Alternative Energy & Power 2023

Last Updated July 20, 2023

Norway

Law and Practice

Authors



Advokatfirmaet Hjort AS was established in 1893 and has since become a well-known and leading law firm in Norway. Hjort has the structure and capacity to engage in all of the central legal areas, with a solid competency within, among others, the renewable energy industry, corporate legal assistance and dispute resolution. The firm’s highly acclaimed judicial competency, combined with a corporate understanding and commercial appeal, are the reasons why it is considered to be an unparalleled contributing partner in regard to important and demanding legal cases.

General Structure

Norway has the highest share of electricity produced from renewable sources in Europe. In 2022, Norway’s total electricity production was 145.9 TWh, divided among the following sources:

  • hydropower – with a combined installed capacity of 34,269 MW and a production of 128.7 TWh, which in 2022 accounted for about 88% of the total electricity production;
  • wind power – with a combined installed capacity of 5,062 MW and a production of 14.8 TWh, which in 2022 accounted for about 10.1% of the total production; and
  • thermal power plants, with a production of 2.8 TWh, which in 2022 accounted for about 1.9% of the total production.

The Norwegian hydropower system has a high storage capacity, accounting for about half of Europe’s total reservoir capacity. More than 70% of Norway’s production capacity is flexible, meaning that production can be rapidly increased and decreased according to needs and at a low cost.

Central Authorities Responsible for Energy and Water Resource Management

The Norwegian Parliament (“Stortinget”) decides on the political framework for energy and water resources management in Norway. The government has the executive authority and implements its policy through the following ministries:

  • the Ministry of Petroleum and Energy (“Olje- og energidepartementet”), which has the overall administrative responsibility for energy and water resources;
  • the Ministry of Climate and Environment (“Klima- og miljødepartementet”), which is responsible for environmental legislation;
  • the Ministry of Local Government and Regional Development (“Kommunal og distriktsdepartementet”), which is responsible for planning legislation;
  • the Ministry of Finance (“Finansdepartementet”), which is responsible for taxation, government expenditure, etc; and
  • the Ministry of Trade, Industry and Fisheries (“Nærings- og fiskeridepartementet”), which oversees Statkraft SF, the state-owned electricity producer.

The Norwegian Water Resources and Energy Directorate (“Norges vassdrags- og energidirektorat”, or the “Directorate”) reports to the Ministry of Petroleum and Energy and is responsible for managing domestic energy resources, and is the national regulatory authority for the electricity sector.

The Directorate is involved in research and development, as well as international development co-operation. It is also the expert body on national hydrology.

Ownership Structure

In order to exploit hydropower resources in Norway and produce hydropower, the power producer has to acquire the necessary property rights for the waterfalls and pertinent rights (“fallrettigheter”) if the waterfall when harnessed is expected to produce more than 4,000 natural horsepower. Pursuant to the Waterfall Rights Act, a concession for acquisition of waterfall rights can only be issued to public bodies. These entities may be Norwegian state-owned enterprises, municipalities or county authorities, as well as companies where public bodies make up at least two-thirds of the capital and the votes. Private actors may thus only account for a maximum of one-third of the ownership in such companies.

Norwegian municipalities, county authorities and the state own approximately 90% of Norwegian hydropower production. Through the wholly owned state enterprise Statkraft SF, the state owns approximately 35% of all production capacity in Norway.

There are no similar requirements for the public ownership of wind power plants, transmission or distribution facilities. However, in accordance with the principles of the EU’s Third Energy Market Package, the Norwegian state, through its wholly owned company Statnett SF (the transmission system operator, or TSO), now owns almost 100% of the transmission grid.

Municipalities and public authorities, on the other hand, overwhelmingly own the distribution grids.

Many of these grid companies are part of vertically integrated companies. From 1 January 2021, it is required that all grid companies are legally unbundled, and all grid companies with more than 10,000 customers must be functionally unbundled. In May 2023, the Norwegian Parliament adopted a new regulation whereafter only grid companies with more than 100,000 customers must be functionally unbundled. This change has not yet (as of June 2023) entered into force.

The following companies are at present the largest in Norway within the relevant energy segment.

Generation and Production

  • Statkraft SF (wholly owned by the Norwegian state);
  • Hafslund Eco AS;
  • Å Energi AS;
  • Norsk Hydro ASA;
  • Lyse AS; and
  • Eviny AS.

Transmission

  • Statnett (wholly owned by the Norwegian state).

Distribution

  • Elvia AS;
  • Glitre Nett AS;
  • BKK Nett AS;
  • Lede AS; and
  • Arva AS.

Electricity Suppliers

  • Fortum AS;
  • Fjordkraft AS;
  • Trøndelagkraft AS;
  • Lyse Energi AS; and
  • Ishavskraft AS.

Under the current Waterfall Rights Act, a concession for acquisition of waterfall rights can only be issued to Norwegian public bodies (see also 1.1 Law Governing the Structure and Ownership of the Power Industry). There are no further restrictions as far as foreign investment is concerned.

While private actors (and also foreign public bodies) may not own more than one-third of large hydropower production facilities, this requirement does not apply to smaller power-producing installations. Private actors may also own wind and solar power facilities. See also 1.4 Law Governing the Sale of Power Industry Assets.

The Security Act

One issue to be aware of is the Norwegian authorities’ possibility to screen investments in Norwegian businesses on the basis of national security.

These rules follow from the Security Act (“Sikkerhetsloven”), which came into force on 1 January 2019. The definition of national security interests is quite wide; if an investment could cause a “not insignificant” risk to national security, the authorities could either block said acquisition/investment or impose certain conditions for the transaction.

The screening regime applies to both EU-based and non-EU based investors, and is not limited to specific sectors. It generally applies to undertakings involved in “fundamental national functions: services, production and other types of activity which are of such importance that a complete or partial loss of the function would have consequences for the state’s ability to protect national security interests”. As such, electricity production and transmission would generally be sectors that are within the scope of such screening.

Each ministry shall be responsible for protective security work in its areas of responsibility, and shall (i) identify and maintain an overview of fundamental national functions, and (ii) identify the relevant undertakings and maintain an overview of undertakings of material importance to fundamental national functions. Any affected private company shall receive prior notice.

The Norwegian government has now proposed several important changes to the Security Act. The proposals are largely in line with changes proposed in 2021, and will introduce more stringent rules on foreign investment, hereunder within the energy sector. The new regulations have not yet (as of June 2023) entered into force.

The principal laws that govern the sale of generation, transmission and distribution assets, and the amalgamation or merger of power industry entities, are as follows:

Pursuant to the Waterfall Rights Act, only public entities may obtain the necessary licence to exploit large waterfalls. The entities may be state-owned enterprises, municipalities or county authorities, as well as companies where public bodies make up at least two-thirds of the capital and the votes.

Private actors (and foreign public bodies) may thus only account for one-third of ownership in such companies. These requirements also apply in the event of sales of assets or business, as well as in conjunction with amalgamations and mergers. The essence of the matter is that private ownership of waterfalls may not exceed one-third.

The Norwegian Water Resources and Energy Directorate has the overall responsibility for maintaining national power supplies, while Statnett is the Norwegian energy system operator.

