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White Paper on Norway’s Energy Policy: Power for Change

On the 15th of April, the Norwegian government presented a White Paper on energy policy – Power for change – an energy policy towards 2030. The main message was that security of supply, consequences for climate and economic growth must be considered together to secure an efficient and climate friendly energy supply.

Norway is equipped with huge renewable resources and the opportunity to capitalize on them. Stronger integration with other energy markets is important to maintain the value of Norwegian renewable resources. Thus, the government aims to increase connections with European energy markets. The regulatory framework is set to be changed so that others than the state-owned TSO Statnett may own and operate interconnectors – today this is prevented by Section 4-2 of the Norwegian Energy Act.

The government signals that it intends to abandon the electricity certificate scheme  with effect from 31st December 2021 by not introducing new targets. It justifies this by the desire to avoid reduced values of Norway’s existing renewable production where the objective is to obtain increased prices for electricity. The government’s definition of existing renewable production is hydropower.
As another measure in order to increase the prices for electricity, the government signals that it will facilitate development of energy-intensive activity, including major data processing centers, by reducing the rate of the electricity tax.

The scheme for Guarantees of Origin (GO), established under the EU renewable energy directive (Directive 2009/28/EC) will be reviewed in connection with EU’s preparation of the new renewable energy directive. In the White Paper, the government expresses skepticism towards the scheme.

The government has also proposed to make the licensing process more efficient.
The government shows strong signals that it wants a long-term development of wind power in Norway, emphasizing that it shall be profitable. There is currently a massive access to serviced wind power sites in Norway with the best wind resources in Europe. Arntzen de Besche assists both project developers and international capital in the process of realizing the possibilities within the wind industry sector in Norway.

New legislation – Unbundling for grid companies

The Norwegian Parliament’s enactment of new legislation of March 17, 2016 implies that legal and functional unbundling shall apply for every grid company for which the Norwegian Water Resources and Energy Directorate (“NVE”) has determined a maximum allowed income2. The current legislation requires vertically integrated companies with more than 100,000 users to separate their grid activities from their generation or sales activities – the enactment proposes that the threshold of 100,000 users is removed.
Legal unbundling signifies that grid activities shall be organized as an individual legal entity, separated from other activities.
The request for functional unbundling implies that management personnel in the grid company are prohibited from participating in the management of an associated company within the group. The parent company might however exert influence over the economic limits of the grid company but shall not instruct in the day-to-day business or in investment decisions.

The deadline for vertically integrated grid companies with less than 100,000 users to implement legal and functional unbundling is set to 21st January 2021.
The provision on legal unbundling render the possibility for cooperation on a jointly system control center between grid companies and companies that generates electricity or district heating, provided that the grid company holds control and responsibility over the grid activities of the system control center.

The legislation also covers a definition of the transmission grid as the highest grid level according to the Energy Act and it provides the MPE with the competence to determine which grid construction that is comprised by the new legislation. Further on, a new provision that provides the MPE with the competence to issue regulations to point out a co-ordinating operator of the distribution system (DSO). Finally, a recommendation was put forward to make exceptions from the restrictions on reversal of decision in the Norwegian Public Administration Act with respect to the redetermination of a ceiling of the grid companies’ income level.

We expect that several investment possibilities will arise from the new requests for change in the ownership structure of grid companies in Norway.