Economic advantage

Increased trade can benefit both sides. In times of high wind or solar production, Norway can import cheap electricity from Germany, thereby saving water in its reservoirs (indirect storage). In times of low wind production, Norway can use the stored water to export power at higher prices.

However, the main economic concern in the Norwegian debate is the fear of increasing electricity prices. Average prices for Norwegian consumers will not necessarily increase. This simplistic expectation is linked to a flawed framing of the debate, as if it would be about exporting electricity while in fact it is mainly about trading. The charts below help explain this based on data of 2010 and 2011. The red areas represent hours when the power prices on the German power market EEX were at least 10€/MWh higher then in the Oslo region. During the “green hours”, the prices in Germany were at least 10€/MWh lower. During the “yellow hours” the difference was smaller.

Price differences

There is clearly a considerable potential for trade in both directions: during “green hours” Norway can import cheaper electricity from Germany, typically when Norwegian reservoirs are empty, or wind and solar production is high in Germany. Vice versa, during red hours Norway can export.

As in the past, the net yearly balance will be positive or negative depending on the weather. Already now “green hours” are almost as frequent as red ones. On the one hand, 2010 was a particularly dry year, which increased prices in Norway. On the other hand, thanks to increased solar and wind production, German power prices went down substantially since 2010, and this is likely to continue.

Norway as a whole will benefit. It will obtain more value from its unique power storage assets. Even if average Norwegian prices would increase slightly, this will be mean increased revenues for Norwegian electricity producers. Most of them are publicly owned. A country like Norway, which needs to wisely manage the immense revenues from oil and gas, certainly can organise a socially fair redistribution of much smaller amounts in the power sector.

Some people fear that the European transition to renewables would undermine Norway’s interests as gas and oil exporter. However, many experts are convinced of the opposite: in the medium term, gas will benefit because a high share of renewables is not compatible with inflexible coal and nuclear power.

Furthermore more interconnection capacities increase Norway’s security of supply for dry years and Germany’s security for times with low renewables production. Thus, the stability of the power system in the whole region is strengthened.

As Scandinavian indirect storage has almost no energy losses (except moderate transport losses), it is more energy efficient than most other storage options. Therefore, Scandinavian storage is one effective option to balance large amounts of variable renewables in Germany and other parts of Europe, and it can contribute to reduce the costs of the Energiewende. This can only be a part of the solution; other flexibility options must be developed and deployed as well.

To enable this cooperation, a gradual growth of interconnection capacities is needed. This can be a good deal for citizens: the recent sub-sea cable between Norway and the Netherlands has paid off in less than three years and is now providing net income to the state-owned companies that operate it. We welcome and support the rapid implementation of the planned crossborder connections, and encourage policy makers to facilitate the realisation of more transmission cables, should they be needed to enable higher shares of renewables in Germany and other countries.