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Why energy prices in Norway will continue to rise this winter 

The Local
The Local - [email protected] • 18 Jul, 2022 Updated Mon 18 Jul 2022 11:37 CEST
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Wien Energie has asked for help payoff off security deposits for the exchange market. Photo by Pok Rie: https://www.pexels.com/photo/electric-posts-409020/

Despite government support, Norwegians have been paying more than ever for energy and steep electricity bills will likely be a mainstay in Norway this winter. 

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Record energy prices expected to increase

During the first quarter of the year, consumers in Norway paid a record 117.2 øre/kWh for electricity, according to figures from Statistics Norway. This is before fees, taxes and grid rent are included, which increase the overall price households pay significantly. 

This was more than 75 øre/kWh higher than the average for the same period in the last five years – and there are currently no indications that the increasing trend will reverse. 

"We believe electricity prices will remain high in the coming months. Low levels of water reservoirs in Norway combined with less export of Russian gas to Europe implies higher electricity prices," Dane Cekov, an analyst from bank Nordea, told The Local. 

At the end of May, the state-owned Statnett announced that the supply situation in Norway might be under strain – in some scenarios – all the way up to and through the winter, especially if Southern Norway experiences drier than usual weather in the second part of the year. 

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Those in the south the hardest hit

However, not everyone in Norway has been hit by high prices. In the north, prices are much lower due to large hydroelectric reserves and lower demand. 

"As you know, there are five electricity price zones in Norway, and there are extreme price differences between the north and the south. The electricity price in Northern Norway is pretty low, but the transmission capacity isn't large enough, so all the excess hydropower can't be sent to the south," Nathalie Gerl, lead power analyst at Refinitiv, told The Local. 

"Therefore, the prices are a lot higher in the Oslo area, the Bergen area, and the southern market zones. These are connected to the UK and Germany by cables, so we see the influence of European prices feeding into Norwegian prices there.

"Although long-term seasonal forecasts have a low certainty, they can show a general tendency for six months. On the Norwegian side, dry weather is expected in the south. Not super dry, but on the dry side, compared to what should be the norm," she explained. 

Government support scheme to continue in the winter, but will it be enough? 

Last autumn, high prices led to the government introducing a temporary scheme that covered 55 percent of a consumer's energy bill that surpassed 70 øre/kWh. Following pressure, the percentage of the bill the state picked up was raised to 80 percent. 

The scheme was extended to cover this winter as well. The scheme is set to cover up to 90 percent of the bill above 70 øre/kWh this winter.  

Cekov expects government support to shield most consumers from the increased prices throughout the winter. 

"Electricity prices will likely rise further towards the winter. The government compensation scheme for households (which now covers 80% of the spot electricity price above 70 øre/kWh and is set to cover 90% during the winter months) will shield households from the high electricity prices in the months to come," Cekov said. 

However, activists have told The Local that the government's schemes don't go far enough. 

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"We have some people (in the group) who are now forced to choose between paying for electricity bills and medicines – that's horrible. 

"Furthermore, many people who live in Norway don't read or speak Norwegian. Many foreigners don't know much about the electricity market in Norway, so they get higher prices and bad deals with companies. For example, their landlord tells them to call a certain company and get electricity, and they follow the advice because they don't know better. 

"In the group, a lot of international citizens ask for help, and we try to help them save money on electricity," Power expert and founder of Facebook group Prismatch Strøm, Mathias Nilsson, told The Local. 

Lawyer Olav Sylte manages the Facebook group Vi som krever billigere strøm (we who demand cheaper electricity) and believes the current scheme isn't working. 

"Today, the subsidy covers 80% of expenses over 70 øre/kWh in a month. From August, it will be 90%. However, that doesn't help at all if the remaining 10% of the price turns out to be ten times more expensive than what people were paying before… We're talking about extreme increases in prices," Sylte said. 

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"The second problem is that people need to pay these extreme prices first, and then they get refunded. This could become a serious problem in Autumn and Winter.

"The state needs to cover 100% over 70% øre/kWh, and it should do it in a way that people don't have to wait for 'refunds.' Some don't have the money to pay. Imagine if you used to pay 2,000 kroner, but now you need to pay 20,000 kroner? Subsidies don't help if people can't pay," Sylte said. 

"In my opinion, ending the foreign cables to England and Germany could be part of the solution here. The government should never have done that, and it's time to stop it. If not, we will have big problems in the winter," he added.

However, Prime Minister Jonas Gahr Støre has ruled out pulling Norway from the European market. 

"When we have a profit, we can sell abroad. But at regular intervals, there are dry periods or whole dry years. Then we need power from abroad to cover our own shortcomings. This trade is good for us," the PM told Aftenposten and E24. 

"It is a dangerous thought and will not serve us well. It could give us more expensive power and lack of power in given situations. We will hardly be able to import power when we need it without contributing to other countries when they need it. There is a reciprocity in this," he added. 

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The Local 2022/07/18 11:37

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