The Norwegian electricity grid consists of two levels: the transmission grid and the distribution grid. Interconnectors with other countries are part of the transmission grid.

Statnett operates the transmission lines nationwide and is responsible for the satisfactory security of supply at all times. This necessitates maintaining a power grid with adequate transmission capacity. It also involves being in charge of managing peaks in electricity consumption and allowing for the import of adequate quantities of electricity.

Should the need to ration electricity arise, the Directorate is responsible for planning and administering the appropriate measures.

Interconnectors

In July 2021, the Parliament changed Article 4-2 of the Energy Act, whereafter a licence for the ownership of cables going outside the Norwegian borders (interconnectors) in general can now only be granted to Statnett (as the TSO) or companies/undertakings where Statnett has a controlling interest.

However, there is a possibility to grant a licence to a cable that goes from Norway and is connected to an offshore production unit (offshore wind farm), and that is then connected from this production facility to another country.

For the sake of clarity, the government emphasised in connection with the changes to the Act that a cable from an offshore production unit directly to another country, without also having a cable to Norway (ie, not connecting the Norwegian grid to the foreign grid), will not be regulated by the Energy Act but would be part of the licensing process under the Norwegian Offshore Energy Act.

From 1 July 2021, a licence for the ownership of cables going outside the Norwegian borders (interconnectors) can only be granted to Statnett (as the TSO) or companies/undertakings where Statnett has a controlling interest.

As of 1 January 2021, the Norwegian government opened two areas for offshore wind farms. Guidelines on how to apply for the areas were published on 11 June 2021.

In May 2022, the government announced that it was planning ahead for a total production from offshore wind farms of 30 GW by 2040.

On 29 March 2023 the government announced a competition for project areas at Utsira Nord (floating offshore wind) and Sørlige Nordsjø II (bottom fixed offshore wind) for offshore renewable energy production.  The award of exclusivity for the areas is expected around new year 2023/24.

Regarding onshore wind farms, the possibility to receive electricity certificates expired at the end of 2021. The previous government had decided that it would not, in general, extend the deadline for construction of wind farms beyond 31 December 2021 (only relevant for licences with requirements to the start date of construction, but where the construction has not started).

As a consequence of this, the Norwegian Water Resources and Energy Directorate stated that it would not give any new concessions for onshore wind farms in the next few years, due to the uncertain political situation regarding onshore wind farms. (The public in general is very negative towards new onshore wind farms, and the main parties in Norwegian politics are also adjusting their views and are tending to be more negative to further exploitation of onshore wind farms.)

This situation has changed in 2022, as the Parliament has decided that a specific excise duty shall be paid to the municipalities as a compensation for onshore wind farms established and/or to be established in them. The new excise duty amounts to NOK0.01 per kWh, which with a normal production from onshore wind farms of 15.4 TWh will amount to NOK154 million each year. 

In April 2022, the government also instructed the Directorate to start reviewing possible new concessions for onshore wind.

Perhaps one of the most interesting aspects of the power industry in Norway is that it has the highest share of electricity produced from renewable sources in Europe, and the lowest emissions from the power sector.

It is also worth mentioning the very high storage capacity of Norwegian hydropower. Indeed, Norway has about half of Europe’s reservoir storage capacity – one could say that Norway is “Europe’s battery” – and the growing share of intermittent production technologies, such as wind and solar, makes it even more vital that there is flexibility available in the rest of the system.

One of the specific features of the Norwegian hydropower industry is the right of reversion to the state of licences granted to private entities after 1917. The right necessitates a shift to state ownership of waterfalls and installations when a previously granted licence expires. This change in ownership is free of charge and predicated on an aspiration to retain natural resources as a public good.

Due to legal amendments in 2008, new licences or the ownership of waterfalls and licences for the transferring of existing licensed waterfalls may only be given to public entities. The prima facie challenge of reversion is solved by transferring the production to a company that fulfils the requirements for public ownership.

The Energy Act is the principal law governing the structure and function of the wholesale electricity market. As of April 2021, Norway has not yet formally implemented Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency (REMIT). However, there are provisional rules in place that in practice implement most of the REMIT provisions. The rules governing the Nordic power market entail a further alignment with the REMIT provisions.

The Energy Act is based on the principle that electricity production and trading should be market-based, while grid operations are strictly regulated. The wholesale electricity market ensures effective use of resources and reasonable prices for electricity. Electricity transmission and distribution is a natural monopoly, and not subject to competition.

The Nordic power market is one of the largest and most developed power markets in Europe, encompassing several Nordic countries, including Denmark, Finland, Norway, and Sweden. The Nordic power markets are closely linked, both by physical interconnectors and by physical and financial market integration.

The Nordic region forms a single electricity market divided into different geographical price areas. The wholesale market consists of several markets where bids are submitted and where prices are determined:

  • the day-ahead market;
  • the continuous intraday market;
  • the balancing markets; and
  • the financial market.

Most of the wholesale electricity trading in Norway is done through the power exchanges, with almost all physical trading taking place through Nord Pool, and almost all financial trading taking place through Nasdaq. It is also common to enter into bilateral power purchase/sales agreements, especially for longer-term physical or financial contracts associated with specific facilities, or in connection with the financing of new energy production facilities. These agreements will often also tie into the physical and financial contracts or use them as a reference price when it comes to delivery and settlement.

The main volumes of the physical market are in the auction-based day-ahead market, whereas the continuous intraday and balancing markets are mainly used for volume adjustments up until delivery. Market participants with a balancing responsibility are required to use the day-ahead market as their primary means of balancing, and participation in the balancing market that is run by the TSO (Statnett) is mandatory. The TSO also determines the trading capacity between bidding areas.

The price is not regulated by the authorities, but is a result of the supply and demand. A theoretical system price is derived from the intersection of the aggregated supply and demand curves in the day-ahead market for all of the Nordic price areas, assuming unlimited transmission capacity. The actual prices in each price area will normally differ from the system price due to capacity congestion issues.

The financial market is typically used for price hedging and to trade in long-term derivatives, and is traded both by physical market participants and by purely financial players. The system price for the physical market functions as a reference price for the financial market.

Lately, flexibility markets have emerged, which are capacity and not energy-oriented. However, these are still in a pilot phase and do not currently have any significant impact on the market.

The Norwegian power market is part of the Nordic power market, both in terms of transmission capacity and in terms of market structure and venues. The Nordic day-ahead market is coupled with the day-ahead markets in much of the rest of Europe through implicit auctioning. This is, in turn, integrated into the wider European power market. Imports from and exports to other jurisdictions are both permitted, encouraged, and also required due to the integration with European power markets.

At the end of 2022, the total installed capacity of the Norwegian power supply system was 39,455 MW, and normal annual production was 156.3 TWh. Norway is normally a net exporter of electricity, and with the two new interconnectors to Germany and the UK that were completed in 2020 and 2021, each with a capacity of 1,400 MW, the total trading capacity of Norway is about 9,000 MW. It should be noted that the interconnectors have become controversial due to their effect on the energy prices, and the government has paused the development of further interconnector capacity.

