From 1 January 2023, Norwegian onshore wind projects face a new 40% resource rent tax and a 'high-price contribution' tax of 23% of the electricity price above NOK 0.70/kWh (€0.06/kWh). In addition, a new natural resource tax of NOK 0.013/kWh has been introduced, while the existing production tax, first introduced last year, is doubling to NOK 0.02/kWh.
“We propose long-term measures that ensure redistribution and the necessary income, both next year and in the years to come," said Norway's prime minister, Jonas Gahr Støre. "And we propose extraordinary tax measures adapted to today's situation, where high electricity prices make it difficult for many, but give significant extra income levels for those who produce and sell the electricity”. It comes as the EU is also considering capping wind revenues in response to the energy crisis.
In April, the Norwegian government announced plans to resume licensing for some new onshore wind farms after a three-year moratorium on projects. Estimates from the Norwegian Water Resources and Energy Directorate show onshore wind is now the country's most cost-effective energy technology. "Expectations of a steadily falling cost level and persistently high energy prices indicate the appropriateness of introducing a resource rent tax on onshore wind power," the government said in its 28 September budget statement.
Designed as a cash flow tax – meaning revenues (including from the sale of guarantee of origin and electricity certificates) and investments are taxed on an ongoing basis in the year in which they are earned/incurred – the resource rent tax applies to wind farms with more than five turbines or a minimum total installed capacity of 1MW. An exemption on energy production sold through existing fixed-price agreements entered into before 28 September 2022 will apply, while other possible exemptions will be considered, the government noted.
While still to be referred for public consultation – planned before the end of the year – the measure is expected to raise NOK 2.5 billion (€240.4 million) a year. The revenues generated will be split equally between the state and municipal sector, although the government proposed around NOK 700 million (€67.3 million) as an additional allocation to municipalities in 2023.
With the 23% high-price contribution tax (which applies to both wind and hydropower), the government said the treasury's revenue will be boosted by around NOK 16 billion (€1.54 billion) annually.
While Norwegian wind energy association NORWEA welcomed moves to boost the wind sector's contribution to local municipalities, it said it wants to make sure the schemes are set up so they distinguish between wind farms with high and low profitability and that existing wind farms are not adversely impacted.
It is not opposed to the principle of an investment-neutral ground rent tax on wind power, NORWEA said, but as it is proposed the tax "could be problematic for existing wind power plants" because no deduction is given for investment costs in excess of the remaining tax values.
"Many existing wind farms have had high investment costs and sell the power on long contracts at moderate prices. These [sites] do not collect ground rent, and therefore should not be taxed as if they do," said Robert Kippe, communications manager at NORWEA.
He also voiced concerns that the government does not specify whether the increase in production tax will just apply to new facilities. "Increased production tax is good, but the increase must be limited to new plants," Kippe said. "We have been clear about this in the past and will now repeat it. In addition, we are concerned that the income from both the production tax and the natural resource tax goes to the host municipalities in full."
NORWEA said it now plans to consult with its members on the full impact of the proposals, including the high-price contribution tax, before commenting further. However, renewable energy producer Cloudberry Clean Energy said "these significant and surprising changes" in the regulatory framework represent "a real challenge" for the industry.
“It is vital that the government does not impose taxes that will jeopardise the transition to more renewable energy in Norway,” said Anders Lenborg, the company’s CEO.
"We are worried that the sudden implementation of significant higher taxes will have a long-lasting negative effect on the development and production of renewable energy in a time where the need for more renewable energy is high.”
Norway currently has 4.8GW of operational onshore wind capacity, according to Windpower Intelligence, the data and research division of Windpower Monthly.