Norway plans to control hydropower to preserve electricity supply

OSLO: Norway is working on a mechanism to preserve its low hydroelectric reservoirs, effectively limiting electricity exports to Western Europe just as its energy crisis worsens.

Filling dams will take priority over power generation when levels fall below seasonal averages, Oil and Energy Minister Terje Aasland said in a statement yesterday.

“In practice, this will go through control mechanisms which limit the possibility of export in the event of low filling of the tanks”, declared the minister in the text of a briefing for the leaders of parliamentary parties.

The ministry will work this week to establish the framework so that the new mechanism can be put in place as soon as possible, he said.

The country is one of the leading European electricity exporters.

However, water levels in southern Norway are already so low that the government has said it must act now to avoid inland shortages this winter.

As Europe’s energy crisis deepens, any restrictions would be another blow to nations from Germany to the UK that depend on cheap Norwegian hydro to help keep the lights on.

Aasland and Prime Minister Jonas Gahr Store met with parliamentary leaders yesterday morning to brief them on the electricity market situation and parliament may be called back from its summer recess to sort out the issue.

The energy minister also confirmed that an increase in a scheme to help consumers and farmers cover soaring electricity costs will be brought forward a month to September 1.

Norway is not a member of the European Union (EU), but is part of Europe’s single energy market and its rules state that countries are not allowed to limit flows to their neighbors for extended periods. .

Cuts would only be allowed if an emergency was declared.

And the country’s utility lobby group said any potential restrictions on Norwegian electricity exports must follow EU electricity market rules.

“If there is anything we do not need in these difficult times, it is to undermine the cooperation and predictability of electricity exchanges and flows on which the European energy transition depends.

“This also includes Norway’s commitment to this cooperation and the trading rules,” Toini Lovseth, executive director of markets and customers at industry group EnergiNorge, said in an email ahead of the minister’s statement.

Norway derives almost all of its electricity from its vast hydroelectric resources.

Historically it has been able to export a large surplus and still have some of the lowest prices in Europe.

But after a dry spring, hydro reserves in the worst-hit area stand at 49.3%, compared to a median of 74.9% for the period 2000-19.

Norway now has more water in reservoirs than authorities’ previous forecasts indicated for early fall, Aasland said.

The likelihood of needing electricity rationing in winter is “low”, he added, citing forecasts from regulator NVE.

Utilities benefit from selling electricity overseas, especially when prices are as high and volatile as they are now.

The country’s largest electricity producer, Statkraft AS, supports “a well-functioning electricity market system where Norway can import electricity in dry years and export electricity when we have a surplus electricity,” he said by email.

However, he declined to comment further on potential brakes. —Bloomberg

Alan A. Seibert