Norway: Wind hit as green reputation slips


May 9, 2016

This content is from our archive. Some formatting or links may be broken.

“We are telling everybody what they should be doing but we are not doing it ourselves.”

That is the view of Nina Jensen, head of the Norway arm of environmental charity WWF. In an interview with the Financial Times, she criticised the Norwegian government for backing environmental projects in other nations, including $1bn to help curb deforestation in Brazil, while allowing a plan to dump industrial waste in one of Norway’s pristine fjords. It has also been looking to allow oil drilling in the world’s largest cold water coral reef, Lofoten.

The result is that the country is gaining a reputation for saying one thing about the environment while doing another.

Wind is part of this. Last month, the Norwegian energy ministry
revealed a plan to end its green energy subsidy scheme by 2021, which would leave developers of new hydro, wind and biomass projects to compete unaided against other energy sources.

This would finish the renewable energy support scheme Norway launched with Sweden in 2012 to boost output from renewable sources. Last year, electricity prices in Norway hit 15-year lows, and the Norwegian oil and energy ministry said that cutting support for new renewable energy developments would help to support the value of existing schemes.

Predictably, the Norwegian wind power association Norwea was less enthusiastic, saying it would be a “premature goodbye” to the system. The proposal is contained in a white paper published last month, which sets the direction of Norway’s energy policy to 2030.

One of the main thrusts of that white paper is to protect the oil sector and, with that in mind, it is easy to see why the government is being accused of hypocrisy. If it has too much renewable power then it could look to boost investment in interconnectors.

In our view, though, Norway’s move is not especially controversial. Yes, policies like this will always be a shock at first and most industries would opt for more government support if it was on offer. However, by committing to a 2021 end date, Norway has given investors certainty for five years. It does not plan to cut support next month or, worse, retrospectively. This is a sensible approach.

It is hardly an unprecedented move either. The five-year extension of the production tax credit in the US is set to gradually phase out subsidies and, from 2021, new wind farms in the US will need to be able to compete without PTC support against other energy sources. This gives investors certainty and manufacturers a target that they have to achieve. Meanwhile, major markets like Germany are moving away from centrally-set feed-in tariffs.

Norway’s proposal may slow the uptake of wind power in that one country, but we do not expect it to have a big impact on the market. Manufacturers are continuing to invest in technology and so, in six years, we expect wind to be even more competitive than now.

Investors should not be too worried about these cuts. Even if it makes Norway look unattractive, there are plenty of other markets. It is the government that should worry, about its growing reputation as a green hypocrite. That sort of thing is hard to shake off.

Investment expertise. High-quality events. Exclusive content. Lead generation.

Talk to the Tamarindo team today to find out how membership would benefit your business.

Related content