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Norway

Norway

Market Status: Norway - Fossil wealth proves a disincentive for wind

NORWAY: A handful of Norwegian wind power projects with total capacity of 102.6MW are expected online this year.

Another highlight for the energy sector is the legislative and administrative groundwork needed ahead of implementation of a green electricity certificates scheme on January 1, 2012. But overall, major energy companies such as Statoil seem more focused on research into floating turbine development, rather than full-scale wind generation projects.

Norway now has wind power capacity of 448.2MW. The opening of the Mehuken 2 wind farm in western Norway last year added a mere 18.4MW of wind. Just 1% of the country's electricity demand was met by wind energy last year.

Though it says it is eager to harness its rich wind resource, Norway seems more enthusiastic about tapping its abundant North Sea fossil fuels. "Another reason for (Norway) sitting back and relaxing with regard to wind power might be our vast hydro resources," says Andreas Thon Aasheim, an advisor at the Norwegian Wind Energy Association. "But if anything, the unusually harsh winter of 2009/2010 proved that we need more electricity production and more production from other sources of energy."

Aasheim believes the lack of activity last year was partially due to uncertainty over the green electricity certificates scheme before it was finally signed with neighbouring Sweden in December after months of discussion. The two countries already have a common electricity policy and the green certificates electricity scheme ensures that energy providers source a certain percentage of their electricity from renewable sources. "We're obviously not pleased with installing only (about) 20MW, but hopefully this will be the last year of installation drought for some time," Aasheim says.

Electricity prices in Norway remain high, with the average going rate at around EUR0.062-0.063/kWh during the winter months. Wind energy producers do not receive any financial incentives for energy produced but do get initial start-up subsidies of around 18-20% of the project and development costs. This will change with the implementation of the green certificates scheme, after which producers will receive certificates based on how much energy they produce.

The certificates in Sweden are currently around SEK 0.22/kWh (EUR0.025/kWh) and Aasheim believes Norwegian power producers should be able to get around NOK 0.65-0.70/kWh (EUR0.08-0.09/kWh), which would make it profitable.

New support

Whether the certificates scheme will push the Norwegian industry forwards remains to be seen. "The industry has been waiting for this for a long time, as the current scheme which involves an upfront subsidy and investment support has failed to launch investments on a large scale. The new support scheme removes a lot of financial risk," Aasheim says.

"Under the green electricity certificates scheme, producers will get paid more for electricity generated as they will be paid both the electricity price and the price of the certificates, which are tradeable assets." Projects planned for completion in 2011 are Nygaardsfjellet 2 (26 MW), Hog Jaeren (73.6 MW) and a new turbine on Havoygavlen (3 MW).

Norway also faces the obstacle of overhauling its electricity grid - a necessary measure to deal with the country's grid capacity issues and increasing electricity production. Statnett, the Norwegian transmission operator, is investing NOK 40 billion (EUR5 billion) in the core grid over the next ten years. This new grid project has sparked debate about whether to install underground cables or overhead lines which would increase costs dramatically and, in a worst-case scenario, price Norwegian wind out of the certificate scheme.

Aasheim is optimistic. "We expect a greater presence from the turbine manufacturers, for one," he says. "There are also many Norwegian companies that have been serving the oil and gas industry here in Norway. We now expect several of them to take a good look at the wind energy industry."

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