Norway’s Energy Policy: A Cautionary Tale for the World

By David Blackmon

Norway’s energy minister, Terje Aasland, described the current situation regarding electricity costs as untenable. Record-high prices have emerged, largely due to the country’s power exports to the UK, Germany, Denmark, and other European nations. Critics had warned the Norwegian government about the potential ramifications of exporting power, yet those concerns were largely overlooked.

With hydropower accounting for about 90% of Norway’s electricity generation, the country typically boasts an abundance of surplus energy. Most of the remaining capacity comes from wind power. The establishment of interconnects for export seemed financially sound at first, but only under the assumption that other countries would maintain robust electric grids. Unfortunately, that has not been the case, particularly in the UK and Germany, where reliance on intermittent energy sources has disrupted stability.

As a result, Norwegian power exports have strained resources during low wind and sunlight periods, leading to exorbitant rates for domestic consumers. The situation escalated recently when a combination of low wind speeds and cold weather drove power rates in Norway to €1.12 ($1.18) per kilowatt hour (kWh), starkly contrasting with averages of around 22 cents in New York and 15 cents in Texas.

This spike in rates has provoked significant public outrage, prompting policymakers to reconsider their strategies. According to reports, both the ruling Labour Party and the conservative Progress Party are working on campaigns to limit or cease these international electricity exports.

Such a policy shift could unsettle planners in Germany and the UK, where Norwegian electricity imports are crucial to their emissions reduction strategies. As these countries phase out reliable power sources, they risk pushing industries like steelmaking abroad, effectively transferring emissions to nations that continue to rely on coal. This mirrors trends observed in California, where an overreliance on intermittent generation has led to soaring electricity costs.

The Biden administration appears poised to follow similar economic paths, although voter pushback this year may help avert the dire outcomes seen in Europe. For Norway, this growing energy dilemma serves as a cautionary tale about the unintended consequences of policy decisions that transcend national borders. The situation is avoidable and highlights the need for caution in energy export strategies.

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