Liberals join Norwegian government, renewable policy unlikely to change

This story was originally published for ICIS Power Perspective subscribers on 15 January 2018 18:37 CET.

On Sunday 14 January, following 12 days of coalition talks in Norway, the conservative party (Hoyre), the progress party (Frp) and the liberal party Venstre reached a joint policy platform which puts emphasis on the energy transition and investments in new technologies (link). While Norway’s new coalition government could speed up climate energy initiatives, we see only limited growth for new renewable capacity.

Background

• In the last term (2013-2017) the conservatives and the progress party secured a majority in the parliament and formed a coalition
  • The coalition was supported by Venstre and the christian democrats (KrF)
• In the new government, Venstre is joining as a minority party with eight out of 169 MPs
  • Venstre is a social-liberal party
  • For the national energy policy this means likely a shift towards greener proposals, aiming at cutting emissions and securing financing to immature technologies
• The platform (coalition treaty) lays out 10 policy objectives in a section dedicated to renewable energy:
  • Make sure renewable energy generation in Norway is profitable
  • Take advantage of the state investment company Fornybar AS to invest in new technology which cuts GHG emissions in their transition period from technology development to commercialisation
  • Facilitate use of the country’s renewable resources by the domestic industry
  • Phase out fossil energy in other sectors by using clean energy sources
  • Develop business opportunities by focusing on climate technology that will be profitable in the long-run – the government will facilitate regulation, research, demonstration, risk loading and introduction to new technologies
  • Establish a committee which will assess the tax regime for Norwegian hydro power
  • Make sure the development of new technologies and market designs strengthen security of supply
  • Continue the energy cooperation with the EU and promote Norwegian opinions and interests in the development of European market and regulations
  • Consider measures to make it easier to connect self-generated electricity to feed the power grid
  • Facilitate energy efficiency in all sectors of the Norwegian economy and implement the EU energy efficiency directive with adaptations

Analysis

• Overall, the new platform does not change the renewable energy policy set by the previous government and stipulated in the 2015-2016 white paper, “The Energy Policy towards 2030” (link)
• In June 2017, Norway presented its climate policy strategy for the period 2021-2030, aiming at reducing 20-25m tonnes CO2 emissions domestically
• In terms of new renewable capacity, the new platform does not change the Norwegian government’s decision to discontinue the joint el-certificate scheme with Sweden by 2021
  • Beyond 2021, new renewable capacity in Norway will not be able to receive direct subsidies, but market their produced power through the wholesale market
• There is limited potential for a politically driven large-scale renewable expansion in Norway through subsidy systems
  • With its power surplus situation, Norway does not need additional power capacity
  • Hydro power is dominant in domestic electricity production and consequently the willingness to subsidise other technologies is limited – hydro power accounted for 95% of the share of generation in November 2017
  • Regarding power prices, Norway has also no need to increase generation capacity as electricity prices are by far the lowest in Europe
• The implementation of the EU energy efficiency directive could soften the estimated increase in Norwegian power consumption
  • The directive seeks to reduce primary energy consumption in the EU by overall 20% by 2020
  • However, electrification will be pushed forward by the Liberals and should support consumption overall
• The review of the tax regime could impact Norwegian hydro generation significantly if the tax burden imposed on producers is reduced
  • However, an assessment is currently not possible as the new government only committed to set up a committee to review the situation

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