Norwegian government to extend energy bill subsidy scheme until next year

The scheme, which sees the state cover 80 percent of electricity bills when the energy price rises above a certain amount, will be continued until March 2023, Norway’s government announced Thursday.

Power pylons.
The governemnt will be extending the scheme until next year. Pictured are power pylons. Photo by American Public Power Association on Unsplash

The state will continue to subsidise energy bills to the tune of 80 percent when the market price exceeds 70 øre per kilowatt-hour.

“We want to reduce costs for households when prices are extremely high. However, we see that there is so much uncertainty now that we want to provide security,” Minister of Petroleum and Energy Terje Aasland told newspaper VG.

The scheme was due to end in April but will continue until March 2023. Over the last ten days, electricity prices have shot up, with parts of Norway paying 10 kroner per kilowatt-hour when taxes and grid rent are included earlier this week.

The proposals for the scheme to continue for another 12 months have been sent for consultation in parliament.

Energy minister Aasland said that the government was also working on a longer-term solution to combat rising energy prices.

READ ALSO: How will the war in Ukraine impact the cost of living in Norway?

“We are working to find lasting solutions that can reduce costs in the future, but we must return to that,” the minister said.

When prices fall below 70 øre per kilowatt-hour, the scheme will not apply. This has made it difficult to predict what the extension would cost the state, according to Finance Minister Trygve Slagsvold Vedum.  

The subsidy scheme was initially introduced in December. The original package saw the government pick up 55 percent of the bill when the spot price, the cost of raw energy power firms pay, rises above 70 øre per kilowatt-hour.

It was later raised to 80 percent following pressure from opposition and critics.

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ENERGY: What Norway’s new grid rent model means for you

A new model for grid rent, the fee you pay the network for powering your home, will be adopted in Norway later this year. So, what will it mean for you, and will it help slash your energy bills? 

ENERGY: What Norway's new grid rent model means for you

Following a six month postponement, a new gird rent system will be adopted nationwide in July, the Norwegian government has announced

Grid rent is the charge consumers pay for receiving electricity into their homes. Under the current model, grid rent is typically anywhere between 20 to 50 øre per kilowatt-hour. Those in rural areas usually pay more, while those in cities pay less.

The new model will have a lower fixed proportion of the fee with a higher part of the charge linked to total consumption, meaning homes that use more power will pay higher grid rent, while those that consume less will have lower bills. 

The new model has been welcomed by the Norwegian Housing Association (NBBL). 

“Now we get a fairer grid rent, where those who load the power grid the most so that the need for development increases, pay somewhat more in fixed terms than those who use little electricity at the same time,” Bård Folke Fredriksen, CEO of the NBBL, told newswire NTB. 

“No one wants to pay for the neighbour to charge two electric cars simultaneously during the day, when it is entirely possible to charge slowly at night when there is good capacity in the power grid,” he added. 

Initially, the model was meant to be adopted in the new year, but a majority in parliament opted to delay the scheme’s introduction. 

“The goal of the new grid rental model is to facilitate the best possible utilisation of the transmission network and a more equitable distribution of costs between customers,” Minister of Petroleum Terje Aasland said in a government statement.

The government has said that, over time, the scheme would lead to lower grid rent for customers. 

“Power-based grid rental will provide incentives for efficient grid utilisation, which will result in lower grid costs for electricity customers, less encroachment on nature and fewer conflicts related to grid development,” Aasland said. 

A transition period of two years will be introduced, and the new consumption charge will only be allowed to account for 50 percent of grid companies’ revenues. The energy ministry will then assess the new model at the end of the transition peroid.