As a result of Norway’s significant hydropower capacity, it has a sizeable surplus of power during periods with good hydrological conditions. When supply is abundant, Norway exports power to other countries. Denmark is a major producer of wind power and has a high production of power with low prices in windy periods. During such periods, it is profitable for other countries to import Danish power. This import enables Norwegian hydropower producers to stock up and retain water until export prices go up.

Prices on imports and exports are determined by implicit auctioning through a pan-European MRC (Multi Regional Coupling) mechanism that optimises the allocation of cross-border capacities between countries. The MCR currently covers 19 European countries, and is currently operated by a number of European power exchanges acting in co-operation.

During 2022, approximately 88% of renewable electricity production in Norway came from hydropower plants, 10.1% came from wind power plants, and 1.9% came from thermal power plants. Norwegian power suppliers can buy guarantees of origin to market their sales as renewable; however, they may also refer to the national electricity mix in general.

There are no concentration limits with regard to a percentage of electricity supply controlled by any one entity in the market. However, general competition law prohibits anti-competitive behaviour.

As of April 2021, Norway has not yet formally implemented Regulation (EU) No 1227/2011 on wholesale energy market integrity and transparency (REMIT). However, there are provisional rules in place through the Energy Act and its regulations that, in practice, implement the REMIT rules on market behaviour, including a prohibition of market manipulation and insider trading.

The Norwegian Energy Regulatory Authority (NVE-RME) is responsible for supervising market behaviour and transparency in the wholesale power market, in particular relating to trading of physical electricity power. NVE-RME may require disclosure of all data, information and documentation necessary to carry out its supervisory function. The RME may also require any illegal behaviour to immediately cease, and issue compulsory fines for violations. Violations of the Energy Act may also entail criminal liability, and could be reported to the prosecuting authority.

The RME is closely integrated with the Norwegian Water Resources and Energy Directorate (NVE), that also supervises the physical distribution of power, as well as the neutrality of the grid companies.

The financial power market is supervised by the Financial Supervisory Authority (FSA) of Norway, and is placed under financial market regulations. Norway generally incorporates the EU financial market regulations, including MiFID II and MAR. The FSA has similar powers to NVE-RME in respect of its supervisory activities.

The Norwegian Competition Authority has general responsibility for ensuring efficient competition, including the power market, and has a wide array of powers at its disposal to enforce the Norwegian Competition Act. The Consumer Authority supervises the rules and regulations pertaining to the sales and marketing of energy towards consumers.

More than 98% of the electricity production in Norway comes from renewable energy sources, so the main challenge in Norway is not to reduce the emissions from the production of electricity as such, but to reduce carbon emissions from other sources, such as industry and transport.

The Greenhouse Gas Emission Trading Act

The Greenhouse Gas Emission Trading Act (“Klimakvoteloven”) limits the emissions of greenhouse gases in a cost-effective manner by means of a system involving the duty to surrender greenhouse gas emission allowances and freely transferable emission allowances. The Act implements the Emissions Trading System from the EU (EU ETS) and the UN, and is one of the main instruments for reducing greenhouse gases (GHGs) in Norway.

The law sets a tax on industries emitting carbon dioxide (CO₂) and applies mainly to emissions from the use of fossil energy sources. Approximately 50% of all greenhouse gas emissions in Norway are subject to the quota regime or greenhouse gas taxes.

The Climate Change Act

The Norwegian Parliament adopted the Climate Change Act (“Klimaloven”) in 2017, which includes binding emission targets for greenhouse gases by 2030 and 2050, respectively. It also requires the government to make carbon budgets. The Act applies to all greenhouse gas emissions included in Norway’s contribution to the Paris Agreement of 2015.

Pursuant to the Climate Change Act, Norwegian emissions are to be reduced by 55% by 2030, and by 90–95% by 2050, compared to 1990 levels. However, the law does not require that all cuts are made domestically. The effect of Norwegian participation in the EU ETS will be taken into account.

Other Instruments/Policies Implemented for the Reduction of GHGs

In addition to economic instruments such as taxes and quotas that price emissions, there are also many other instruments/policies implemented by the Norwegian authorities to reduce greenhouse gas emissions, as listed below.

  • The government public procurement law (which came into force in 2017) contains environmental provisions that will help reduce harmful environmental impacts and promote climate-friendly solutions where relevant.
  • The government is planning significant investments in climate-friendly and environmentally friendly transport solutions.
  • The government has entered into urban growth agreements with several cities in Norway, with incentives to ensure that the growth in transport will be taken care of, primarily with the greater use of public instead of private transport, as well as cycling and walking.
  • Norway has for several years given fully electric vehicles exemptions from taxes imposed on cars that rely on fossil fuel. In 2020, this led to Norway becoming the first country in the world where the sale of fully electric cars has overtaken those powered by petrol, diesel and hybrid engines, and in 2021 more than 65% of all cars sold were fully electric vehicles. The goal is to be able to end the sales of petrol and diesel cars by 2025.
  • Norway is an early mover regarding zero-emission and low-emission solutions on ferries and ships – for instance, by fuelling them with hydrogen or ammonia – and has an ambitious policy for using sustainable biofuels.
  • Several public support schemes have been established that promote zero-emission and low-emission solutions, including several under the administration of Enova. Enova is a state-owned enterprise that manages assets in the Energy Fund and is in charge of promoting a shift to more environmentally friendly consumption and production. Enova is also responsible for the development of energy and climate technology.
  • The Research Council of Norway (which reports to the Ministry of Education and Research) is responsible for managing the funding for energy research allocated by the ministries. The Research Council receives most of its state funding from the Ministry of Petroleum and Energy. There are several schemes and programmes under the Research Council of Norway and Innovation Norway, including “Klimasats”.
  • An investment company with state funds, Nysnø, has also been established, with the purpose of helping to reduce greenhouse gas emissions.
  • The government introduced a ban on the use of mineral oil for heating buildings from 2020.

Natural Gas and Reduction of Emissions From Industrial Facilities

Even though natural gas is not used to produce electricity (other than on the oil and gas-producing installations themselves) and is hardly used at all as energy for heating, cooking, etc, in Norway, the income from the oil and gas industry is vital for the Norwegian industry. The Norwegian government is therefore promoting the use of natural gas in ways that do not lead to carbon emissions, but instead enhance the green shift. One such possibility is using natural gas for the production of decarbonised (“blue”) hydrogen, which can be used as emission-free fuel – for instance, within the heavy transport industry (ships, ferries and trucks).

A prerequisite for being able to market emission-free hydrogen from natural gas is, however, to have a system for the capture and storage of the CO₂ that is released through the production process.

The same challenge exists for reducing the carbon emissions from industrial facilities that release CO₂ in their ordinary processes – for instance, cement production, steel production and waste-to-energy facilities. The government’s answer to these challenges is to facilitate (and to a large degree fund) a full-value chain for the capture and storage of CO₂ in Norway.

Carbon Capture and Storage (CCS) – Laws and Regulations

Carbon capture and storage (CCS) is a key element in the Norwegian government’s policy to enable carbon neutrality by 2050. Laws and regulations related to CO₂ management are:

  • Regulations to the Petroleum Activities Act;
  • Regulations on the utilisation of subsea reservoirs on the continental shelf for the storage of CO₂ and on the transport of CO₂ on the continental shelf; and
  • Regulations on documentation when storing CO₂ on the continental shelf.

