to the late 1980s, several factors combined to accustom both individual and large-scale Norwegian electricity consumers to abundant electricity at a very low price. Norway has many waterfalls and a history of social democratic governments willing to subsidise dam construction to provide cheap electricity for industry and price controls for household consumers. It also has had a highly centralised supply-driven approach to generation and transmission of electricity that relied on constructing new production capacity well in advance of increases in demand. This means that many Norwegian hydro plants have been in operation for decades and are paid for many times over.

In addition to being rich with hydrological resources, the Norwegian continental shelf is abundant with oil and gas reserves, which have made Norway a large exporter of crude oil in the world and the second largest supplier of natural gas to Europe.

The Norwegian net generation was 128.1 TWh in 2011 (124.4 TWh in 2010). The share of the hydro plant generation accounted for around 95.3 % of the total Norwegian net generation in 2011. This percentage shows the importance that the weather conditions have on the net generation capacity. The inflow to the hydro reservoirs in Norway in 2011 was the highest registered since 1989 and 1990.The Norwegian net exchange of power changed from 7.6 TWh net import in 2010 to 3.0 TWh net export in 2011.

The total installed generation capacity of the country at the end of 2010 was 31,714 MW. The available generation capacity during a cold winter is about 25,000 MW. Net increase in hydropower generation capacity during 2011 has been about 179 MW. During 2011, 85.1 MW wind power has been commissioned, but 8.6 MW has been decommissioned.

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Even though the domestic electricity production is almost entirely based on carbon-neutral hydropower, it is worth noticing that Norway import electricity from coal-fired plants (particularly in Denmark) and nuclear power (from Sweden and Finland) in situations of low hydropower availability in the Nordic market area and/or sudden and extreme peaks in domestic demand.

Norway was a net exporter of electricity in 2011 of 3.0 TWh.  In 2010 Norway had a net import of 7.6 TWh. Norway was a net exporter of 0.2 TWh to Sweden in 2011, and a net import from Sweden of 3.9 TWh in 2010.

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Extend network

The Norwegian transmission and distribution grid consists of over-head lines, underground and submarine cables that extend for roughly 300,000 km. The grid is divided into three levels: the central grid (transmission), the regional grid and the distribution grid.At the highest level is the central grid, which is mainly owned and maintained by Statnett. This network has a large transmission capacity with two important objectives:

  • It connects all consumers to a domestic transmission grid spanning from the very North to the very South of Norway.
  • It connects Norway to surrounding countries to exchange power when there is a lack or a surplus in Norway.
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Capacity concerns

Increased production of renewable energy depends on a well-functioning electricity grid. Considerable emphasis is placed on carrying out grid developments and improving the transmission grid both domestically and abroad. For instance, Statnett’s grid investments have increased considerably in recent years, and will remain high in the future. In 2010, Statnett’s investments totalled nearly NOK 1.9 billion.

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Renewable energy

The solar energy that hits the earth every year is estimated to be more than 10,000 times the energy consumption. In Norway this value is about 1,500 times the energy consumption. Typical solar irradiance in Norway is 700 – 900 kWh/m²/year.

Wind Energy
While Norway´s offshore wind potential is only surpassed by Portugal and the country enjoys the best onshore potential in Europe the market is developing only slowly after the introduction of the green certificates in 2012. Towards, 2025, public research have estimated a potential wind development of 5.8 GW (17,4 TWh) to 7.1 GW (21,5 TWh). Grid capacity is a limiting factor.

At the end of 2011, Norway had installed 512 MW of wind turbines at 18 sites producing ca. 1 GWh and 0, 7 % of the country’s total generation. The Ministry of Petroleum and Energy is together with NVE currently researching the consequences of building offshore wind. The 15 potential Norwegian offshore wind fields could produce 18 to 44 TWh yearly.

Forest biomass is the major source of bioenergy in Norway, followed by waste used in district heating.  Forests cover 12 million ha, which is 37% of the land area, with a growing stock of 910 million m3. From and annual growth of about 25 million m3, less than half (44%) is harvested annually. The standing stock and annual increment have been increasing the last 70 years. The most important biomass resources in Norway are firewood, wood chips, logging residues, thinning residues and stumps from clear cuttings. Forest biomass has an estimated sustainable potential for bioenergy production between 86 and 108 PJ.  The sustainable potential of biomass for energy production is estimated between 117 and 140 PJ.

