(Montel) A Norwegian plan to curb power exports when reservoir levels sink to critically low levels could be counterproductive, leading to retaliatory measures from its neighbours potentially driving up prices, said industry groups in a recent public consultation.
Norway power export curb plan counterproductive – utilities
“Reduced exports from Norway, that is not accepted by our neighbouring countries, could lead to reduced import possibilities and thus periods of higher prices and weakened security of supply,” said Norway’s largest power generator Statkraft.
Lobby group Renewables Norway agreed such export curbs could lead to retaliatory measures that would end up weakening security of supply, despite the government aiming to bring in the measure to counter a repeat of last year’s European energy crisis when prices rocketed in the wake of the Ukraine war.
“Cross-border links provide a strong contribution to Norwegian security of supply and it is important that capacity is maintained as much as possible,” said the lobby group in the consultation, which ended on 8 September.
Strict thresholds?
Any threshold for applying export cuts should be very strict, with the measure for example only applicable in a situation of power rationing, it added.
Export curbs could also have a negative impact on liquidity in the Nordic financial power market, by discouraging hydropower producers from selling financial futures, said power exchange Epex Spot.
“When production is suddenly restricted, producers could find themselves in an unexpected short position, meaning they have an obligation to deliver but are unable to do so and hence need to buy from another market participant which still is able to produce [at high prices],” it said.
“This additional risk could give a strong incentive to producers to lower volumes in the futures market.”
In contrast, some industrial groups welcomed the proposal via the consultation.
Elkem, a producer of silicon-based materials and one of Norway’s largest power consumers, said it was important for energy consumers that the country limited exports when hydropower reservoir levels ran below critical thresholds.
Green surplus
It also played down the fear of retaliatory measures, saying Norway mainly imported power when there was a surplus of renewables generation in neighbouring countries.
“In a strained situation, they would probably not have any power to export,” Elkem said.
Danish TSO Energinet has previously criticised Norway’s plan, saying it would have a negative impact on the Nordic market as a whole.
The government aims to implement the new measures this coming winter.
