The “ketchup effect”

Norway installed the least amount of renewables in the Nordic region last year. Ahead of the country’s first ever offshore wind auction, we talk to former energy minister Åslaug Haga about the outlook for new green energy in terms of meeting growing demand. Listen to a discussion on the ways in which country should speed up capacity build and why it is important to avoid the “ketchup effect”.

Host: Snjólfur Richard Sverrisson, Editor-in-Chief, Montel
Guest: Åslaug Haga, Director, Renewables Norway.

Transcript

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 0:06

Hello listeners and welcome to the Montel Weekly podcast, bring You Energy Matters in an informal setting. In today's spot, we discuss the outlook for the power sector in Norway. Investments into green capacity last year were the lowest of any Nordic country, and some have warned that the country which has historically been an exporter power could become a net importer of electricity by 2030. How does the electricity sector view this change in status and the outlook for the coming years? I'm Richard Sverrisson, and joining me this week is Åslaug Haga, former Norwegian energy minister and current director of Renewables Norway, the sector organization for the electricity industry. A warm welcome to you Åslaug.

Åslaug Haga, Director, Renewables Norway: 0:46

Thanks a lot. Lovely being here.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 0:48

I'd like to start off by talking about the energy crisis are we at the end of the energy crisis now and maybe staring into the face of a, an investment crisis in, in Norway in terms of renewables expansion?

Åslaug Haga, Director, Renewables Norway: 1:01

Yeah. Norway has been really spoiled. We've had plenty of renewable energy and now we see the demand is increasing dramatically. And we introduced very little new power into the market. So 2023 was really a poor year, you know, there was hardly an increase at all. So yeah Norway will be struggling in the time ahead. And there are basically not only an demand for investments, but it's also for permits. Without permits you don't get anywhere. So I think we basically have two crisis right now. It's an investment crisis and it's a permit crisis.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 1:42

Interesting. Norway currently has an oversupply o of power and with lower electricity prices than many of its neighbors. But what's the outlook to 2030? You mentioned the permitting crisis. We talked about the investment crisis. What what's, what does the next five years have in store?

Åslaug Haga, Director, Renewables Norway: 1:59

It is of course very hard to predict. But if we are to listen to those who think they know we are probably reaching a point in 26, 27, where, we'll, we will actually produce less than we consume, which is a completely new situation for Norway. Is that gonna happen? Well, in the sense that yes, we probably produce less than we consume, but of course everything doesn't go into black because we have markets that we rely on. But clearly a a very different situation and where we would probably see price hikes where we also probably would see. That industry is getting trouble getting the electricity that they need to become green. But of course, it, it all depends for example, how industry develops and if we are really serious, whether we are really serious about reaching the climate goals. It's not hard to reach climate goals. If you don't think it's important to keep up industrial development we are very concerned that Norway needs to continuously build industry transition the existing industry to become green and at the same time reach climate goals. And I really hope that continues to be the line of the government. But again, I mean, if you're not concerned about industry, it's not awfully difficult to reach climate goals.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 3:35

Absolutely. I think you made some very good points, which I want to return to later Åslaug. But how, in terms of, avoiding that situation where you have the spike, spiky electricity prices where you don't have the production that can meet demand, how do you boost electricity generation in Norway?

Åslaug Haga, Director, Renewables Norway: 3:54

There is a bit we can do when it come to hydropower. Of course. Hydro is continue to be the sort of the backbone of electricity production in Norway. People tend to think that there's so much more that we can produce from hydro. No, we can't really, if we don't choose to go into the protected areas. And I don't think there's any political appetite to do that. So in terms of hydro, yes, we can clearly have a bit more production of hydro but not the amounts that we would need. Now, solar, believe it or not, is an option in Norway. And the government has set an ambition of eight T hours in, in 2030. It's gonna be pretty difficult to reach that that goal. So what is left? Considering that offshore wind is not an option until 20 30, 20 32, 20 34, let's hope it's 2030, but it's clearly not an option before 2030. So what is left is really onshore wind, which is not awfully popular in Norway these days. To put it mildly I think those attitudes might change when you see the consequences of not coming up with more production of renewables. But as of now onshore wind is really the only option, and it's clearly the cheapest option that we have.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 5:30

But how, I mean, has the opposition, the vehement sort of vocal nature of it opposition to onshore wind that. Has that taken you by surprise from your, the time when you were energy minister there wasn't that amount of opposition. There wasn't Okay. That much potential for onshore wind development or much talk of it. This, we're quite in a different place now, but ha have you been surprised by this anti wind, anti onshore wind feeling?

