Norway’s energy crisis, AI and the looming supply squeeze

Norway’s energy sector is at the centre of a dramatic political storm. With an election looming in September, Finance minister Trygve Slagsvold Vedum pulled his Centre Party out of the government, warning of greater dependence on what he calls Europe’s “dysfunctional” electricity market. But political uncertainty is not the only challenge — Norway faces a growing supply deficit, AI-driven demand spikes from data centres, and increasing hurdles in building new capacity.

This week, the Montel Weekly Podcast comes to you from Oslo at the Pareto Securities Power & Renewable Energy Conference. Montel’s Petter Udland sets the scene before we hear from Lars Ove Skorpen, Director Power & Renewable Energy at Pareto Securities. 

We discuss the government crisis over the EU’s 4th Energy Package, the impact of AI and DeepSeek on Norway’s power demand, the challenges of expanding interconnectors, and why investment in new capacity is not keeping up with demand.

 Host: Richard Sverrisson - Editor-in-Chief, Montel.
 Guests:
 Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities
 Petter Udland, Montel journalist, Oslo

Podcast editor: Bled Maliqi

Transcript

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

Hello listeners and welcome to the Montel Weekly podcast where we bring you the latest news, issues and changes happening in the energy sector. Our focus today is on Norway, where as we speak, the center party, a junior coalition partner, has left the government. Earlier this week finance, minister and center party leader Trygve Slagsvold Vedum described the EUs electricity market as dysfunctional. Norway's Labor Party the main coalition partner plans to implement just three of the eight directives in the Clean Energy package, also known as the fourth energy package, which was adopted in 2019. These three directives include the renewable energy directive, the energy efficiency directive, and a buildings directive. But this was not acceptable to Vedum´s center party. Energy has been firmly thrust into the center stage ahead of elections in September. I'm in Oslo at the Pareto Securities Conference, taking the pulse of the country's energy sector amid the political crisis, engulfing the government. Setting The scene alongside me here at the conference is Montel's Pettter Udland. Pettter at the moment we are in the middle of quite dramatic events, aren't we? This is a political crisis in Norway. What's the what's going on and why has it happened and why has it happened now?

Petter Udland - journalist, Montel: 1:26

So seemingly according to most media now, the government will be split the coalition government. So the la consisting of the Labor Party and the center party as it's known and the. European eu Clean Energy for all package is the source of this conflict and specifically three different directives, parts of this package that has now been proposed by the Labor Party or the Energy Minister for the Labor Party that this are adopted into Norwegian. The center party is a very skeptical, EU skeptical party. That's its tradition. It's always been like that. And that has now been sort of, these three directives are kind of put that conflict on full blast.

Richard Sverrisson - Editor-in-Chief, Montel: 2:06

And what happens next, Petter?

Petter Udland - journalist, Montel: 2:08

So now the center party is likely to leave. The government the coalition will be split and the Labor party will, will keep on its own. And what that means for these three directives means that they will likely be imp implemented into Norwegian law. That is the will of the Labor party. That's what the Prime Minister once Jonas Gahr Støre has said all along. And there is also in the Norwegian parliament there is a majority for this directive. So that those seemingly now will be implemented in Norway.

Richard Sverrisson - Editor-in-Chief, Montel: 2:34

Petter. Thank you very much. Thank you. And joining me now is Lars Ove Skorpen, who's Director of Power& Renewable Energy at Paretos Securities, which is hosting today's conference here in Oslo. Ah, warm. Welcome to you.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 2:45

Thank you very much.

Richard Sverrisson - Editor-in-Chief, Montel: 2:46

So we've seen some quite dramatic events today, Lars Ove and then the political scene here in Norway. What's your immediate view of that?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 2:54

First of all, we, did expect that, that this could happen, and we actually had a backup in our program today because we had the minister scheduled to speak. And of course we saw that this situation was increasing in intensity. So I guess it's fair to say we're not really surprised. However, I think that, the case, the situation and what. Causes. This is not a really, a good reason to leave the government for sp if you ask me.

Richard Sverrisson - Editor-in-Chief, Montel: 3:23

Sp which be is the center party. Yeah, exactly. Yeah. The main core of the issue is the three directives, isn't it? In the clean energy package or fourth energy package. How important are these to, to Norway Noise relationship with the eu?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 3:34

To be honest I think there are. Important. And these have been implemented in EU for years. But I think that senter party is making more out of it than it actually is. They're making this thing into a question on, for instance, cables. They're making this into a question on power prices, and it's not, it's nothing about that at all.

Richard Sverrisson - Editor-in-Chief, Montel: 3:53

No, absolutely. And this is all very clear, when they, when the government was formed that this was gonna be on the agenda.'cause they had to, implement these directives and as part of the EU agreement. So it seems a bit strange that it's coming to the forefront now.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 4:07

Exactly. I mean, you could of course speculate if you getting down maybe at 5% on the pulses and you have a limit here and it gets set. Not a good, very good situation if you fall below four, 4%. And strangely enough, the opinion probably by a lot of the arguments from the center party that this has to do with cables and power prices as well. It, it could be that they felt that this is maybe a good reason and election is due in September, so why not now?

