How Will Norway’s Energy Needs Be Met in the Future?

Offshore wind

One of the areas that had high expectations beforehand was offshore wind. In 2019, the EU’s installed offshore wind capacity increased by 33%, and in 2020, operators in Europe’s offshore wind industry committed to projects worth 270 billion kroner. The EU currently has 25 gigawatts of offshore wind but aims to expand this to 300 gigawatts by 2050. The Norwegian industry has previously indicated that the government needsto be proactive in the energy report for Norway to participate in international development.

Today, the government launched a review on how offshore wind power can be a new, profitable industry in Norway, Additionally, a new guide for area allocation, concession process, and applications for offshore wind power was introduced, along with a consultation paper proposing changes to the Offshore Energy Act and the Offshore Energy Act Regulations. This provides significant information about the future of offshore wind in Norway, and we at Hjort will provide a detailed description of all the proposals in the coming days. Below follows a brief, preliminary overview of the key points highlighted by the government in the actual Parliamentary Report.

In the report itself, the government highlights the opportunities offshore wind provides and announces that they will establish a collaborative arena for industry operators, authorities, the support apparatus, research environments, clusters, and other relevant stakeholders to strengthen the offshore wind industry, and to better equip both small and large supplier companies to win contracts also in the international market.

The government will also start to identify areas for assessment with the aim of opening and awarding concessions under the Offshore Energy Act.

Furthermore, the government has examined how the offshore wind industry should be taxed. The government considers that it is not appropriate to introduce a resource rent tax at the present time, but they are working on changes in the Norwegian Tax Act to ensure tax liability to Norway for income from wind power on the Norwegian continental shelf.

The government also considers legal provisions for the mortgaging and possibly establishing a register for the creation of rights in facilities for offshore renewable energy production.

The government further discusses the offshore power grid. In the proposed changes to the Offshore Energy Act, Statnett is appointed as the TSO for offshore cables and facilities not regulated by the Petroleum Act. In this context, the government also mentions that they will begin developing regulations concerning the system responsibility at sea.

The government announces that it will consider, and may propose, an amendment to the Offshore Energy Act that provides authority to impose more specific conditions on the license holder for power grid regulations at sea. In addition, the Government aims to clarify whether, and under what conditions, it will be possible to apply for a concession for hybrid projects before an area is allocated on Southern North Sea II.

Auction

The Ministry of Petroleum and Energy sets out that auction will be the main model for the allocation of areas for offshore renewable energy production. The process for allocating areas will start with a call for tenders from the Ministry of Petroleum and Energy.

The Ministry of Petroleum and Energy then sets up a prequalification where the operators must meet certain requirements for financial capacity, technical competence, and health, safety, and environmental standards before they can participate in the auction. The prequalification will ensure that all operators involved in the competition for areas have the competence and capacity to carry out the development of a large-scale offshore energy project.

For floating wind power at Utsira Nord, the consideration of technology development makes auction a less suitable instrument, as it is not given that the best technology projects will prevail in an auction. Therefore, the Ministry of Petroleum and Energy sets out that the allocation at Utsira Nord will be conducted with a qualitative competition. The criteria for allocation at Utsira Nord will reflect the goal of developing projects that contribute to technology development and cost reductions for floating offshore wind. The criteria for the allocation of areas will be described in the call for tenders from the Ministry of Petroleum and Energy.

Onshore wind power on hold

There has been significant uncertainty in the industry following the government’s parliamentary report on onshore Wind Power (Meld. St. 28 (2019–2020)) and the Parliament’s handling of this (Innst. 101 S (2020–2021)). In practice, the processing of new applications for land-based wind power concessions has been put on hold pending the government’s investigation of a new legal basis for the concession process, which aims to ensure greater local anchoring. In the Energy Report, the government warns that an impatient industry must arm itself with further patience. The government informs that they have started work on investigating how changes in the concession process can be implemented in the best possible way. The concession process for onshore wind power will only resume after the future legal basis is clarified. The government indicates in the report that it is not realistic to expect proposals for legislative changes to be presented to the Parliament before spring 2022 at the earliest.

Hydropower

The parliamentary report contains no news of significant importance for the hydropower sector. The government plans for hydropower to continue being the backbone of the Norwegian power system, especially as the need for regulatable and flexible renewable power production will continue to increase. The government does not plan for large-scale new developments but will prioritize facilitating profitable and sustainable investments and upgrades in the sector, including by continuing the conversion of the resource rent tax to a constant current tax, which was introduced earlier this year.

The government signals that in the concession process, they will emphasize hydropower’s ability to produce when the need is greatest. In the work with revisions of older watercourse concessions, where the main purpose is the improvement of environmental conditions in regulated watercourses, the value of regulatability and flexibility will also be given significant weight. For power plants with outlets in rivers, the government warns that it will be particularly important to weigh the need for flexibility against the considerations for the watercourse environment.

