Analysis: Norway lags following Swedish pact

NORWAY: The 2012 pact between Norway and Sweden to jointly develop renewable energy projects was intended to spur the development of an estimated 6GW of wind capacity across both countries.

Norwegian projects lose out, but the government plans to amend depreciation rules
Norwegian projects lose out, but the government plans to amend depreciation rules

However, Norway claims it is getting a raw deal out of the arrangement.

Two years ago the neighbouring countries set up a shared renewable energy certificate scheme. Under the deal Sweden and Norway agreed split subsidy costs from these renewable projects, regardless of which side of the border they were located on. It was part of a drive to meet an EU commitment to jointly add new capacity capable of generating 26.4TWh by 2020.

If conditions in the countries were the same, roughly equal levels of development could be expected. Before joining, Norway expected to build around half of the system's wind capacity — around 3GW by 2020. Last year it only added 62MW to takes its total capacity to 766MW.

However, Øyvind Isachsen, CEO of the Norwegian Wind Energy Association (NORWEA), said that the playing field is far from level — and he claims this is holding back his country's wind market while spurring development in Sweden.

"We could have 26.4TWH of renewable energy built solely in Sweden, but why should five million Norwegians pay 50% for what nine million Swedes are doing," he said.

He points to the difference in depreciation rules and tax systems in the two countries as the explanation for poor growth of wind power in Norway, compared with the 677MW commissioned in Sweden to reach 4.8GW.

"When people have invested in wind power in Sweden instead of Norway it is because they will get returns on their money faster from Swedish projects, and that has to do with the depreciation rules," said Isachsen.

"There is something wrong when a turbine in Norway has to produce 400 hours more a year to make the same return as a Swedish turbine," he added. This is despite the presence of better wind resources in Norway.

Energy firm Statkraft is not currently constructing any projects in its native Norway, but has 369MW under construction in Sweden.

"If projects are equal on all other factors, then a Swedish project would be favoured because of the depreciation rules and tax situation," explains Torbjørn Steen, Statkraft vice president of communications, wind power and technologies.

However, the country's government has recognised that Norway is losing out to its neighbour, and has promised to introduce depreciation rules in line with those in Sweden some time next year, back-dating them to the start of 2015.

This could allow Statkraft to go ahead with its plans to build 735MW of recently consented projects near Trondheim in central Norway. But while Steen said that a policy change may be a factor in a final investment decision for these developments, he added: "It is too early to say whether a change in the depreciation rules would be a deal maker or breaker with these projects."

Gustav Ebena, head of renewable energy at the Swedish Energy Agency said that other forces are at play: "Of course there are differences in depreciation rules, but there are other factors that are playing important roles as well. What we had in Sweden between 2009 and 2011 was a tremendous learning process in the wind industry — we learned how to develop projects, so that is paying off. And infrastructure was improved — the grid is much more developed than in Norway for example."

While a change in regulations could allow onshore wind to take off, it is unlikely to spur offshore development. The certificate system does not favour any particular type of renewable energy, with mature technologies receiving the same subsidy as emerging technologies.

There are 16 projects that have been announced in Norwegian waters, but only the single floating Hywind turbine is operating, and none of the pipeline projects are likely to be the subject of a final investment decision under the current certificate system.

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