Production of liquid biofuel based on domestic raw materials from agricultural or forestry areas in Norway is still very modest. However, this could change over time. Norway is in a good position for producing large amounts of biodiesel from animal and ?sh residues. The maximum potential of 162 kt biodiesel from used animal fat in Norway is 35 kg per inhabitant.

Hydroelectricity, due to elevated high lakes and heavy rain and snowfall, has been the dominant source of electricity production ever since the Norwegians started to produce electricity. Today hydroelectric production accounts for 99% of total electricity production, and Norway has traditionally been a net exporter of electricity. The most prominent example is the attempt by civil protesters to block the construction of a hydropower dam in the Altavassdraget drainage basin in the northernmost part of the country in the 1970s. Despite such protests, though, exploitation of hydrological resources continued throughout the 1980s and the 1990s, which contributed to the maintenance of a stable electricity balance and a general situation of electricity surplus.

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Energy efficiency

The industrial sector contributed most to Norwegian final energy consumption in 2011, with 29.8% or 6,050 ktoe. Energy consumption in the industrial sector experienced an incremental downward trend from 2000-2008 (1% each year), with a significant drop (21%) in 2009 due to the economic recession, and a corresponding increase from 2009-2010 of 12%. Household energy use has also been identified as an area for further efficiency gains, with 0.2% increases per annum registered from 2000 to 2010. From 1990 to 2010, an approximate saving across all sectors of 59 TWh was recorded. The Norwegian government has predominantly been focusing on reducing consumption in the buildings sector as a whole, with the state enterprise for energy efficiency, Enova, instituting a number of appliance and product labelling measures to influence household purchasing decisions in favour of efficiency, as well as new building regulations promoting efficiency and a greater degree of passive/low-energy housing.

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Following the UK, Norway deregulated its power sector and liberalized its electricity markets in 1991. The objective was to make the power system more efficient and the market mechanism was regarded as the most effective instrument to increase efficiency of the power system (NMEP 1990). In line with other European countries, the price of power had, until then, been set by the government, and the state owned company, Statkraft, was in charge of the entire value chain. With deregulation, the responsibilities of distribution and production were separated into two independent companies: Statnett, the transmission system operator (TSO), was made responsible for electricity distribution, while Statkraft assumed control over production activities. With the liberalization of markets, the price was no longer set by the government but varied according to supply and demand.

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The Norwegian electricity market was formally opened up for competition when the Energy Act came into force the 1st of January 1991.

In 1996, the Swedish and Norwegian electricity markets were fully integrated in the world’s first international power exchange, labelled Nord Pool. Inspired by this move, and motivated by the prospect of being integrated into Nord Pool, Finland liberalized its own power sector in 1998. Denmark was more reluctant but eventually joined in 2000. With the establishment of the Nordic market, it became a common Nordic ambition to extend market principles further – that is to strengthen the liberalization process in the rest of Europe.

In Norway, in the 19th century, due to the plentiful existence of waterfalls and geographical separation of the localities by fjords, a multitude of small municipally owned hydro-power stations were set up. Thus, the tradition of electricity provided entirely by municipal sector was born (“energy municipalities”). In 1973, 337 distribution companies supplied electricity at local level, of which 76% had fewer than 5,000 consumers. But major changes occurred in the 1990s when a national electricity agency was established to operate the national grid and the new legislation created a fully open electricity market. However, hydro powered plants, which constitutes the main source of electricity, and short-distance transmission grids continued to be owned and operated (mainly) by municipalities while some of them have been privatised.260 Operation and investments costs are financed by fees from users calculated on the basis of their consumption.

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Energy framework

Through negotiations with the EU, Norway has pledged that 67.5% of its energy consumption will come from renewable energy by 2020 (compared with 62% in 2010). Even though Norway is not an EU member state, the country participates in the EU Emission Trading System (EU ETS). It is believed that Norway may play an important role in reducing emissions abroad by exporting renewable energy, but also by offering reductions from carbon capture solutions as they mature sufficiently.