The Norwegian Longship Project

The Norwegian government is putting considerable weight (and money) into facilitating a full-value chain for CCS in Norway, and the Norwegian Longship CCS project is considered a milestone in its industry and climate efforts. The Longship project will consist of one (or possibly two) carbon capture facilities, a transport solution and an underground storage solution in western Norway. The transport and storage parts of the project are being carried out by a joint venture company, Northern Lights, that will store the CO₂ in subsea reservoirs on the continental shelf in the North Sea.

The EFTA Surveillance Authority has approved the state-aid part of the funding, and the Northern Lights partners are currently discussing concrete deliveries of CO₂ from several companies around the North Sea, both Norwegian and foreign, within several industrial sectors – for example, waste-to-energy, steel, refineries, cement production and biomass/biofuel.

See 3.1 Climate Change Law and Policy.

See 3.1 Climate Change Law and Policy.

The principal laws that govern the construction and operation of generation facilities are:

  • the Waterfall Rights Act (“Vannfallsrettighetsloven”);
  • the Energy Act (“Energiloven”);
  • the Watercourse Regulation Act (“Vassdragsreguleringsloven”);
  • the Planning and Building Act (“Plan- og bygningsloven”);
  • the Water Resources Act (“Vannressursloven”);
  • the Expropriation Act (“Ekspropriasjonsloven”); and
  • the Offshore Energy Act (“Havenergilova”).

Pursuant to the Waterfall Rights Act, a developer of hydropower must acquire ownership rights to the waterfall in order to exploit the water for electricity purposes.

Only public entities may acquire rights to waterfalls with a power production potential exceeding 4,000 natural horsepower. These entities may be state-owned enterprises, municipalities or county authorities, as well as companies where (Norwegian) public bodies make up at least two-thirds of the capital and the votes.

Private actors may thus acquire no more than one-third of the ownership in companies owning large waterfall rights. This requirement applies to the aggregated ownership interest throughout the corporate chain.

There are no restrictions on private ownership for smaller hydropower plants. The same applies to wind and solar power projects, which private actors may own and operate, regardless of the output of the plant.

The Watercourse Regulation Act regulates flows in rivers, reservoirs and transfers between river systems in conjunction with power generation, and outlines the requirements for obtaining licences for such regulation. Pursuant to the Watercourse Regulation Act, the licences include a delimitation of the highest and lowest permitted water levels in reservoirs, other rules for reservoir management, and the requirement of establishing a business development fund in a municipality where the development takes place. The licences may also contain conditions pertaining to licence fees and mandatory sales of power to local authorities.

The Water Resources Act regulates the utilisation of water for fish farms and the extraction of deposits. It also applies to small-scale power projects. The licences given pursuant to the Act include conditions to guarantee compensation for or mitigate damage.

The purpose of the Energy Act is to ensure that energy is generated, converted, transmitted, traded, distributed and used rationally. The Act constitutes a framework for electricity generation and trading competition. It also states that the building and operating of power grids is a monopoly and provides for the regulation of grid companies.

The developers of onshore wind farms must obtain a licence pursuant to the Energy Act to build and produce power. While hydropower represents the backbone of renewable energy production, onshore wind power has in recent years been the fastest-growing renewable energy source in Norway. The rules applicable to the development and exploitation of onshore wind power are also, in principle, less rigid than those that relate to large hydropower projects.

As the requirement for public ownership does not apply to wind power, the development of wind farms has been particularly conducive to private investment. However, since 2019, all applications for wind power licences have been put on hold by the authorities due to widespread popular and local opposition to wind farm projects. This has led to new legislation increasing the municipalities’ authority and responsibility in the licensing process.

The purpose of the Planning and Building Act is to promote sustainable development in the best interests of individuals, society and future generations. It does not apply to marine pipelines for the transport of petroleum, and only certain chapters of the Act apply to installations for the transmission or conversion of electric power.

The Offshore Energy Act provides the legal basis for the development of offshore renewable energy production. The Act establishes the Norwegian state’s exclusive right to utilise offshore energy resources and applies to Norway’s territorial waters outside the baselines and to the continental shelf.

A licence is required for offshore electricity generation, conversion and transmission. Licences can only be obtained after the central government authorities have carried out a strategic environmental assessment and decided to open specific areas for licence applications.

The Norwegian Water Resources and Energy Directorate has the authority to grant licences for:

  • hydropower plants with less than 10 MW installed capacity, and dams and other installations in watercourses which lead to an increased generating potential less than 500 natural horse powers, pursuant to the Water Resources Act; and
  • wind and solar power plants, electrical generators, power lines, substations and other electrical power installations pursuant to the Energy Act or the Offshore Energy Act.

For hydropower projects exceeding the thresholds above, and for all hydropower plants with average annual production exceeding 40 GWh, licences are granted by the King in Council (the Cabinet, in effect). This also applies to licences for acquisition of waterfalls pursuant to the Waterfall Rights Act. However, applications are first reviewed by the Directorate, which then makes a recommendation to the Ministry of Petroleum and Energy.

The licence typically includes standard conditions and rules of operation, which reflect the need to consider various interests. As the exploitation of renewable resources has an impact on the environment, the Directorate will ensure that the benefits of the proposed project are greater than the disadvantages, before granting the licence. The Directorate’s supervisory department ensures adherence to the conditions and rules of operation after approval of the licence.

The steps in a regulatory process for a large plant may be summarised as follows:

  • the company notifies the Directorate about the project and includes a proposal for an Environmental Impact Assessment (EIA) programme;
  • a public hearing on the notification and the proposed EIA programme is held;
  • the Directorate approves the EIA programme;
  • the company performs the EIA and produces a comprehensive report;
  • an application for a licence is filed with the Directorate together with the EIA report;
  • a public hearing on the licence application and EIA is held; and
  • the Directorate submits the application to the Ministry of Petroleum and Energy together with its recommendation.

In cases where the Directorate has authority to grant the licence, the Directorate’s decision may be appealed to the Ministry of Petroleum and Energy. Persons and entities other than the company may appeal, provided they have a legal interest in doing so.

For smaller projects with only marginal environmental impact, the process is subject to simplified procedures.

Approvals granted pursuant to the Waterfall Rights Act for acquisition of waterfall rights typically include conditions on licence fees and mandatory sales of power to the state and municipalities in which the waterfalls are located.

Licences pursuant to the Watercourse Regulation Act include a delimitation of the highest and lowest permitted water levels in reservoirs, other rules for reservoir management, and the requirement of establishing a business development fund in a municipality where the development takes place. The licences may also contain conditions pertaining to licence fees and mandatory sales of power to local authorities.

The licence under the Water Resources Act also states conditions and rules of operation. The supervision department in the Directorate follows up and supervises the fulfilment of the conditions.

The licence under the Energy Act/Offshore Energy Act also states conditions and rules of operation. The supervision department in the Directorate follows up and supervises the fulfilment of the conditions.

