Introduction
Mixed reception
Governmental response
Controversial hybrid offtake solutions from offshore production
Norwegian electricity generation, supply and interconnectors
Concerns with effect on other marine interests and environment
On 9 February 2022, the government announced the initiation of the first phase of offshore wind projects to be located in the Sørlige Nordsjø II area, with other areas to follow. Led by Prime Minister Støre and the ministers present (ie, the ministers of petroleum and energy, trade and industry, and finance), a number of policy initiatives were unveiled.
This article is part of a series examining recent energy developments in Norway.(1) In particular, this article explores how the government's energy transition proposals have been received.
The initiative has been met with some scepticism, despite the fact that the first project would result in the construction and operation of windmills producing 1500 megawatts with an annual production of up to seven Terawatt-hours a year, able to supply in excess of 460,000 households.
The opposition claims that this is a 50% reduction of the policy goals set by the previous minority government headed by Conservative Party leader Erna Solberg. This, according to some observers, will result in Norway – with its exceptional access to large offshore areas within its exclusive economic zone (slightly above 2 million metres squared) – falling behind in the renewable energy transition race.
The government has been called upon to give full speed ahead, not to slow down. Secondly, the industry and environmentalists, as well as some opposition politicians, are sceptical for a variety of reasons. The acreage selection of Sørlige Nordsjø II, with limitations imposed on production capacity and offtake, has been criticised by industry and the opposition on both sides of the political spectrum. Capacity and offtake limitations will most likely create sub-commercial projects requiring subsidies. The critical development speed of several is considered much slower than desirable to face off competition from surrounding North Sea states.
Several interest groups have expressed fears that the transition will not benefit the offshore industry cluster. In particular, labour unions have voiced concern with regard to substitute employment opportunities for the workforce currently connected to the offshore petroleum sector. On 7 June 2022, in order to lay the foundation for a future offshore wind sector in Norway and to allay such fears, the prime minister – again with the minister of finance at his side, but this time also the head of the largest labour union in Norway – launched five fundamental policy principles for the future offshore wind sector. The principles are expressed in the following manner, each point also being elaborated in accompanying text:
- "Norway will become one of the world's leading nations in offshore wind."
- "The offshore wind industry will be developed according to the Norwegian tripartite model."
- "We will develop an offshore wind industry that will contribute to more jobs at sea and in the supply industry."
- "The offshore wind industry will contribute with power production that enables new onshore green industry activities."
- "The offshore wind industry shall be sustainable and be developed and positively coexist with other ocean industries."
Such principles are expressed in relatively lofty language and, in some ways, are less specific than the "10 oil commandments" established for the offshore petroleum industry in 1971.(2)
Controversial hybrid offtake solutions from offshore production
The prime minister made it clear that all power generated by the first-phase projects shall be landed in Norway. By this decision, the government has, at this first stage, rejected so-called "hybrid landing solutions". Industry and the opposition consider that projects without hybrid offtake solutions will not become economically sustainable and will thus require taxpayer-financed subsidies.
The question of hybrid-structured wind power projects has become increasingly politically contentious. At the core of the debate is the unusually high electricity prices experienced throughout Winter 2021/2022. The high prices are partly a result of the energy supply squeeze experienced in Europe. No one expects the high electricity demand in Norway, and the high natural gas and electricity prices in Europe (Norwegian continental shelf natural gas production is exported, contributing to 25% of Europe's total natural gas supply needs) to abate in the short term. There is a growing popular movement calling for government price interventions and for rapid increases in domestic electricity production and transmission capacity. Several voices on the right and left wing are demanding that government curtail electricity exports and reduce hydropower supply to substitute gas turbines from the power supply on offshore petroleum production facilities.
Norwegian electricity generation, supply and interconnectors
Some years back, Norway expanded its electricity interconnector capacity. At that time, due to the nature of Norwegian hydropower generation, the interconnectors would enable Norway to export electricity in excess of domestic supply. Norway was, at that time, adequately supplied through its extensive hydropower generation capacity. The generation capacity was also very flexible. It was possible to curtail production almost instantly and without incident, when cheaper electricity was available from other power generating facilities. The thinking was that the interconnectors would enhance Norwegian security of supply.
The Norwegian supply situation and therefore high electricity prices are caused partly by extensive exports of Norwegian hydropower through submarine interconnectors. The combination of various factors have internally contributed to the explosive increase in Norwegian electricity prices, including:
- lower levels of water in Norwegian reservoirs;
- inadequate electricity transmission capacity;
- the electrification of offshore petroleum production installations to reduce emissions; and
- the explosive growth in electric vehicles.
Externally, various other factors have substantially exacerbated the supply squeeze, including:
- the shortage of natural gas for power generation in Europe;
- the shutdown of nuclear power and coal fired power stations;
- the slower-than-expected development of and shortfall in production of electricity from variable renewable generation such as wind.
The price increase has been particularly sharp in the southern part of Norway, where all submarine interconnectors are connected.
To soften its critics, the government has instructed the Norwegian Energy Directorate (NVE) to evaluate the implications of connecting offshore wind projects to Norway as well as to foreign markets. Then, hybrid developments would have opened the possibility to land electricity by submarine cables to Norway, as well as to foreign destinations. The NVE will have to look into alterative grid solutions and their respective effect on the grid and electricity supply situation as a whole.
Concerns with effect on other marine interests and environment
Environmentalists claim that projects in Skagerrak in particular are placed across major trekking routes for migratory birds. Sørlige Nordsjø II is not far off those routes, while other acreage may be even more sensitive from a bird migration point of view. Other environmental aspects are of also concern. The government admitted, in its circulated proposal for the graticulation of the areas, that there is "limited knowledge of the environmental value of the areas, in particular with regard to Utsira North".
Fisheries associations are concerned with the projects tying up large areas comprising acreage suitable for marine harvesting. With chapter 9 of the Law relating to Renewable Energy Production at Sea on compensation to Norwegian fisheries in place, the government is in a position to implement compensation mechanisms for acreage limitations imposed on fishery activities and damage to fishing gear and equipment.
Comparable mechanisms were implemented with substantial success from the mid-1980s in relation to offshore petroleum activities. They ensured an efficient system for timely and adequate conflict resolution settling compensation to fisheries suffering loss from limitations on economic activities or damage to gear or equipment. The functionality of a multi-party conflict resolution board resulted in a relatively low level of conflict between fisheries and offshore petroleum activities.
For further information on this topic please contact Bjørn-Erik Leerberg at Simonsen Vogt Wiig Advokatfirma by telephone (+47 21 95 55 00) or email ([email protected]).The Simonsen Vogt Wiig Advokatfirma website can be accessed at www.svw.no.
Endnotes
(1) For earlier articles in the series, see:
- "Norway's answer to energy transition in new geopolitical age: background"; and
- "Norway's answer to energy transition in new geopolitical age: recent developments".
(2) The petroleum policy fundamentals, commonly referred to as the "10 oil commandments" included in Innst S nr 294 (1970-71) p 8, in Stortingstidende at p 638.