Åslaug Haga, Director, Renewables Norway: 5:55

I left Norway in 2011 to work abroad and when I left Norway in 2011. Everybody working in onshore wind was actually heroes when I came back roughly 10 years later. They were exactly the opposite. So something happened in between. And why did that happen? I think the explanations are many. One explanation is that you had what we call the catch up effect. Not much had happened from 20. 10 UN until 20 16, 17 when you suddenly saw a big increase. So something had to do with that. Norway is also, particular in the sense that Norwegians have this funny, strange, wonderful relationship with nature. And we are very concerned, to go for our walks where we don't see cars, we don't see people, we don't see windmills, clearly. Am I surprised? Yes. I think I was and still in the way am surprised that the opposition could be so strong. I think also that we have learned a lot since we had this catchup effect. We have learned that more money has to be left in local communities. We've learned that one has to be more conscious about how we deal with nature. Not saying that companies haven't been conscious about that previously, but more, and and I think too, we have we have learned that the decision making should rest with the local communities. And all of these things have actually changed now in the sense that, now there are legal requirements for all the things I mentioned that need to be changed. More consideration needs to be taken towards nature. More money left in the local communities. And the decision making power is actually with the local communities. Let's hope that contributes to us being able to develop more onshore within the time ahead. We desperately need it.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 8:05

Absolutely. So that's the first step, if you like. The second step is you have to get companies, involved and willing to invest into such facilities or onshore turbines. And you mentioned the permitting crisis. How can you get over that? The issues around permitting especially,

Åslaug Haga, Director, Renewables Norway: 8:22

First of all, we need the local communities to say yes. We will not build a kilowatt hour or energy. We will not build any grid without the local communities in Norway now saying yes. So that is the prerequisite. So we need to have this understanding that electricity is needed for us to upheld workplaces and and the level of economic development that we actually have. So we need that understanding, but also the system needs to be changed. As of now, it can take on a good day, it's maybe five to seven years. To get the permit to build a wind park or a solar park. When we speak about grid it can take 12 to 14 years to go through all the formal processes. So this has to be changed unless there's no way we are gonna be able to reach climate coal in 2030. And these are political discussions. No political decisions, sorry. We clearly think it, it can be done. We can still upheld all the democratic processes but we need to set time limits also for both NVE, for sta net for the ministries. To, to deal with this can be done, processes can go in parallel. So it's not needed. It doesn't have to take five to seven, 12 to 14 years to get a permit. And we see in the European Union they cut down these processes substantially. Maybe we won't get to the same level. But a lot can be done.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 10:00

Absolutely. I think, when you're talking about fast tracking these kind of permits or the, this kind of process, I think that's something that certainly I think your colleagues in Italy and France and Spain have come complained about for many years. That it's just far too long to get them through the system. I've also. The, in recent months, maybe in the last year there was talk about nuclear in, in, in Norway. Is that really being discussed seriously now?

Åslaug Haga, Director, Renewables Norway: 10:24

It's certainly being discussed. Is it being discussed? Seriously? I know that in, in local communities, yes, they are discussing this as an option which it of course isn't in the immediate future. Maybe something can be developed in 2040. Who knows if Norway politically want to go down that road. We know that we will have nuclear in the Norwegian energy system in the years to come. I mean, we have nuclear in Sweden. We are nuclear on the continent, and that's part of our system. So yes, there's gonna be nuclear in the system. Are we gonna produce nuclear energy in Norway? I'm not gonna say, that couldn't happen. What I'm concerned about that debate is that it's very easy to think about everything that is far out. So people think now they can avoid building onshore wind. They can avoid building grid. No, we can't because nuclear is there as an option. No, we can't, because the timeline just doesn't work. If we wanna have electricity prices at a decent level in Norway, if we want to keep up the workplaces in the industry, we need something to happen now. And nuclear is not an option. And in addition to this, of course, we don't have any legal framework for dealing with it. It's awfully expensive and you don't have the technology as or now, but again, not saying it's not it could possibly be something of a future, but it doesn't solve the problem before 2030 or 2035.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 12:04

Exactly, and there's a lot of talk of small modular reactors or SMRs, but they're at a very early stage. And then they haven't been actually tried or tested anyway yet. And as you say it's something for the longer term, certainly part of the decarb carbonization move, it's not in the short term where it's really needed. But,

Åslaug Haga, Director, Renewables Norway: 12:22

yeah, no and I'm very concerned about that, huh? Because there is an urgency. To this situation that we started out discussing that Norway actually is gonna produce less electricity than we use in the near future, and we need to solve that now.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 12:39

Absolutely. And I think you mentioned the amount of renewal capacity that came online in 2023 was very low. In fact, as I said in the intro, that, Norway was at the bottom of the Nordic League, if you like. What went wrong?

