Norway

Wind Energy in Norway

In 2016, no new wind power capacity was installed in Norway; however, investment decisions made during the year suggest that over 1,700 MW of new capacity will be built by the end of 2020. Installed capacity totaled 873 MW at the end of the year, and production of wind-generated electricity totaled 2.125 TWh (compared to 2.512 TWh in 2015).

Wind resources in 2016 were considerably lower than normal. The wind index for Norwegian wind farms was 95%, corresponding to a production index of 92%. The average capacity factor for Norwegian wind farms in normal operation was 29%. Wind-generated electricity amounted to 1.4% of the total electricity production in the country, offsetting 1.6% of total demand.

Norway’s electricity production includes a high share of renewables. The primary source is hydropower, which accounted for approximately 96% of the country’s electricity production in 2016 alone and exceeded demand by 10.9 TWh.

National Objectives

Renewable sources amounted to 97.7% of the national electricity production in Norway in 2016—1.4% of which came from wind power. There was a net electricity export of 16.4 TWh, as electricity consumption in the country totaled 133.1 TWh for the year. The high ratio of renewable energy production, combined with concern over local environmental impacts, has fueled public debate on Norway’s wind power development in recent years.

As a member of the European Economic Area (EEA), Norway accepted the European Union’s (EU) renewable energy directive in 2011. The nation's target for renewable energy was set to 67.5% of total energy consumption by 2020. Norway will meet this target through a combination of energy efficiency measures and increased renewable energy production.

Renewable Energy Targets

The incentive mechanism for increasing renewable energy production in Norway is a joint support scheme with Sweden to finance 28.4 TWh/yr of new renewable energy capacity by 2020. This market-based electricity certificate scheme is unique as the targets are both country- and technology-neutral.

The policy does not dictate which country the new renewable energy production comes from, nor does it dictate the generation technology. Rather, the policy objective is to allow the market to dictate the location and type of renewable energy capacity, ensuring a cost-effective increase in renewable energy production from a macroeconomic standpoint.

In practice, this policy means that Norway has no explicit wind energy target. However, the electricity certificate scheme resulted in investment decisions to build considerable wind energy installations in Norway by 2020.

Policies Supporting Development

Enova SF provided financial support for wind power projects in Norway from 2001-2010. The state-owned organization awarded funding on a case-by-case basis, supporting projects just enough to make them commercially viable. This program terminated in 2011, although the last projects to receive support were commissioned in 2012 and 2013.

In 2012, Norway and Sweden entered into a common electricity certificate market scheme. The economic incentive provided by the electricity certificate scheme aims to develop a combined 28.4 TWh/yr of new renewable power production in the countries by the end of 2020. Norwegian power consumers are expected to finance 13.2 TWh of this new power production.

The certificate system shifts the cost of supporting renewables from Enova to the electricity consumer. Approved power plants receive one certificate for every generated MWh from renewable energy sources for 15 years after commissioning. Owners of approved plants then have two independent products on the market: electricity and certificates.

The demand for certificates is created by a quota obligation—a requirement that all electricity users purchase certificates equal to a certain proportion of their electricity use. The market then determines the price of certificates by supply and demand, varying from one transaction to another.

In April 2017, the Norwegian and Swedish governments reached an agreement on the electricity certificate scheme’s future after the original deployment cut-off in 2020. The agreement extended the cut-off for Norwegian projects by one year; wind power in Norway must be commissioned by the end of 2021 to receive support from electricity certificates. There is no plan to subsidize new wind power in Norway after 2021, therefore any wind power realized in Norway after that year will have to be profitable based upon electricity sales alone.

Additionally, the agreement dictates that Norway will not expand beyond their current existing target for power production (13.2 TWh of new renewable energy). In contrast, Sweden has elected to expand its target to add an additional 18 TWh of new renewable production by 2030 within the electricity certificate scheme. Norway and Sweden have also agreed to continue trading certificates in a common market, even after the 2021 cut-off for Norwegian wind farms. Due to the new target in Sweden, the demand and market for certificates will be extended until 2045.