Power prices, Foreign cable | Should secure us with coal
The comment expresses the writer’s opinions.
While the price of electricity reaches ever new heights and the state and municipality reap super profits at the expense of households and businesses, the security of supply turns into a hope that it will soon start to blow on the continent.
But when the politicians in the energy and environment committee dealt with the license application for cables to Germany and England in autumn 2013, they believed that security of supply should be strengthened with access to German and British nuclear power and coal power.
I Statnett’s license application the following is stated as the first main point on the first page of the summary of the attached analysis:
“Thermal production in Germany and Great Britain helps the Norwegian-Swedish power system to handle hydrological fluctuations and produce more when it is dry and less when it is wet.”
But at this time the decision to wind down German nuclear power was known. It was also known that Britain had decided to phase out coal power. Great Britain is on target and Germany is almost there.
Security of supply
The energy stores in southern Norway almost reached median degree of filling in week 45after the harvest’s rainfall which turned 2022 into a wet year.
But then it turned around. In the last four weeks, the draining of the warehouses, which has been driven by a new record for net exports, of 3.8 TWh in the period. German and British prices mean that the state coffers and various municipal power boxes are filling up at a record pace, with electricity tax and VAT on top.
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On the summary page, Statnett writes that the cables will strengthen security of supply, that they enable us to “import more in a shorter time and at a lower price than without the cables”. However, experience and reality tell the opposite.
The next time the word “security of supply” appears on page eleven, “In sum, EMR creates long-term stability for investors and thus makes it possible to achieve the targets for emission cuts while ensuring security of supply”. EMR, «Electricity Market Reform», is the British counterpart to the German energy reform which many would argue is the very basis of the European energy crisis.
This can hardly be interpreted differently than that the cables were the means to increase profitability for wind power investors in the Nordics.
“Through major reforms such as Energiwende and EMR, respectively, Germany and Great Britain the political goals in concrete and binding measures. There is indeed a lot of discussion going on here about both goals and means of action, and there are several heavy opposing forces that want a different development. On an overall level, however, there is little to suggest that the policy will be written significantly changed”, Statnett.
The realities of already adopted political decisions were obscured, while the impression created in the summary’s first main point, that thermal power from Germany and Great Britain should help the Norwegian-Swedish power system, was in reality an illusion.
Anyone who had followed German and British energy policy, which should be a prerequisite for assessing connection to these countries, would have realized that these power sources in no way represent any security of supply, since they had been decided to be phased out.
Was it someone in the energy and environment committee at the Storting, or one of the decision-makers who had caught this? And, what advisors did they use? Statnett, who had served the premises?
Strengthened or weakened?
“Security of supply will be strengthened” reads the title of the sub-chapter on page 44 of Statnett’s analysis.
This begins with the fact that there is really no need for the security of supply the cables could possibly be on, «With a Nordic surplus of over 30 TWh, it becomes necessary to import to the Nordics at a low level even in the driest years. In addition, the exchange capacity of Norden is significantly greater, even without our cables. The profit from cheaper imports in dry years is therefore low in our base estimates”, writes Statnett.
With that, one might ask, what was the point?
Read also: Electricity prices fall significantly – a positive sign going forward
But Statnett followed up with the fact that the security of supply would still be strengthened, with the possibility of cheaper imports even without cables, and added that «We will also have a lower probability of idle time in the magazines and rationing in the vårknipa»
It is worth remembering that when Norway was a net importer of power in 2010, from Sweden and Denmark, average price 44 øre/kWh. Furthermore, without the electrification of the shelf, which was then already underway, we would hardly be a net importer. Add that today’s Denmark is unable to provide any security of supply, since they have phased out coal power.
Kjell Erik Eilertsen
Civil engineering from NTNU, MBA from INSEAD.
Background from the oil industry, finance and as a journalist.
Financial advisor/board position/investor/writer.
The capacity for the two new cables can transmit up to times the Norwegian power surplus. They have more than double the export capacity out of the NO2 power region (Agder/Rogaland), and they have increased the capacity between the Norwegian-Swedish system and the continent by 50 percent.
But then Statnett warns, «Such a need could arise if we get lower profits and a new period of problems in Swedish nuclear power production. As mentioned, this is not something we base our main scenario on.”
The situation now is that Swedish nuclear power plants are temporarily closed for maintenance, while, as in the first main point of the summary, it is presented as security of supply, it has been decommissioned.
Thus, everyone sits and waits to find. Wind is our new security of supply. Much like in the sailing ship era.
Swedish utility
The politicians who flipped over to page 45 could read about the benefits the Swedes would get from the cables.
“Sweden will get big gains from the cables from Norway, because the cables raise the price level throughout the Nordics, so that the country gets better payment for its large net exports. It is important to mention that the Swedes lose a lot of trade income from their existing connections».
The cables were therefore supposed to raise the price throughout the Nordic region. Statnett foresees helping Swedish power producers achieve higher prices, since existing cables between Sweden and the Continent were a bottleneck. The new cables should thus introduce price contagion to Swedish power producers via Norway.
Read more comments from Kjell Erik Eilertsen
Probably none of the decision-makers caught the contradiction that Statnett had put into print. In one context, the capacity for the new cables did not play any role since the capacity out of the Nordic region is already so high. Next, the Swedes’ connection with the Continent is presented as a bottleneck that has weakened the profitability of Swedish power producers.
From the England cable coming into operation until Swedish nuclear power plants are closed for maintenance, the price of electricity in Oslo has been approximately 50 percent higher than in Stockholm and Gothenburg. The new “power highway” via Norway has raised Swedish electricity prices, which has increased profitability for Swedish power producers. Completely in line with Statnett’s intentions.
The whole story of the two new cables to Germany and England ends in a fundamental question. Have they strengthened or weakened Norway’s security of supply?
Most indications are that they have weakened the security of supply and the economy. Neither politicians nor the power industry have yet come up with credible reasoning that suggests the opposite.
The new cables are simply about increasing profits for power producers, at the expense of households and companies, for which Statnett has run the errands of the power producers and in reality has been their lobbyist, disguised as a state company.