In order to construct and operate a generation facility, the developer may apply for the expropriation of property rights pursuant to the Expropriation Act. Depending on the circumstances, relevant provisions in the Cultural Heritage Act, the Pollution Control Act and the Reindeer Husbandry Act must be taken into consideration in the licensing process.

Compensation is due to the owner of the relinquished property. The owner is also due compensation for any damage or inconvenience brought upon the remaining properties. Pursuant to the Expropriation Compensation Act, the reparation is determined based on the selling price or the service value, whichever is higher.

Facilities for production, transmission or distribution of electrical power may not be decommissioned without prior approval from the Norwegian Water Resources and Energy Directorate. No later than one year ahead of the licence’s expiration, the licence holder must apply to the Directorate either for a decommissioning approval or for an extension of the licence. In the event of decommissioning, the holder of the licence is obliged to remove the facility and restore the landscape to its original state.

The Norwegian grid system consists of three levels: the central transmission level and two levels of distribution – the regional level and the local distribution level. Many of the relevant laws and regulations apply to all three levels. In addition, the terms and conditions for licences to construct and operate the grid system are enforced equally on all levels.

The principal laws that govern the construction and operation of transmission lines are the Energy Act and the Offshore Energy Act, the purpose of which is to ensure that energy is generated, converted, transmitted, traded, distributed and used rationally. The Energy Act constitutes a framework for electricity generation and trading competition. It also states that building and operating power grids is a monopoly and sets forth the regulation of grid companies.

A construction and operating licence is required to construct, own and operate power lines. A licence to build and operate transmission lines must be approved by the King in Council. However, only the TSO, Statnett, may own or operate transmission lines.

The licensing system aims to ensure a uniform practice for the construction and operation of electrical installations. The goal is also to assess and alleviate the potential impacts of these installations. Thus, socio-economic considerations and various public and private interests are taken into account during the licensing procedures, as well as environmental impacts.

Approvals to construct and operate a transmission line and associated facilities are typically supplemented with various requirements, including applying for renewal of the licence within a set time before its expiration, initiating the operation of the lines by the end of a set period, being acquainted with the relevant rules and regulations, and being responsible for decommissioning the facilities subsequent to such measure being granted by the Norwegian Water Resources and Energy Directorate.

There are also requirements devised to prevent or limit any detriment to the natural environment and cultural heritage. If necessary due to fundamental interests, the terms and conditions may be supplemented at a later stage. All terms and conditions serve to fulfil the purpose of the laws on which the granting of licences is predicated. It is the Directorate’s responsibility to monitor the adherence to the terms and conditions of the licence under the supervision of the Ministry of Oil and Energy.

Statnett is the only TSO and therefore (from 1 January 2021) the only legal person that is allowed to own and operate transmission lines and associated facilities in Norway. Hence, the construction and operation of the transmission grid constitutes a natural monopoly. The proponent for the construction and operation of a transmission line will thus have eminent domain, condemnation or expropriation rights in the area to which it gains access.

In order to obtain this exclusive right, an application must be filed with the Ministry of Petroleum and Energy, which then decides whether the licence is granted. The rights to the surface of land are obtained through expropriation.

The owner of the property is to be compensated for the relinquishment of the building and operation of transmission lines, as well as for any damage or inconvenience brought upon any remaining properties. Pursuant to the Expropriation Compensation Act, the reparation is determined based on the selling price or service value, whichever is higher.

Transmission entities have an exclusive right to construct and operate transmission facilities within a defined territory; see 5.4 Eminent Domain, Condemnation and Expropriation Rights.

The most important laws and regulations governing the provision of transmission service and the regulation of transmission charges and terms of service are as follows:

  • the Energy Act (“Energiloven”);
  • the Energy Act Regulation (“Energilovforskriften”);
  • the Regulation on grid regulation and the energy market (“Forskrift om nettregulering og energimarkedet”);
  • the Regulations regarding Environmental Impact Assessments (“Forskrift om konsekvensutredninger”); and
  • the Regulations of 11 March 1999 concerning financial and technical reporting, permitted income for network operations and transmission tariffs (“Forskrift om kontroll av nettvirksomhet”).

As the building and operation of transmission lines is a natural monopoly, the Norwegian Water Resources and Energy Directorate decides on an annual income cap for the TSO. The income is supposed to cover the costs of operation while generating a reasonable profit on investments.

Tariffs

All grid services must be offered at non-discriminatory conditions and objective point tariffs.

As grid companies are monopoly companies, the authorities regulate their revenues. Consequently, the Norwegian Water Resources and Energy Directorate decides on a revenue cap for each grid company every year. The grid company must set its tariffs so that net earnings from grid operations over time do not exceed the permitted level.

It is generally required that grid tariffs are objective and non-discriminatory, as well as designed and differentiated based on relevant grid conditions. As far as possible, the tariffs should be fashioned to provide long-term signals that encourage efficient use and development of the grid.

The tariffs for consumption should cover a share of the costs that accumulate at the relevant grid level and higher levels. The tariffs for consumption vary between consumers connected to the distribution grid and consumers directly connected to the central grid. The prices may also fluctuate between different companies.

The Norwegian Water Resources and Energy Directorate is responsible for the inspection and enforcement of grid operations, and may issue orders to ensure compliance with regulations and licensing terms. All grid services must be offered at non-discriminatory conditions and objective point tariffs. Due to being a monopoly, the grid companies on all levels are obliged to provide services to all consumers within the geographical area covered by the licence.

The Norwegian grid system consists of three levels: the central transmission level and two levels of distribution – the regional level and the local distribution level. Many of the relevant laws and regulations apply to all three levels. In addition, terms and conditions for licences to construct and operate the grid system are enforced equally on all levels.

The principal law that governs the construction and operation of distribution lines is the Energy Act, alongside the Planning and Building Act.

The purpose of the Energy Act is to ensure that energy is generated, converted, transmitted, traded, distributed and used rationally. The Act constitutes a framework for electricity generation and trading competition. It also states that building and operating power grids is a monopoly and sets forth the regulation of grid companies.

The purpose of the Planning and Building Act is to promote sustainable development in the best interests of individuals, society and future generations. It does not apply to marine pipelines for the transport of petroleum, and only certain chapters of the Act apply to installations for the transmission or conversion of electric power.

The construction and operation of distribution lines necessitate an approval to build and operate them. The local area licence is needed to construct, own and operate power lines and electrical installations for the distribution of electricity carrying a voltage of 22 kV or less. The local area licence permits the holder to build, own and operate necessary lines within that geographical area.

The application for licences must be filed with the Norwegian Water Resources and Energy Directorate. However, if the projects are of a certain magnitude, they must be approved by the government.

The construction and operation of electric distribution facilities necessitate prior approval in the form of two licences. A local area licence is necessary to construct, own and operate power lines and electrical installations for the distribution of electricity carrying a voltage of 22 kV or less. The local area licence obviates applications for each individual installation, instead permitting its holder to build, own and operate necessary lines within that geographical area.

A construction and operating licence is required in order to construct, own and operate facilities that are not covered by the local area licence. However, this type of licence is only needed where the producer of power wishes to be connected to the distribution facilities and the holder of the local area licence does not engage in construction of any kind. The construction and operating licence necessitate applications for each individual installation. The installations may include facilities associated with both wind farms and hydropower plants.

