Norwegian coalition tipped to win election, but policy may still shift
Ideas on energy policy held by the seven parties represented in the Norwegian parliament differ widely, making the outcome of next month’s election (14 September) an important one.
Latest election polls in Norway suggest the Red-Green Coalition – formed by the Labour, the Socialist Left Party, and the Centre Party in 2005 – looks set to retain power, though even this would not guarantee the status quo.
Norwegian economist Professor Erik Reinert told ICIS Heren that energy policy may be affected even if the existing coalition government headed by Labour won, because the Socialist Left Party (Sosialistisk Venstreparti) and the Centre Party (Senterpartiet) have aligned themselves this year on several key issues – notably investment in renewable energy, in particular wind and biofuels.
Reinert pointed out that the vision of the prime minister and leader of the Labour Party (Arbeiderpartiet), Jens Stoltenberg, is tied to oil, rather than investment in alternative energy on the scale desired by his coalition partners.
Twenty four parties will take part in next month’s election, though the parliament currently has only four parties in opposition: Christian Democratic Party (Kristelig Folkeparti), Conservative Party (Høyre), Liberal Party (Venstre), and Progress Party (Fremskrittspartiet).
Privatisation of state-owned energy assets
Of these, the Progress Party has garnered significant press coverage with its election pledges to sell shares in state-owned companies, such as the largest power producer Statkraft, as well as to increase the amount the government can take from the so-called oil fund. Both would help offset its election pledges to lower taxes and increase spending on infrastructure.
Proponents of the policy to sell state-owned assets suggest another motive – a belief that privatisation would introduce accountability to private shareholders and encourage more efficient operation of the companies. There has been no talk of further reducing the government’s share in Statoil.
Norway’s Oil Fund
Norway does not lack money. The Norwegian Government Pension Fund – Global (formerly the Petroleum Fund) – is worth some Norwegian kroner (NKr) 2.38 trillion (€277bn). One of the political debates is over whether or not to raise the annual amount of money available to the Ministry of Finance from the fund each year (currently up to 4%) for state expenditure. Those against the move argue that this would cause inflation.
State guarantee to encourage long-term supply contracts
This month, the government proposed to create a NKr20bn fund to encourage producers to sign long-term electricity supply contracts. The measure – which would not be implemented until after an election victory next month – targets large industrial consumers such as metals, lumber, pulp, chemical producers with consumption of 10GWh/year or more, and contracts with a duration of at least seven years.
Opinion is divided over the proposal. Doubters suggest it is merely a pre-election pledge to gain votes. But proponents see it as a much-needed boost.
“The government first mooted the idea four years ago and has since examined how to best implement it and ensure its compliance with EU competition law,” Finn Langeland, head spokesman for the Federation of Norwegian Industries, told ICIS Heren.
In recent years, electricity prices in Norway have increased, while the price advantage enjoyed by Norway’s industrial sector compared with the rest of Europe has decreased, Langeland said. Meanwhile, long-term power agreements have become increasingly difficult to enter into, partly because the necessary long-term financing is hard to obtain.
“There is a big power surplus today. This market situation creates a window of willingness to sell long-term contracts and at a competitive price,” Langeland added.
Nord Pool spot prices have slumped this year after peaking in July 2008 because of a recession-driven fall-off in demand.
By contrast, Tomas Dyrhaug, secretary for the Norwegian Industrial Energy Users’ Group, told ICIS Heren that the proposal would ameliorate the position of the producers, but not the large consumers at which it is aimed.
A slow-down in oil and gas exploration and production?
If the Socialist Left Party and the Centre Party have indeed aligned themselves more closely, it may prove more difficult for the new coalition to push ahead with exploration of environmentally sensitive areas such as in the waters surrounding the Norwegian Arctic island of Jan Mayen. JA
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