Åslaug Haga, Director, Renewables Norway: 12:52

What probably went wrong in the first place was that the government introduced new taxes that just came out of the blue. And I don't really think they completely knew what they did because I don't think the intention was to stop investments in onshore wind or in hydro. The result of these new taxes was that there was no, it was not possible for companies to, to figure out how they could make money. And then companies don't invest as, as simple as that. So I think what happened on the tax side really stopped a lot of processes from from investments, now, maybe it didn't really stop all processes because what we see now when this tax regime was changed in Parliament in December, is that companies are actually coming out saying that they will invest more. So clearly during that phase when these taxes were introduced, that prevented investments, companies were still working on. Developing projects. So we see now that investments are coming to a larger degree. And that's why we try to tell parliament, politics work, if you do silly things with a tax regime you get what you ask for. Exactly. And when you change that in a positive direction, you also get what you ask for. So it's it's very positive that in investments now seem to be coming from major actors. We, but we still all, but we, but we are also of course, and we did that last year as well struggled with a public acceptance that we didn't have the public acceptance that, that we need. It's a combination of things. I I am, I still am optimistic. Good decisions have been made in parliament on the tax system. There is a growing understanding that the com, that the country actually needs more renewable energy. We haven't really seen the willingness locally to to speed up and get around to making decisions, but I do believe it's coming now.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 15:16

Do you feel that, as a former politician that the, that. Policy makers should do more to, should listen more to organizations such as renewables, Norway, before embarking on that, those kind of decisions that they did with a new tax regime.

Åslaug Haga, Director, Renewables Norway: 15:30

Yeah, clearly. We could have told them in advance if they had asked us these decisions just absolutely came out over the blue. And clearly not much work had been done to understand in advance what actually would happen. Whether they should listen only to us, they probably shouldn't, but they should listen also to us. And I think now what we really need politicians to do is to go out there and say to the general public that not investing. In renewable energy has consequences for the country, and we don't hear much of that, but politicians need to explain that. Prices will increase if we don't produce more in the time ahead. When demand increases that businesses will struggle. Industry will struggle to become green if we don't allow for more production. And companies won't be able to sell their products unless they are green. We are proud of our aluminum. It has to be green if we wanna sell it in the years to come. And I think, it would be good if we could see more politicians being out there explaining why this green shift is important.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 16:50

Because the public acceptance is key here. Providing the, local communities with some form of ownership of the renewable facilities, either through, if it, boosts funds to hospitals, to local public transports and involves them in the decision making process.

Åslaug Haga, Director, Renewables Norway: 17:04

Yeah. Many local communities are struggling. With money and for money of these it would really help. One wind turbine would give a local community somewhere between 600 and 800,000 Norwegian krones. So if you have 10 of these turbines, it's actually real money for local communities. That means teachers, that means nurses. And I think we, it would be very helpful if, politicians centrally in parliament would speak up to a larger degree than they do now.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 17:38

We're seeing, you mentioned offshore wind. Obviously that's also nothing that can change the current supply and demand balance immediately. But that the first auction is happening now on the 18th of March. If I'm not mistaken, what are what's the current status here? And you can talk a little bit about maybe your. Your expectations or concerns ahead of the auction?

Åslaug Haga, Director, Renewables Norway: 17:58

You are not mistaken. It's March 18 and we are very excited to see what happens on the 18th. I feel pretty confident that there will be bids. How many I I don't know. Clearly there are many companies struggling to figure out how they can make money. With what has been put on the table from the government side. So I don't know how many, I'm optimistic that there will be sufficient bids for the process to go ahead.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 18:33

And if there are no bids, what happens then?

Åslaug Haga, Director, Renewables Norway: 18:35

Yeah, that's is of course, political decision. It would have to be a completely new round, I think, with Parliament or clearly with with Parliament and a completely new. Process. So we would start afresh to a large degree. And the thought of that is just very worrisome because we need to get going. And I also hope that a decision is within reach when it comes to ra, which is floating offshore wind. We know there are processes now ongoing with the surveillance authority. Let's hope and pray they go. We certainly do whatever we can to have a dialogue with the commission, to have dialogue with all the relevant actors on the EU side and explain the model, which we think is good. We defend the model that the government has decided on. Yeah, let's hope and pray, but, uncertainty is big.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 19:32

We'll find out soon enough. I suppose

Åslaug Haga, Director, Renewables Norway: 19:34

on the southern North Year too. Yeah. And the auction on the eighteenths, we'll find out soon.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 19:38

Do you think maybe the subsidies should have been increased or, is the money too limited here that's being offered?

Åslaug Haga, Director, Renewables Norway: 19:44

Some would say yes. Others say that's maximum of what is politically possible. So let's hope that bids are coming. I think I'll leave it myself to say that. But I know it's difficult for many to figure out how they can manage with with the 23 billion that is there.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 20:01

Absolutely. And some would say as well that, okay, offshore wind conditions are excellent in Norway, but so are onshore as well. And onshore is where really. We should be building.

