The sharp increase in electricity prices in Norway and the rest of Europe has several reasons running at the same time. Politicians across the continent are looking to see if price developments can be controlled. This shows that although electricity is a commodity, it is also a societal service that relates to people’s welfare and is strongly involved in politics.
The price problem is also a warning that authorities must consider how best to fund the road to a fully renewable and electrified society.
Stephen Seifertsen (Photo: Gunnar Lear)
Energy prices fluctuate up and down as a result of changes in supply and demand. Weather conditions still have a significant impact in Europe and Norway and are the main cause of fluctuations. In Norway, it has a lot to do with hydrology. In Europe the increasing dependence on wind conditions.
This is a consequence of European climate policy: fossil production will be replaced by renewable energy, and wind energy first and foremost.
- When there is no wind and there is no storage capacity for wind energy, the use of coal and gas to produce electricity increases.
- The EU target to reduce emissions means that the price of carbon dioxide2Increased emissions and increased cost of fossil production.
- It will be very costly when coal power plants and gas power plants, which are replacing failed wind power, are put into operation only when prices are high.
- In addition, gas prices have risen significantly this year as a result of European and global competition for gas reserves.
The sum of all this also affects the prices of Norwegian electricity.
As far as I know, the Social Democratic government in Spain is the first to adopt a so-called “shock package” against high electricity prices. The electricity tax was temporarily reduced from 5.5 percent to 0.5 percent, the value-added tax on electricity was reduced from 21 to 10 percent and other taxes were suspended. Among these measures is setting a ceiling for the price of gas.
Italy and the UK are also now discussing capping energy prices.
This is more information than inspiration for the political debate over electricity prices in Norway. Various proposals are made here, from restrictions on energy exchange with the outside world to lowering electricity taxes and subsidizing targeted housing.
Some will argue that the reason for the development of prices is the green shift, and that the problem is wind farms, increasing carbon dioxide2Prices and energy exchange with other countries. The problem is actually the opposite. We get high electricity prices because the green transition is not going fast enough.
Fossil energy – coal, oil and gas – still determines the price of electricity in Europe. ko2The price accounts for about 20 percent of the price increase, but at the moment this is mostly due to market prices for coal and gas power. Brown energy still sets the price, not green energy.
Thus, the challenge is not primarily a lack of investment in oil and gas, as Aker CEO Øyvind Eriksen recently claimed.
When renewable energy finally takes over and sets the price, the price of energy will drop drastically. Coal, oil and gas are volatile, expensive and over time climate-damaging resources that are today very competitive due to favorable framework conditions.
Instead of stimulating greater production of fossils, politicians should consider how to use more resources to accelerate a green transition.
Europe is looking for a more comprehensive development of renewable energy. Wind energy storage capacity is today the weakest point. Norway has more than a thousand magazines with the capacity and storage capacity we need.
The biggest challenge facing Norway’s green transition is the insufficient capacity of the network. Even with Europe’s best power grid, new green industrial projects have to wait many years for power supply if we don’t quickly address the challenge of insufficient grid capacity.
Thus, we are in another price problem. Norway is facing a massive development of the power grid, central, regional and local, if we are to increase the electrification of the country. The financing model we have today, where network development and maintenance, green taxes, electricity taxes and value-added tax on consumers, may not be the best way to fully and renewable electrification of the country.
Although weather and policy measures in the short term can reduce current electricity bills, development costs and continued dependence on fossils for some years to come will contribute to price volatility that is moving at an ever higher level.
Political authorities, the energy industry, industry and consumer organizations must come together to think new. If we don’t solve the basis of this price problem in a way that the citizen and the business can live with, it doesn’t help much to say that in 10 to 15 years, electricity will be much cheaper.
What we risk is backlash and campaigning that undermines the entire green transition. We can’t stand it and don’t have time for that.(Terms)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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