Power Grid

Partner at Hjort, Kristin Bjella, participated in the so-called Reiten Committee in 2014, which examined how the power grid could be better organized. This is still relevant, and in the Parliamentary report, the government mentions that they want the most efficient planning and development of the transmission network possible, and that the transmission network should be utilized as effectively as possible. The government’s goal is that grid connection should not be an obstacle to the establishment of new businesses and jobs. At the same time, the Parliamentary report takes into account that the development of the grid is costly and involves natural interventions and land conflicts.

The government states that the transmission grid can and should be utilized more efficiently to avoid excessive grid investment and construction. This contributes to keeping the grid fee as low as possible in the long term and reduces the need for unnecessary grid development, with associated interventions in nature and the environment. In the report, the government announces that they will implement the following measures to ensure this:

• The government has asked the NVE to assess and propose measures to reduce the processing time within the current regulations.
• The government has also asked the NVE and RME to investigate, respectively, user payment for concession processing and tariffs for connection to the transmission network.
• The government has established a fast-working public committee that will investigate issues related to the development of the transmission network. The committee will consider three overarching themes:

1. 1. Measures to reduce the time it takes to develop and process concessions for new power grid facilities,
   2. Principles for maintaining a socio-economic development of the transmission grid in a time of great uncertainty regarding consumption development, and
   3. Possible improvements in the system of connection obligation.

Hydrogen

As part of the Parliamentary Report, the government presents a “roadmap for hydrogen.”

The short-term ambition is to establish hubs for hydrogen within maritime transport and to enhance research on hydrogen.

The roadmap envisions that by 2050, a market for the production and use of hydrogen will be established. To facilitate this, the government proposes that authorities, in collaboration with private actors over the next four years until 2025, should:

• Establish five hydrogen hubs within maritime transport;
• Establish one or two industrial projects with associated production facilities;
• Establish between five and ten pilot projects for the development and demonstration of new and more cost-effective hydrogen solutions and technologies.

The government also refers to the fact that the Research Council of Norway and Enova are today launching the collaboration “Heilo – Hydrogen as energy carriers for low emissions and transition”.

CCS

The government aims to facilitate socio-economically profitable storage of CO2 on the Norwegian continental shelf and points out that a successful Longship project will significantly contribute to the development of CO2 management as an effective climate measure, and to lower the threshold for establishing new projects.

The government emphasizes that companies with the necessary expertise and who have matured industrially sound and profitable projects should be able to rely on the state to provide a predictable and flexible process for access to storage areas in all phases of this business. Therefore, it will facilitate industrial actors to explore, search for, and/or develop new storage localities for CO2 on the Norwegian continental shelf.

The state, however, will not enter into direct negotiations about state support with individual actors and will assume that any future CO2 management projects in Norway must compete for investment and operational support from general support schemes such as Enova and the EU’s Innovation Fund.

It is emphasized that since this business is in an early phase in Norway, it is appropriate for all new industrial operators to contact relevant authorities at an early stage to clarify the requirements that will be set for an application to be considered fulfilled.

The Ministry of Petroleum and Energy will return to the Parliament with an assessment of alternatives for state ownership, including an SDØE model and taxation of CO2 storage in the proposal for the state budget for 2022.

Oil and Gas

It is stated in the report that in the coming years, the government will work for long-term value creation from the Norwegian continental shelf within the framework of Norwegian climate policy and the Paris Agreement, and will focus on the following four main objectives for its work:

• Facilitate profitable production of oil and gas, through for example predictable framework conditions.
• Continue the current practice of regular concession rounds on the Norwegian continental shelf to give the industry access to new exploration areas within the spatial frameworks of the management plans.
• Continue to collect knowledge through further mapping of petroleum resources, also in areas not opened for petroleum activities.
• Continue quota obligation and CO2 tax as the main instruments in climate policy on the Norwegian continental shelf, while maintaining strict environmental requirements for Norwegian oil production.

No changes are planned in the current system with TFO rounds (exploration in the mature areas of the Norwegian continental shelf) and numbered concession rounds (exploration in immature parts of the Norwegian continental shelf).

Further focus is on the fact that technology and expertise from the oil and gas industry must be utilized in new areas, which will contribute to increased efficiency and value creation, for example within CO2 management (capture, transport, and storage), hydrogen production, floating wind power, or battery production.

"Energisk - a legal podcast from Hjort"

Thursday, June 17, Hjort’s podcast ‘Energisk’ will be visited by the CEO of Energi Norge, Knut Kroepelien. We will discuss how the brand new industrial report will affect the Norwegian energy industry. We conclude the season with Oil and Energy Minister Tina Bru as a guest. We are very excited to hear how the government’s energy and industrial plan will ensure enough power production to cut emissions, while also creating new jobs and facilitating new industrial development.

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