The application for a licence must be filed with the Norwegian Water Resources and Energy Directorate, but the government must approve projects of a certain magnitude. The Directorate grants both the local area licence and the construction and operating licence needed prior to the construction and operation of distribution facilities. The licensing system aims to ensure a uniform practice for the construction and operation of all electrical installations, and to assess and alleviate the potential impact of these installations. Thus, socio-economic considerations, various public and private interests, as well as environmental impacts, are taken into account during the licensing procedures.

See 5.3 Terms and Conditions Imposed in Approvals for the Construction and Operation of a Transmission Line and Associated Facilities.

See 5.4 Eminent Domain, Condemnation and Expropriation Rights.

See 5.4 Eminent Domain, Condemnation and Expropriation Rights.

See 5.6 Transmission Charges and Terms of Service.

Advokatfirmaet Hjort AS

Universitetsgata 1
N-0164
Oslo
Norway

+47 22 47 18 00

+47 22 47 18 18

advokatfirmaet@hjort.no www.hjort.no
Author Business Card

Trends and Developments


Authors



Advokatfirmaet Haavind AS (Haavind) is one of Norway’s leading law firms, delivering strategic legal advice and services in all aspects of commercial law. Haavind is a full-service law firm, which counts several of the largest companies in Norway – and the public sector – among its clients. The firm works systematically to stay ahead of the game by understanding trends and new technology and translating this into opportunities for its customers. Haavind’s lawyers find great motivation in reaching good solutions and working hard to ensure relevance, quality and efficiency in their deliveries. The firm has experience of working with and advising organisations that actively contribute to sustainable development. Haavind is legal partner to several large international companies with a strong focus on ESG and the United Nations’ sustainability goals.

Introduction

The Norwegian power sector is, in general, highly regulated – particularly when it comes to hydropower activity, which has more than 100 years of history and still forms the backbone of the country’s power system. Overall, Norway has stable legal frameworks and this is clearly one of the reasons why there have been so many foreign investments within the Norwegian power sector in the past.

For the most part, foreign investors can invest in the Norwegian power sector without specific restrictions – at least when it comes to investments in wind power, small-scale hydropower, grid companies, district heating and other infrastructure relating to the power sector. The main exception to this concerns large hydropower (the threshold for which is a production capacity of approximately 40 GWh per year), where non-public entities (including foreign entities) are not allowed to invest in and own more than one-third of a company that owns such assets. Public entities, being allowed to own such assets, are defined as entities owned and controlled by public authorities and/or undertakings.

One important aspect of Norwegian hydropower is that it – to a large extent – is a flexible production method, as it can be stored using water reservoirs. More than 75% of Norwegian hydropower production is flexible through the use of its reservoirs, which represent half of Europe’s total reservoir storage capacity. This is a perfect counterbalance to the increasing amount of non-flexible production such as wind power and solar power.

In June 2021, Norway’s former government issued a White Paper on the long-term value creation from Norwegian energy resources, including – for the first time – both the renewables sector and the oil and gas sector. The White Paper points out that the Norwegian oil and gas industry currently faces major challenges as a result of maturing fields on the Norwegian continental shelf and increasing demands for lower emissions. However, it is emphasised that the oil and gas sector will remain a significant factor in the Norwegian economy in the years to come – albeit not on the current scale. The use of expertise and technology within today’s oil and gas sector to develop new “green” industries and technologies is also an important goal for the Norwegian government.

Offshore Wind

In terms of developments, offshore wind is and will continue to be the main focus of attention in Norway. The new regulations to the Offshore Energy Act, effective as of 1 January 2021, allow companies to apply for a licence to develop projects in the appointed areas of Utsira North (UN) and Southern North Sea II (“SN II”). In June 2021, the Norwegian government presented much-anticipated consultation papers on the proposed amendments to the Offshore Energy Act and Regulations, along with guidelines for the offshore wind licensing process – all of which provide further details of the offshore wind regulatory regime. The authors note with particular interest that the government has announced the opening of additional licensing areas and that the awarding of licences to bottom-fixed installations will principally follow an auction-based system – this being especially important for SN II. A qualitative award system may also be utilised and could prove particularly relevant for UN, given that the area is suitable for floating technology.

The government has appointed the current transmission system operator (TSO) for the Norwegian mainland, Statnett SF, as the TSO for a future North Sea Grid as well. The government has also announced that grid costs related to this future North Sea Grid will be carried by licensees rather than onshore grid customers.

While the suggested amendments represent a regulatory clarification, key questions still have to be addressed before this budding industry can expect any real offtake. The financial framework, in particular, remains contentious and is an important point that requires clarification for stakeholders. The government has been working on the financial framework during the past year and, in February 2022, the Ministry of Finance initiated a hearing on amendments to the taxation regime. The proposed amendments include taxation of foreign companies and persons participating in the development and utilisation of renewable energy resources on the Norwegian continental shelf.

On 29 March 2023, the government announced the launch of the long-awaited tenders for the first project phase of offshore wind power development in the UN and SNII areas. SN II is a bottom-fixed offshore wind project, which will be radially connected to the onshore grid in the first phase. SN II’s first project phase has a maximum developed capacity of 1,500 MW and will be awarded through a monetary auction with pre-qualified applicants. The pre-qualification will take place in October 2023 and the first project phase of SN II will be awarded in December 2023.

The UN area is divided into three sub-areas, each consisting of 500 MW, and is dependent on support schemes. The UN project will be awarded through a qualitative competition according to a two-step model, in which:

  • the three sub-areas are awarded based on qualitative criteria; and
  • the companies compete for support schemes as part of the further licensing process.

The deadline for submissions of applications for sub-areas within UN is 1 September 2023 and the UN sub-areas will be awarded in December 2023. The corresponding dates for the support schemes are yet to be decided, but the competition is expected to take place in 2024.

New areas are expected to be developed for offshore wind production in 2025 and, in a report published on 25 April 2023, the Norwegian Water Resources and Energy Directorate (Norges vassdrags- og energidirektorat, or NVE) pointed out several suitable areas for offshore wind. The Norwegian government aims for the SN II and UN projects to enter into operation by 2030 and aims to allocate licences for the production of a further 30,000 MW of offshore wind power by 2040, which is equivalent to Norway’s current total power production.

Further information on Norway’s offshore wind production can be found on Haavind’s Offshore Wind Insight portal, which publishes the latest news within the field of Norwegian offshore wind development.

Onshore Wind

Review of the licensing system

The increasing level of conflict surrounding onshore wind farm projects has resulted in a widespread desire for amendments to the licensing system. In response, the government presented a White Paper to the Norwegian Parliament in June 2020, setting out proposals for regulatory amendments in respect of all future applications for licences relating to onshore wind power projects. The White Paper was reviewed by Parliament in December 2020, resulting in a request to the government for:

  • shorter deadliness for commencement of the construction works and commissioning;
  • the inclusion of height and distance restrictions on wind turbines in the licences; and
  • measures to ensure increased local and regional involvement in the licensing process.