Åslaug Haga, Director, Renewables Norway: 20:12

Onshore is clearly cheaper, but it has than other aspects to it in terms of local acceptance. But when we think that offshore wind is awfully important, it is because it gives Norway fabulous opportunities in the longer run and particularly on, on the floating side. Where we really can be a leader globally. Yes, Southern North D two is important. We need to get going. I think we will get going. In the longer run, clearly we'd see that meaning floating is probably even more important

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 20:50

for Norway. I observed some of those wind turbines close hand and they're absolutely phenomenal. The size and, but still very graceful at the same time. Very impressive. One of the key, you mentioned demand. One of the key areas here is the growth in data centers. They're they're being rolled out at pace, not just in Norway, but also in, in, in Norway's neighboring countries, in Sweden and in Finland, Denmark, even another close to competing with traditional industry. You mentioned aluminum. What do you think the role of the state or polished policymaker should be in determining the access to renewable resources in a way?

Åslaug Haga, Director, Renewables Norway: 21:23

That is of course a big political issue, and as of now, we haven't seen that the political environment really is willing to prioritize, which I understand because it, that is awfully difficult. The question is it needed, let's hope it isn't. Let's hope we can manage without making those priorities. And that would be other point of of you and other perspective that we should do what we can to accommodate what is required when it comes to electricity and. We need to take into account that we are building a completely new energy system. This is not only a question of producing a bit more hydro or a bit of solar or on, on onshore wind and a bit offshore wind. This is about creating a completely new system. And this is huge. It changes our societies completely. And so we need to speak about production. We need to speak about how can we utilize the grid much more effectively than we do now. What, where does batteries come into this? How can we combine solar and batteries? How do we utilize hydrogen in the time ahead? We are constructing this completely new system and let's hope. That the understanding of how big this is can help us to understand that we need to put all effort, lot of political will into developing this, and then we don't, probably don't have to make these very hard decisions about this one is gonna be priorities or that one is gonna be prioritized. We probably need it all in this completely new world that we are developing. I I really think what we are seeing in this transition of the energy system, it's a completely new industrial revolution. It should be compared to that, and it changes the way you and I manage how business operates, how industry works. It's huge.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 23:37

Absolutely. And but one thing you haven't mentioned there was like, and that's Interconnectors, so electricity interconnectors. Do you think that Norway will become more dependent on its neighbors to provide the electricity that it can't itself produce when we get to 26, 27, 28?

Åslaug Haga, Director, Renewables Norway: 23:52

That would be really silly of this country. We have the best opportunities possible to produce so much green energy that Europe needs that the world needs, that why on earth shouldn't we do that? Why shouldn't we make sure that yes, of course we have enough green energy to our own consumption but also to contribute to what, our neighbors need and as I said, the world actually needs. I really hope we can create the understanding that Norway has, that has a great opportunity to continue to be a huge energy producer. We've been so lucky to have all the hydro that sort of developed Norway. We've been filthy rich on exporting oil and gas. We are just so privileged Now. We also have the opportunity to be a huge producer of green energy. Why on earth shouldn't we pick up that opportunity?

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 24:57

Absolutely. But in, in terms of the cables, I know it's a very politically difficult argument or discussion in Norway. But they come to the aid of Norwegians in terms of when there's a dearth of supply. So there is a positive side to being interconnected with the neighbors, wouldn't you say?

Åslaug Haga, Director, Renewables Norway: 25:12

Absolutely. And of course what I said, if we wanna be a big producer of green energy, you need cables. You need grid, you need the North sea grid, and I cannot see why we shouldn't develop that further. But you need a political decision that this is this is the way the country wants to go. As of now, we are completely dependent on cables and interconnectors clearly. I don't really think we have a discussion anymore in Norway about cutting cables, but there are discussions about how many and how much electricity should go through these cables. And that's of course clearly in the very near term, these are discussions that are valuable to have. But what I'm really looking for is the big decision about whether Norway wants to become a big producer of green energy for Europe in the years to come.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 26:05

And keep prices for its industry at a competitive level.

Åslaug Haga, Director, Renewables Norway: 26:09

Absolutely. That's, that's a great advantage that we've had over the years. It's been very important for industrial development in Norway that electricity prices have been relatively low. We would probably have to expect that they increase some, let's hope that they don't fluctuate as much as we've seen recently. But our, possibility for making sure that prices are kept relatively low, are great. Because we have the resources to do it.

Snjólfur Richard Sverrisson, Editor-in-Chief, Montel: 26:40

Åslaug Haga, we run out of time. Unfortunately, we could talk here for hours. But thank you very much for being a guest on the Montel Weekly podcast.

Åslaug Haga, Director, Renewables Norway: 26:45

Pleasure to be here.