Power policy

Renewables were supported through a joint tradable green certificate scheme with Sweden, which Norway left in 2020. There is no long-term variable renewables build-up plan as the country has almost entirely decarbonized its power sector with hydroelectricity, although Norway is planning offshore wind auctions with a temporary accelerated depreciation measure in force for wind power plants acquired between June 19, 2015, and December 31, 2021. Norway has an overall emissions reductions target of 50-55% by 2030 compared to 1990 levels, which will require decarbonization of other sectors. The country's vast sovereign wealth fund is a key investor and has committed to divest from all coal-related investments and instead build up its clean energy portfolio. Small scale PV is also incentivized by a net metering scheme, but customers must choose who they sell power to.

Power prices and costs

Norway is split into five power price zones and has one of the lowest wholesale tariffs in Europe. The wholesale market is dominated by zero-marginal cost hydroelectric power. The tariffs are split relatively evenly between taxes, the power price and network charges. While in 2019, the average baseload day-ahead price was 38.95 euros per MWh, and in 2020 it was a low average of 9.29 euros per MWh not seen in 20 years. Overall, day-ahead (DA) prices in the region decreased, mainly due to effects of the restrictive measures that most governments took in response to the Covid-19 pandemic. These resulted in a decrease in demand for electricity and gas, which pushed down the marginal cost for generators which in return lead to a significant drop in average DA prices. Norwegian prices mostly set by the marginal opportunity cost of hydro were low in 2020 also due to the high availability of hydro stocks as a result of melting water. Even though Norway is a strongly market oriented country, in 2021, large power users ask for Norwegian protection from rising wholesale electricity prices due to a shift in the same hydropower from a surplus to a deficit, getting to prices like 60 euros per MWh, much higher than 2019 numbers. Not only a national issue, power prices across Europe rose as overall industrial demand rebounded from last year’s pandemic-driven slump and as carbon prices reached record highs.

Power market

The retail market is fully liberalized in Norway, with at least 139 electricity suppliers in 2019; all sector but transmission are unbundled. Hydroelectric power is the dominant source of generation, accounting for 87% of capacity and 97% of generation in 2020. Wind and gas assets accounted for 5% and 1%, respectively. Norway, which is not a part of the European Union, has agreed to implement the EU’s Third Energy Package and to join the bloc’s Agency for the Cooperation of Energy Regulators (ACER). That allows the country to stay as an equal partner in the EU’s energy markets, but takes away some of its sovereignty over energy policy. The move to join ACER happened because the Norwegian wholesale power market is shared with Denmark, Sweden and Finland. Since Norway is not a member of the EU it would lose equal access to the European energy market if it did not join ACER. That could put the common electricity market at risk. In 2021, the Centre Party showed their political desire to alter the European Economic Area (EEA) agreement, the cornerstone of EU-Norway relations since 1994, because of a feeling of handing much authority to the EU, particularly within the area of energy. They were also opposed to Norway’s adoption of the Third Energy Package in 2019 for fear the agency could force Norway to build more power lines to Europe, thus increasing domestic electricity prices.

The Norwegian clean energy sector attracted around $20 billion of investment in 2010-19, dominated by small hydro early in the period. Wind has slowly taken over, accounting for 85% of the $3.6 billion invested in 2017-19. This is driven by the Fosen Vind complex, which comprises six onshore wind farms with a combined capacity of 1 gigawatt. It is expected that wind power will continue to dominate clean energy investments in the next few years as the country builds out its onshore wind base and Norway’s sovereign wealth fund invests in the second-largest operational offshore wind farm.

Doing business and barriers

The business environment for renewables is positive in Norway as the country is actively pushing to increase clean generation. It is already almost entirely reliant on renewables for power generation, only using natural gas for backup. Power demand has been flat in recent years. As a result, there are several initiatives to attract major data centers to regions with abundant hydro resources.

There are few regulatory barriers to entry into Norway, as evidenced by the high number of competitors in retail and distribution. The country has almost completed its smart meter roll-out, with around 98% of metering points (2.9 million) now having one installed. This has led to increasingly dynamic retail tariffs at a lower price. This, together with an active consumer base, contributed to 60% of consumers having changed their power supplier at some point. Among those who never change their supplier, 15% have changed their tariffs or type of contract. The mixture of low electricity prices and high costs for materials and labor represents a barrier, particularly within generation. A focus on hydro and wind also means that there is a constraint on the choice of generation technology.

EV market

Given that Norway is fairly advanced in the renewable power sector, its green focus has shifted to other sectors, such as transport, and the implementing of an array of tax reductions and other incentives for the purchase and ownership of electric vehicles (EVs). This helped make it the leading country for electric vehicles in Europe by absolute numbers and in the world on a per-capita basis. Since 2012 the growth rate of EVs has been constant, varying from 30 to 131% (with an atypical increase of 5,89% in 2019). The share of ICE vehicles sales has decreased since 2017.

EV policy

The government's electric car policy has been important to reaching the goal for average CO2 emissions from new passenger cars at a maximum of 85 grams per kilometer. This goal was reached in 2017 - three years ahead of schedule. In September 2019, the average emission from new passenger cars was 47 grams of CO2 per kilometer. Many EV policies have been put in place since 1997, but the ones still in force in 2021 are either fiscal ? no purchase taxes, VAT exemption of 25%, reduced annual road tax, fiscal compensation for the substitution of fossil vans to zero emission ? or are daily incentives such as access to bus lanes and reduced ferry fares and parking fees.

Buildings market

Norway is targeting improving building efficiency by up to 30% by 2030, with 2015 as a baseline. With building stock almost 70% direct electricity and energy performance standards of 100 kwh/m2 for a single family home, 95kwh/m2 for apartments and 115kwh/m2 for commercial buildings, the target is on track.

Buildings policy

Given the country’s success, Norwegian policies related to buildings and renewable energy have been canceled. Until 2018, replacement of an oil boiler with an air-to-water heat pump in a year-round home, a public building or a commercial building was supported by up to 40,000 Norwegian krone ($4,600) from Enova. Heat pump purchase support was withdrawn in April 2021. The next big goal is in 2025 with a full ban on oil-fired heating. The ban has already been in force for many locations, with the exception of farming and hospitals, since 2020.