Parliament also included a request to consider how the licensing process  under the Norwegian Energy Act could be further harmonised with the process pursuant to the Norwegian Planning and Building Act. The latter request was interpreted as a general attempt by Parliament to increase the influence of local municipalities in the licensing process.

The NVE submitted their proposal for amendments to the regulatory framework to the Ministry of Petroleum and Energy (MPE) in May 2022. In short, the proposed amendments include:

  • more specific requirements for impact assessments (eg, the methods to be used in such assessments);
  • new standard conditions to be set out in facility licences (eg, requirements for minimum distance to buildings and housing, maximum turbine height); and
  • new deadlines for detailed development plans.

Furthermore, on 28 April 2023, the government submitted a proposal to Parliament for changes to the onshore wind regulations that would give municipalities the right to veto new onshore wind projects. The government proposed that zoning plans for the wind farm must be made in accordance with the Planning and Building Act before a potential licensee can apply for a licence under Section 3(1) of the Energy Act. The proposition was passed by Parliament on 12 June 2023.

Increase in disputes brought before the courts

The onshore wind sector has been facing increasingly frequent litigation, triggered by a growing political opposition to wind power in general. In the authors’ experience, however, few actual delays to wind power development have been caused by legal action.

Nonetheless, the battle over the validity of wind power licences has made its way into the courtroom. In addition to the growing opposition to wind power, there has been a sharp uptick in the number of validity disputes since 2019. Several cases have reached the appellate courts and even the Supreme Court. One of the cases the Supreme Court handled in the autumn of 2022 concerned Fosen wind farm. The Supreme Court concluded in this case that the licensing authorities must conduct an additional assessment of the impacts from the wind farm and review the conditions attached to the facility licence for the project. Following the Supreme Court’s conclusion, there has been a growing number of protests and disputes from Sámi people against new renewable energy projects and the Fosen case, in particular – with a demand for the wind turbines to be removed. Despite the apparent increased willingness to fight energy projects in court with reference to the Fosen case, the majority of disputes are still resolved amicably.

Changes to the taxation of wind power

In 2022, the Norwegian government announced its plan to impose a moderate production tax on onshore wind power plants from 2022 onwards. The production tax will be paid to the Norwegian state; however, the government intends to route this income to the municipalities hosting the wind farms. The proposal includes both existing and new wind power plants.

The proposal came in response to requests from many stakeholders (including the wind power industry itself) to route a higher share of the tax income from the wind power business towards the hosting municipalities, which is believed to help increase local acceptance of the projects.

The production tax was approved in 2021 and is a part of Parliament’s decision on special duties for 2022. The tax is applicable to all onshore wind power farms that require a facility licence, meaning all wind power farms with more than five turbines or an installed capacity exceeding 1 MW. The tax is based on production and all producers must pay NOK0.01 per produced kWh. Although the production tax entered into force on 1 July 2022, it was increased to NOK0.02 per produced kWh with effect from January 1, 2023.

Furthermore, on 28 September 2022, the Norwegian government proposed a resource rent tax on onshore wind energy at an effective rate of 40% with effect from 2023. As a result of several critical consultation responses, the government decided to postpone the implementation of resource rent taxation and stated on 11 May 2023 that it will submit a proposal regarding resource rent taxation on onshore wind to Parliament during the autumn 2023 session of Parliament – with proposed effect from the income year 2024. In the authors’ opinion, the reasoning behind a resource rent taxation does not apply to onshore wind and a resource rent taxation could result in bankruptcies among onshore wind companies. The onshore wind industry is therefore in suspense as it awaits the result of Parliament’s hearing of the upcoming proposition. 

Hydropower

Even though the vast majority of hydropower potential has already been utilised, the NVE calculates that the remaining hydropower potential is 23 TWh. Notwithstanding the potential for new builds, it is becoming increasingly important to upgrade existing hydropower plants – as not only is this crucial in order to increase hydropower production in the  energy mix, but also to maintain the level of production capacity in existing plants.

The higher electricity prices and the general energy crisis in Europe have led to several companies reassessing possible investments in projects that were shelved in recent decades.

However, the Norwegian government introduced sudden changes to the regulatory framework for hydropower by significantly altering the taxation of onshore wind on 28 September 2022. The changes included increasing the resource rent taxation on hydropower from 37% to 45%, with effect from the income year 2022.

The government furthermore introduced an extra taxation on hydropower, with effect from 28 September 2023, whereupon the hydropower producers have to pay a high-price taxation of 23% of the power purchase price exceeding NOK0.70 per kWh. The government has stated that the high-price taxation is due to the current extraordinarily high energy prices in Europe and is temporary, but has not given a clear statement for when the tax shall be removed. The high-price taxation has effectively stopped several planned major investments in hydropower, owing to the projects not being profitable under the new tax regime. With the rising need for increased power output and flexibility due to the growing amount of solar and wind power in the energy mix in Europe and Norway, the high-price taxation sends an unfortunate message to the hydropower companies.

Another major issue relating to hydropower in Norway has been the discussion surrounding the impacts of the taxonomy emerging from the EU’s Green Deal. In the initial discussion of consequences for the hydropower industry, concerns were raised regarding the risk of Norwegian hydropower being classified as non-sustainable and therefore less eligible for access to capital – partly owing to criteria being based on experience from hydropower development in other countries that are not necessarily relevant to how this business is conducted in Norway.

A key factor here is the link to the EU’s Water Framework Directive, which will contribute to improving the environmental conditions of watercourses throughout Europe. Following a consultation process in which Norway was awarded the opportunity to comment on the impact of suggested criteria for categorisation, the criteria – although far from perfect – now seem to be at a level that Norwegian hydropower players overall find acceptable.

Grid

Further unbundling requirements

On 24 March 2023, the Norwegian government sent a proposition to Parliament concerning changes to the Energy Act that would raise the threshold for the legal unbundling of distribution system operators to a minimum of 100,000 grid customers. The changes to the unbundling requirements are expected to be passed in Parliament shortly (as of June 2023).

Grid tariffs

The NVE released a proposal on a new grid tariff model in 2020, which incentivises customers to reduce peak loads. In 2021, the Norwegian government passed a new grid tariff model – based on the NVE’s proposition – that was supposed to enter into effect from 1 January 2022. This timeline was postponed owing to the unusually high electricity prices in the winter of 2021–22 and the new date for entering into force was set to 1 July 2022. In the beginning of May 2022, the government passed additional amendments to the new grid tariff model.

The new grid tariff model aims to facilitate a more effective use of the grid and a more just distribution of the costs between the customers. According to the new tariff model, customers with a power consumption of less than 100,000 kWh per year will have their grid tariff differentiated based on peak load consumption, in such a manner that customers with a higher peak load consumption pay a higher grid tariff than those with a lower peak load consumption. Customers with a consumption above 100,000 kWh per year are still able to have a separately fixed grid tariff, in accordance with the current grid tariff scheme.

The new grid tariff model will incentivise effective use of the grid and – through new technology, batteries, etc – allow for a more flexible use of the grid. It should also reduce the need for investments in new grid capacity.

Interconnectors

Through its hydropower reservoirs, Norway manages approximately half of Europe’s regulation capacity. As the energy mix becomes increasingly non-regulated as a result of the addition of wind and solar power, the need for – and the commercial aspect of – regulated hydropower is ever-more important.

