Norway’s power sector plagued by higher prices
The Norwegian electricity grid is under pressure from a lack of capacity and higher prices for coal and natural gas in Europe, state-run grid operator Statnett said December 10.
The Dutch TTF contract in the European market is trading near $35/mn Btu, nearly 10 times higher than the corresponding price in the US. Norwegian grid operator Statnett said that this was having a spillover effect on the Nordic market, where prices for electricity are also very high.
“Important reasons for this are very high European electricity prices as a result of high gas and coal prices, higher CO2 prices and little water in Norwegian reservoirs in the south as a result of a dry summer and autumn,” the regulator stated.
Norway is rich in oil and natural gas, but powers most of its economy on renewable forms of energy such as hydroelectric power.
Gunnar Lovas, the executive vice president for power systems and marketing at Statnett, said that prices will not stay this high forever.
“This is not the new normal, although the price in the years to come may be higher than what the average price has been in recent years,” he said.
On demand, Statnett assumes annual electricity consumption in Norway will increase more than 10% during the five-year period ending in 2026. This is the largest consumption increase for any Nordic country, driven in large part by the electrification of the oil and gas sector.
Meanwhile, there might not be enough planned new power capacity to meet the expected increase in demand, suggesting the market surplus will move from 15 to 3 TWh by 2026.
“It is clear that there will be a need for more power production to achieve the goals set for electrification and the establishment of new industry in Norway,” Lovas said.