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What is the worst-case scenario for electricity prices in Norway this winter?

The energy crisis in Europe shows no signs of retreat, and some analysts warn that the price of electricity in Norway could reach unprecedented levels. What are the realistic projections at the moment? The Local spoke to energy experts and analysts.

Pictured is a power meter.
Energy experts have told The Local what they think will happen with energy prices throughout the winter in Norway. Pictured is a power meter. Photo by Jon Moore on Unsplash

In recent months, electricity price records have become “business as usual” in Norway. Price levels that were considered almost incredible a few months ago are now part of everyday life for Norwegian households.

Furthermore, a respected industry analyst – Tor Reier Lilleholt, head of analysis at Volue Insight – recently warned that, in an extreme scenario, southern Norway could face a price of 20 kroner per kilowatt-hour this winter.

What are the odds of such a scenario actually materialising, and what should people living in Norway expect when it comes to electricity prices this winter?

Spring likely to be a crucial time for change in prices

As market and supply conditions now stand, analysts don’t see any significant changes in Norwegian price levels in the short term. 

“First of all, we need to make a distinction between the south and the north of the country. In southern Norway, which is connected to Europe, we’ll likely see high price levels during the entire winter season, up until spring. In May and June, with the snow melting, things are likely to change,” Reier Lilleholt told The Local.

Electricity production in Norway is dependent on hydropower, so it needs to have enough water in the reservoirs to have sufficient energy through the winter (alternatively, it must be able to import the energy it needs).

“But prices will remain high until there is enough water in the reservoirs – that is, until spring, which is a crucial point in time. When it comes to prices, of course, the temperature will play the most important role. With colder temperatures, the prices will be higher. If the temperatures are milder, it will be less challenging. As you know, the temperature is important for gas prices, which – in turn – are important for electricity prices,” Volue’s chief analyst added.

Senior analyst Dane Cekov at Nordea agrees with Reier Lilleholt’s estimate that prices are likely to remain high throughout the winter.

“A lot of it, of course, depends on the energy situation in Europe, and there are no quick fixes for the European energy problems. Prices are likely to remain as high as they have been lately, and the situation will remain volatile,” Cekov told The Local.

Worst-case scenario?

Both analysts think that the worst-case scenario for electricity prices in Southern Norway could involve prices of over 10 kroner per kWh. 

With recent developments, even 20 kroner per kWh – the price levels recently seen in France – wouldn’t be something unimaginable, as Reier Lilleholt recently told Norwegian Broadcasting (NRK).

“I’ve stopped saying that there is a ceiling for prices anywhere. There is an upper limit (allowed at auction) in Europe, but some areas are hit hard by prices. 

“For example, we recently saw prices as high as 4,000 euros a megawatt-hour (in Estonia, Latvia, and Lithuania). The prices are also soaring in France, which is connected to Germany, the UK, and the Netherlands, as is Southern Norway,” Reier Lilleholt accentuated to The Local.

Cekov, on the other hand, emphasized the protective role of Norwegian electricity measures.

“The worst case? What we see in the Baltics could be an example, yes. However, no matter how high spot prices rise, the subsidies in Norway will dampen the effect. 

It is a good thing for Norwegian households that the government stepped in with electricity subsidies. Another positive thing is the fact that the grid rent will not rise as much as previously, as the government will also subsidize that. 

“Therefore, Norwegian households will be shielded from the worst-case scenario this winter,” Cekov pointed out.

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Sweden, Denmark and Norway block Nord Stream from examining pipeline 

Nord Stream, the company which owns and operates the gas pipeline hit by suspected sabotage last month, has said it cannot examine the pipeline because it has not been given permission by the Swedish, Danish and Norwegian authorities. 

Sweden, Denmark and Norway block Nord Stream from examining pipeline 

The twin Nord Stream 1 and 2 pipelines have been leaking huge quantities of gas since they were damaged in a series of suspected explosions on September 26th. 

In a statement issued on Tuesday, Nord Stream AG, the company which owns and operates the pipelines, said it had so far been unable to carry out its own inspections. 

“As of today, Nord Stream AG is unable to inspect the damaged sections of the gas pipeline due to the lack of earlier requested necessary permits,” the company, which is 51 percent owned by the Russian gas giant Gazprom, wrote. 

“In particular,” it added, “according to the Swedish authorities, a ban on shipping, anchoring, diving, using of underwater vehicles, geophysical mapping, etc. has been introduced to conduct a state investigation around the damage sites in the Baltic Sea.”

“According to information received from the Danish authorities, the processing time of the Nord Stream AG request for the survey may take more than 20 working days.”

The company said it was also being blocked by Norwegian authorities. 

Nord Stream has chartered “an appropriately equipped” survey vessel in Norway, the company wrote, but the vessel has been denied the “green light from Norwegian Ministry of Foreign Affairs” to depart for the Baltic.

Swedish prosecutors on Monday imposed a ban on all marine traffic, submarines and drones on the entire region around the leaks, with some commentators questioning the legality of the ban.

The prosecutors say they have made the decision because police are carrying out “a crime scene investigation”. 

“The investigation continues, we are in an intensive stage. We have good cooperation with several authorities in the matter. I understand the great public interest, but we are at the beginning of a preliminary investigation and I therefore cannot go into details about which investigative measures we are taking,” prosecutor Mats Ljungqvist said in a press release. 

Sweden’s security police Säpo took over the investigation from the police on September 28th, on the grounds that the suspected crime “could at least partly have been directed at Swedish interests”. 

“It cannot be ruled out that a foreign power lies behind this,” it said in a press release. Ljungqvist leads the Swedish prosecution agency’s National Unit for Security Cases.

In a statement on Sunday, Säpo said they were working “intensively” with the Swedish Coast Guard and the Swedish Armed Forces to investigate who might be responsible for the sabotage.