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:

• the Waterfall Rights Act – “Vannfallrettighetsloven”; 
• the Energy Act – “Energiloven”;
• the Limited Liability Companies Act – “Aksjeloven”; 
• the Public Limited Liability Companies Act – “Allmennaksjeloven”; and
• the Partnerships Act – “Selskapsloven”.

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.