Green power as an advantage for Norway requires broad political compromises – E24
Hydro’s ambition is to invest more, not less, in developing Norway as a green industry. Our customers, partners, employees and local communities also want that. In order to succeed, we need national policy to unite on long-term solutions for power and industry.
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Arvid Moss
CEO, Hydro
This is a chronicle
The chronicle expresses the writer’s attitude. You can submit articles and debate entries to E24 here.
The European energy crisis and subsequent price increases in Europe and Norway are due to Russia’s war and Russia’s use of energy as a means of power vis-à-vis Europe. In short, it has been absolutely necessary and economically sensible to provide direct support to households and businesses.
Moment of destiny for Norwegian and European industry
The spot price of electricity in the past year has been extremely high. Norwegian power prices have been linked to neighboring countries and the continent for many decades, and the prices have followed each other closely. All in all, the links have served Norway well, preventing major price variations between dry and wet years, and we have saved large investments that we would otherwise have had to make in large multi-year warehouses.
But if the high prices persist, it poses a very serious challenge for European and Norwegian industry.
50 percent of aluminum production in Europe has already been shut down temporarily or permanently since October 2021. It is very dramatic and bad for the climate. China is the world’s largest producer of aluminium, but production is mainly based on coal. If the European aluminum industry is forced to close, the value chains for producing everything from cars and buildings to packaging will be extra exposed to the growing geopolitical uncertainty and have a bad climate footprint.
At the same time, both Statnett and NVE warn that the Norwegian power surplus is diminishing and is about to deteriorate. The power surplus has meant that Norwegian prices have been stably lower than the continent in recent decades. As early as 2027, the situation may have reversed to Norway becoming a country with a power deficit (and in southern Norway a couple of years before that). If we get there, it will be a serious challenge for the industry. Then our historic competitive advantage erodes: access to plenty of power at competitive prices.
We have ambitions in Norway
Hydro wants to invest more in Norway. Ensuring a long-term and solid power surplus is the big challenge. We believe that Norway, with its rich access to natural resources, good cooperation in working life and highly skilled workforce, provides a fantastic starting point for developing tomorrow’s materials, products and industrial processes. We have and will build new strong value chains from R&D via innovation, scaling, industrialisation, commercialization and full access to the most advanced customers through the EEA agreement.
At Hydro’s smelter, we are now investing in new technology in recycling, carbon capture and green hydrogen with the aim of becoming the world’s first supplier of zero-carbon aluminium. In the battery value chain, we focus on
sustainable materials, such as low-carbon anode material and recycling of electric car batteries, ventures in which Norway has strong expertise to build on.
Hydro wants to build our global competitive advantage by taking the leadership role in climate-friendly solutions. But renewable power at competitive prices is essential to achieve profitable investments in a global competition.
It is useful to develop more power
For households and businesses, large increases in power prices in the short term are unreasonable, also since we have had a relatively low electricity price on average for many decades. The historically low price is a consequence of the fact that we
has had a surplus in Norway, a market-based system and exchange of power.
Solutions we can agree on must be long-term to create predictability for the industry. The argument that there is no point in developing more power as long as we exchange electricity with foreign countries is not correct. In August published
NVE a note that shows that a high surplus in the Norwegian power balance will mean that Norwegian prices in most years will be lower than prices in Germany and Great Britain, as history has shown. Whether we invest to strengthen it
the current Norwegian power balance will therefore have a major impact on the future power price and the extent to which foreign prices spill over into Norway.
If the argument about not expanding because we exchange electricity with other countries wins, we will instead end up with a self-fulfilling prophecy of persistent price contagion and high power prices in Norway.
Power political settlement on specific actions
Norway needs a broad political agreement on a power policy that ensures the development of enough power, both in the short and long term and at competitive prices. Are we to trigger the investments needed, both in force and in
industry, there must be a broad political majority behind the main lines of energy policy.
There are four things in particular that a broad settlement should focus on:
- A concrete roadmap with action plans to develop enough power to ensure a solid, annual power surplus (20-30 TWh) until 2030. In the short term, starting up onshore wind and upgrading hydropower is critical, and processing times for power and grids must be reduced.
- A roadmap for offshore wind on an industrial scale as soon as possible (2030) to reduce costs and enable the sale of power to Norway for profitable, green inland investments.
- A tax system to find that is investment neutral and predictable. We believe suggest does not represent it.
- Continued energy cooperation with our neighboring countries and a market-based power system.
Any decisions to change the way the power market works, or Norway’s power policy cooperation with our neighboring countries, must also stand up for posterity. Extreme effects of war are a poor frame of reference for standardizing new solutions. The main challenge is to produce more power at low cost.
The industry invests with decades as a horizon. Broad settlements that emerge are important, also for our reputation among international investors.
Hydro is ready to take greater responsibility for developing the power that we and other industry players need. In December, we launched Snøheia industrivind together with two publicly owned power companies, Eviny and Zephyr. The purpose is to develop 1 TWh of wind power for industry in Høyanger and Sunnfjord.
We believe that Norway needs more of these types of projects, but they will only become a reality if we can be sure that the long-term guidelines in
the power policy is fixed.