With existing and forthcoming interconnectors between Norway, other Nordic countries and the UK, Norway exchanges both power and regulation capacity. Given this structural position, it has been postulated that Norway can act as “Europe’s green battery” – much to the excitement of some stakeholders in Norway and the concern of others. As seen with the proposed NorthConnect project (capacity of 1,400 MW), the export of power remains a hotly contested political issue and the government decided to reject the licence application for the Scotland–Norway interconnector on 16 March 2023. One of the key issues behind the political debate is the idea that Norway’s power-intensive industry and consumers benefit at large from Norway’s low electricity prices, in comparison with other European countries.

In March 2021, the new interconnector to Germany (NordLink, with a capacity of 1,400 MW) was completed and commissioned. The new interconnector to the UK (North Sea Link, with a capacity of 1,400 MW) was completed in 2021 and started transmission on 1 October 2021. With their respective capacities, the NordLink and the North Sea Link represent a 45% increase in Norway’s capacity to exchange power.

After some political back-and-forth, Statnett SF – the current Norwegian transmission system operator for the Norwegian mainland – has been granted the exclusive right to own and operate all interconnectors. Some exemptions apply in respect of the NorthConnect project (licence application rejected) and some aforementioned aspects relating to the future North Sea Grid (see Offshore Wind).

New Technologies and Innovation

Further digitalisation of the power sector

New digital solutions for the power sector are continuously contributing to more efficient operations and system maintenance, assured power supply and better preparedness. Increased digitalisation and the collection of higher-quality data will also provide a more precise evidential basis for investment decisions and allow for the automation of a number of decision-making processes. This also creates a need for new regulations, business models and customer adaption. This is exemplified by the implementation of smart metering, whereby new equipment has been installed in 97% of all metering points within Norway.

Hydrogen

Hydrogen – and, in particular, green hydrogen – is increasingly being put on the agenda in Norway. In 2020, the Norwegian government released its new national hydrogen strategy, focusing on subsidising new hydrogen technology and initiatives.

In the short term (ie, by 2025), the government – in co-operation with private stakeholders – wishes to:

  • encourage the establishment of five hydrogen maritime hubs;
  • establish one or two industrial production projects; and
  • establish five to ten pilot projects for the development and demonstration of new and more cost-effective hydrogen solutions and technologies.

In the medium term (ie, by 2030), the Norwegian government’s ambition is that hydrogen will be established as a real alternative within the maritime sector, with prospects of market-based developments. By 2050, the goal is to have established a market for the production and consumption of hydrogen. In terms of the EU’s environmental goals towards zero carbon emissions and its focus on hydrogen, Norway’s structural advantage within green hydrogen based on renewable energy production may be particularly beneficial.

Norway is specifically looking at how to utilise hydrogen to cut the country’s second-largest emission producer, the transport sector. Its aim is to halve the current emissions from the transport sector and maritime transport by 2030. Hydrogen will be an important factor in achieving this goal.

Carbon capture and storage

The Norwegian government published a White Paper on 21 September 2020 regarding the so-called Longship project and the government’s carbon capture and storage efforts (CCS) are focused around this project. Longship is a full-scale CCS demonstration project, developed by the joint venture Northern Lights JV DA (between the companies Equinor, Shell and Total) and Norcem’s cement factory in Brevik in the Porsgrunn municipality. The project encompasses carbon capture from Norcem’s cement factory (400,000 tonnes of CO₂ per year) and also potential carbon capture from Fortum Oslo Varme’s waste-to-energy plant in Oslo (400,000 tonnes of CO₂ per year).

Northern Lights is responsible for the transport and storage part of the Longship project, which utilises ships for transport of liquid CO₂, a reception terminal in the Øygarden municipality on the west coast of Norway, and a pipeline to a storage formation under the seabed where CO₂ will be injected. Northern Lights has received state funding for the first project phase, which has a planned transportation and storage capacity of 1.5 million tonnes of CO₂ per year. Northern Lights may sell the remaining transportation and storage capacity to other companies involved in carbon capture and the Norwegian government clearly intends that European companies will utilise the Longship transportation infrastructure for CCS in the future. 

The Norwegian government has planned no further CCS projects apart from Longship and looks likely to leave it up to the market to develop further. CCS is not economically profitable without external or governmental funding and it is uncertain whether there will be further investments in CCS projects in Norway following the Longship project.

Concluding Remarks

The Norwegian energy sector is developing fast, with increasingly blurred lines between the traditional power/electricity sector and the oil and gas sector. This development is driven by strong political goals of both further electrification (including of oil and gas installations) and also developing new and profitable industries such as (floating) offshore wind, hydrogen and CCS as part of the necessary transition of Norway’s oil and gas industry. Norway has considerable ambitions within these new industries. The high electricity prices, combined with the energy crisis in Europe, are also contributing to even faster development and more investments than expected just a year ago.

In May 2022, the EU presented the RePowerEU Plan inm response to the hardships and global energy market disruption caused by the Russian invasion of Ukraine. The European shift from dependency on Russian gas has significantly accelerated the investments and timeline for the transition to renewable energy in Europe.

The US Inflation Reduction Act (IRA) on 16 August 2022 has sped up the US shift towards renewable energy, with the US stating that it will invest USD369 billion through support schemes and subsidies in renewable energy and zero emission technologies. The EU responded to the IRA with its “Green Deal Industry Plan” on 1 February 2023. The Green Deal Industry Plan included a relaxation of state aid rules until the end of 2025, making it easier for EU and EEA states to provide support schemes for renewable projects. 

All together, there are strong indications that the development that is unfolding today will be further strengthened in the years to come.

Haavind

Haakon VIIs gate 10
Oslo
Norway

+ 47 22 43 30 00

post@haavind.no haavind.no
Author Business Card

Law and Practice

Authors



Advokatfirmaet Hjort AS was established in 1893 and has since become a well-known and leading law firm in Norway. Hjort has the structure and capacity to engage in all of the central legal areas, with a solid competency within, among others, the renewable energy industry, corporate legal assistance and dispute resolution. The firm’s highly acclaimed judicial competency, combined with a corporate understanding and commercial appeal, are the reasons why it is considered to be an unparalleled contributing partner in regard to important and demanding legal cases.

Trends and Development

Authors



Advokatfirmaet Haavind AS (Haavind) is one of Norway’s leading law firms, delivering strategic legal advice and services in all aspects of commercial law. Haavind is a full-service law firm, which counts several of the largest companies in Norway – and the public sector – among its clients. The firm works systematically to stay ahead of the game by understanding trends and new technology and translating this into opportunities for its customers. Haavind’s lawyers find great motivation in reaching good solutions and working hard to ensure relevance, quality and efficiency in their deliveries. The firm has experience of working with and advising organisations that actively contribute to sustainable development. Haavind is legal partner to several large international companies with a strong focus on ESG and the United Nations’ sustainability goals.

Compare law and practice by selecting locations and topic(s)

{{searchBoxHeader}}

Select Topic(s)

loading ...
{{topic.title}}

Please select at least one chapter and one topic to use the compare functionality.