The overall target of the Norwegian energy and climate policy is to reduce greenhouse gas emissions by 30% (compared with 1990) by 2020 and to be carbon-neutral in 2050 (taking into account the country’s contribution to emission reductions abroad).

Norwegian-Swedish Green Certifícate Scheme
Norway has chosen to cooperate on meeting their renewable energy targets in a common green certificates scheme, introducing the certificate scheme in 2012. As it is a common scheme shared with Sweden, any certificates issued in Sweden may be surrendered in Norway and vice versa. This mechanism ensures that the renewable energy installations will be deployed where it is most cost efficient to do so, independent of whether the location is in Norway or Sweden.

The Energy Fund
The Energy Fund is a government fund established to ensure a long-term, predictable and stable source of finance for the strategy on energy efficiency and the promotion of renewable energy.  The state enterprise Enova manages the Energy Fund.

Norway has adopted a strategy for development of offshore wind power and is planning to expand hydropower production by utilizing previously untapped hydropower potentials and by refurbishing some older hydropower installations for increased effect. For instance, a new treaty with Sweden on green certificates aims at subsidizing 26.4 TWh of renewable production between the two countries.

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Energy debates

Today Norway finds itself in a paradoxical situation regarding the role that new production of energy from renewable energy sources should play in the Norwegian energy system. On one hand, new types of renewable energy are far away from being competitive with the country’s traditionally cheap main source of electricity and therefore need some sort of public support or subsidies in order to be realised. Norway has chosen to adopt a “technology neutral” approach to renewables, meaning a fixed governmental support for renewable production regardless of type. So far the renewable construction has been mainly wind and small-scale hydro. However, a new green certificate subsidy scheme is in place, which promises to lower the economic barriers to new projects.  On the other hand economists and others are claiming that Norway does not need more production of renewable energy as the domestic electricity demand has levelled out, the country is already more or less self-sufficient with predominantly renewable energy, and measures to enhance the production will in practise lead to subsidising electricity production in Europe. In relation to this a much discussed idea has been to offer Norwegian hydropower as an alternative for a transition towards European low carbon societies as the storage capacity of this hydropower system could be used to offset the intermittent nature of renewable energy. This is an argument for the need to increase the electricity production in Norway. However, this would require investments both in cables to Europe and it raises the tricky question about who should bear the costs. Thus, all in all the Norwegian public is faced with a rather complex situation regarding what role new renewable energy technologies should and could play in the energy system.

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Energy studies

Nordic Energy Research (NORDEN)
It is the funding institution for energy research under the Nordic Council of Ministers – the intergovernmental body between Denmark, Finland, Iceland, Norway and Sweden. NORDEN funds research and innovation in the Nordic region and contribute to energy technology policy-making.

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Role of government

Minister of Petroleum and Energy: The ministry is responsible for the government's energy policy, including management of Norway's energy resources, including the valuable deposits of petroleum and hydroelectricity.

Norwegian Water Resources and Energy Directorate: Authority to make licence decisions for power transmission grids with the exception of the largest power lines, wind power plants, district heating plants, hydropower plants between 1-10 MW, as well as hydropower plants under or equal to 1 MW in protected watercourses. NVE also has the authority to make decisions in cases regarding assessment of licence requirements according to the Water Resources Act.

  • County municipalities: Authority to make decisions in cases regarding hydropower plants up to 1 MW based on recommendations from the NVE. The exemption is hydropower plants in protected watercourses.
  • Municipalities: As a local planning authority, the municipalities, according to the Planning and Building Act, process cases regarding transmission lines and small wind turbines under 1 kV and small hydropower plants where the NVE has granted an exemption for a licence requirement according to the Water Resources Act.

Ministry of Petroleum and Energy: Authority to make decisions in complaints regarding licences for power transmission facilities, wind power plants, district heating plants, hydropower plants under 10 MW and licence requirement assessments of hydropower plants.

The King in Council: Licence decisions in hydropower matters over 10 MW, as well as hydropower plants that need a licence according to the Act relating to regulation of watercourses and/or the Industrial Licensing Act. In 2012, the authority to make licence decisions in matters regarding power lines of 300 kV and 420 kV and over 20 km, that are covered under the impact assessment regulations will be transferred from the NVE to the King in Council, cf. White Paper No. 14 (2011-2012).

The Storting: Major or controversial regulation and hydropower development cases are submitted to the Storting for consent in the form of a Storting proposition before the licence is formally granted by the King in Council.

Ministry of the Environment: it has primary responsibility to ensure the consistency in the Government’s environmental and climate policies. The Ministry is the highest authority in matters subject to e.g. the planning part of the Planning and Building Act, the Nature Diversity Act, the Pollution Control Act and the Cultural Artefact Act. The Directorate for Cultural Heritage, the Directorate for Nature Management and the Climate and Pollution Agency are underlying agencies under the Ministry of the Environment.

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Government agencies

Enova SF
The Norwegian government enterprise owned by the Norwegian Ministry of Petroleum and Energy. Enova was established in June 2001 and has been in full operation since 1 January 2002. It is an important policy instrument to promote energy efficiency, the promotion of renewable energy and the development of energy and climate technologies, and Enova offers investment aid to projects within the aforementioned fields. Enova’s activities are financed by resources in a dedicated fund, “the Energy Fund”.  

The Directorate for Nature Management
The Directorate for Nature Management is a consultation body in planning cases and cases under the regulations relating to impact assessments. The Directorate is also responsible for providing guidance vis-à-vis the municipalities. The Directorate for Nature Management is also a consultation body for licence applications for new energy facilities. In watercourses with anadromous fish such as salmon and trout, the Directorate for Nature Management is also responsible for audits and inspection with follow up of nature management conditions in certain licences, and can potentially issue new orders within the framework of given nature management conditions in the licence terms for hydropower plants.

The Climate and Pollution Agency
Authority to issue permits according to the Pollution Control Act, where the authority is not delegated to the County Governor.

The Centres for Environment-friendly Energy Research (FME)
They were established in 2009 as a follow-up of the Climate Compromise and the Energi21 strategy. The Centre scheme is administered by the Research Council of Norway and involves funding for research centres (syndicates) comprised of selected research communities and industry partners who collaborate within prioritised research areas.

In 2009, eight Norwegian research communities were granted the status of Centres for Environment-friendly Energy Research (FME). These are within the areas of CO2 capture and storage, offshore wind power, energy efficiency in buildings, solar cells, bioenergy and environmentally friendly phase-in of new renewable energy in the hydropower system. These research centres contribute to broad, binding cooperation among leading research institutes and innovative companies in Norway as well as close collaboration with international players. In 2011, three more centres were given the status of Centres for Environment-friendly Energy Research, two of which receive support through the Ministry of Petroleum and Energy’s budget. These centres conduct research within social science aspects of energy and climate research.

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Energy procedure

Hydropower plants larger than 40 GWh must always be impact assessed in pursuance of the Planning and Building Act’s rules for reporting and impact assessments (IA). Facilities larger than 30 GWh must be impact-assessed if they could have a significant impact on the environment, nature, cultural artefacts or society. In projects less than 30 GWh, there are no requirements for impact assessments and reports.In matters where there is no reporting requirement pursuant to the Planning and Building Act, the consequences of the project must still be described thoroughly as a part of the licence application.

If the project will not be impact-assessed according to the Planning and Building Act, such as for small power lines, the case starts directly with an application to the NVE according to the Energy Act. In such cases, the NVE assesses the consequences of the project in connection with processing the application. In connection with processing all applications, the NVE will hold a consultation for affected interested parties and possibly hold public meetings, etc.

For cases according to the Energy Act, NVE generally has the authority to make licence decisions. The NVE’s licence decisions can be appealed to the Ministry of Petroleum and Energy. In the appeals procedure it is normal for the Ministry to hold additional consultations if needed, and meetings and inspections are also usually carried out. When the Ministry has made an appeals decision, the licence decision will be final.

The grid system planning process in Norway is made compulsory from the regulator through power system studies. The country is divided in 17 regional planning areas, where one of the 8 distribution system operators has the responsibility of coordinating the planning process among the DSO's in the area, and make a regional grid development study. Stattnett, the national transmission system operator, is responsible for the planning process and issuing of the national grid study. 10-year plans are submitted both for the regional and national grids to the national regulator, NVE, every year.

These studies must include presentations of statistics with characteristics of generation, transmission and usage of electrical energy, and also must include conditions that are of importance and relevance for the development of the power system in the designated area, for example environmental impact assessments.

A new 140 km, 700 MW DC cable between Norway and Denmark, Skagerak IV, was licensed in June 2010. The cable is expected to be commissioned in 2014. There is also construction license applications for a DC cable to Germany with capacity of 1400 MW sent in 2009/2010. Jointly developed by Stattnett, the German TSO TenneT and KfW, the German national bank, the line is expected to be commissioned in 2018. Statnett and National Grid in UK have also signed a cooperation agreement with the aim of commissioning a new DC cable between Norway and UK by 2020, with excepted capacity of 1400 MW.

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Energy regulator

The regulatory tasks are ensured by the Norwegian Water Resources and Energy Directorate (NVE). A regulatory office (department in NVE) was set up in 1990. As electricity regulator, NVE has played an active role in developing network regulation, real market access for all customers, easy procedures for customer switching, security and quality of supply and efficient regulation of system operation.

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Degree of independence

NVE is the national independent regulatory authority for the electricity market in Norway. The Director General acts as regulator. NVE has no ownership interests in the electricity industry and is independent from the economic interests in the electricity industry. NVE is an independent legal entity with its own budget adopted by Parliament and power to act in the scope of its competences.

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Regulatory framework

The Energy Act: Construction and operation of wind power plants, district heating plants and power transmission and conversion plants are included under the Act relating to the generation, conversion, transmission, trading, distribution and use of energy, etc. of 29 June 1990, No. 50 (the Energy Act) cf. Section 1-1. Facilities for generation, conversion, transmission and distribution of electricity cannot be built, operated or owned without a licence, cf. Section 3-1.

The Water Resources Act: Even if a power developer already owns the waterfall rights, and does not want to regulate the watercourse, any encroachment in the watercourse necessary to utilise the power will normally require a special permit according to the Act relating to river systems and ground water of 24 November 2000, No. 82 (the Water Resources Act).

The Watercourse Regulation Act: To establish hydropower plants with a regulating reservoir, a permit pursuant to the Act relating to regulation of watercourses of 14 December 1917, No. 17 (the Watercourse Regulation Act) is needed. The Watercourse Regulation Act includes regulations that balance the rate of flow in a watercourse over the year, typically through storage of water, and transfer of water from one watercourse to another.

The Planning and Building Act: Energy production facilities are covered under the planning provisions in the Act relating to planning and building matter processing of 27 June 2008, No. 71 (Planning and Building Act).

The Electricity Certificates Act: It obliges electricity suppliers and certain electricity consumers to prove that a certain quota of the electricity supplied by them was generated from renewable sources. Such proof shall be provided by means of tradable certificates allocated to renewable energy producers.

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Regulatory roles

The main statutory objectives for NVE concerning energy, and which the regulatory functions is a part of, is to promote social and economic development through efficient and environmentally sound energy production, and promote efficient and reliable transmission, distribution, trade and efficient use of energy.

NVE has powers according to the Energy Act. NVE has powers to issue regulations on economic and technical reporting, network income, market access and network tariffs, non-discriminatory behaviour, customer information, metering, settlement and billing and the organised physical power exchange (Nord Pool Spot). As well as issuing regulations on system responsibility and quality of supply. NVE can take necessary decisions to fulfil the delegated powers according to the Energy Act.

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Energy regulation role

Cooperation agreements are in place between NVE, the Competition Authority and the Financial Supervisory Authority of Norway, as well as the Directorate for Civil Protection and Emergency Planning. However, these departments do not take an active nor constant role in energy regulation.

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Regulatory barriers

There is a great potential for improved energy efficiency in Norwegian buildings. However, a systematic and broad analysis of the efficiency improvement potential as other nations have done has not been carried out. Technologies within heating, light, ventilation and control systems are available and can be implemented. Many of the measures for buildings are also categorised as profitable or have a moderate cost level. The challenge is therefore to remove the barriers, establish expedient regulations and develop a market. The current incentive schemes through Enova have not had a satisfactory degree of impact. An incentives scheme must be developed that provides added stimulus for improved energy efficiency.

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