Richard Sverrisson - Editor-in-Chief, Montel: 4:34

Okay. Exactly. And I, but he's called it the center party or the finance minister. You mentioned another minister earlier and that was the energy minister from the

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 4:41

That's right.

Richard Sverrisson - Editor-in-Chief, Montel: 4:41

The finance minister has called the EU electricity market Dysfunctional. Do you agree?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 4:46

No, not at all. Of course we have seen high prices, but as was said during the conference today, don't shoot the messenger because that's a signal and we have to that take those signals seriously. I think that they're looking at cutting cables which is not gonna be good for security because to be honest, in maybe five, five years time Norway could be a net importer of power instead of right now where we're a net exporter. So this is probably a very shortsighted call it view if you like.

Richard Sverrisson - Editor-in-Chief, Montel: 5:13

It's a bit like shooting yourself in the foot here, isn't it? I think you mentioned the cables. Are you thinking they're in particular of the renewal of the Denmark cables to Denmark?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 5:21

I think that's the one coming up because these cables are already there, but they're old and they are call it up for renewals and this is maybe then a good symbol case to say, no, we don't like this. Even the Labor Party jumped on this for an hour last fall when the power prices skyrocketed. But that was one hour. And I said, where were these guys when we had 245 hours in the same price area that Southern Norway with prices less than zero? We didn't hear anything then.

Richard Sverrisson - Editor-in-Chief, Montel: 5:49

It's a very kind of, as you said, a short term move. It's almost a protectionist kind of element. Which is sweeping Europe a little bit. We see it, elements of it in France, a little bit in Germany elsewhere, even Sweden as well. Talking about the, is that worrying trend across Europe or do you think it's very sort of short-lived?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 6:06

I hope it is, but I'm not sure. Electricity has become much more politicized over the years. I think today is actually probably peaking or I hope it's peaking because this was not a very good reason to leave the government.

Richard Sverrisson - Editor-in-Chief, Montel: 6:17

Yeah, exactly. And I think, there's the big reaction when prices skyrocket. But not in, in the reverse situation when we have these negative prices, that's quite interesting as well.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 6:26

Exactly. And I think that most people actually forget that the government has already insulated them. Today they cover 90% of power prices above 75 or per kilowatt plus VAT. So in reality, this is not a problem as long as you use, less than 5,000 kilowatts a month. And that's a lot actually.

Richard Sverrisson - Editor-in-Chief, Montel: 6:46

It is, absolutely. And and the other aspect here is as well as you pinpoint it, you know, if Norway, it's clear that demand is growing. Supply side is not keeping up in Norway, we'll come to that in a minute. So Norway is at the behest or it will increasingly rely on its neighbors. And if you then you don't really hear so much of the debate there of in terms of solidarity and people, the reliance at no will. Potentially have in the future.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 7:11

I agree. And I would say that's a new thing because if you, again, if you go back let's say before Ukraine the invasion there we would have had a much more. Call it also care for our neighbors, and also take a CO2 emission because we know that's not a national problem. It's a global problem. And to be honest, we should export clean, renewable power to substitute first and foremost coal at the continent, but also gas. So I think this is very shortsighted, but we're living in a populist era that's just the name of the game.

Richard Sverrisson - Editor-in-Chief, Montel: 7:40

Absolutely. And that's all we have to live with. And but if we can focus. On Norway. Some parts of Europe are seeing I wouldn't say de-industrialization, but certainly the industry, heavy industry is struggling. What's the situation like in Norway?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 7:52

I think they are doing fine as of now. There have been of course periods again when the press. Prices carted back in 22. Obviously for a lot of industries that was not hedged, but most of the power intensive industry hedged their power prices going forward and many for quite many years. So they're not that exposed to short fluctuation with very high prices. But I think of course, they could be challenged over time when you have the combination of, less supply into the market. More demand primarily from data centers who have very high willingness to pay and are very aggressive getting into this market. And of course if we then do not deliver on new renewable power, some of these, especially the ones with call it the most sensitivity to high prices. Could potentially face a, difficult situation, maybe even have to shut down lines or, take Alcoa for instance, at Lista, I guess that that plant is still not operating a hundred percent. And they are maybe one of the most sensitive to high power prices.

Richard Sverrisson - Editor-in-Chief, Montel: 8:57

Because they don't have so much of the margin as, not as great as potentially some of the big tech companies. Exactly. But Avi where's the sort of hurting point? Where does it start to hurt? What at the level of the power price, when the think, it's like is it 40 50? Where does it, where's, obviously it's different for every company, isn't it?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 9:13

Yeah. Very good question. And I think it depends, of course. On their prices. And how is it the prices of silicon, manganese, aluminum, pulp et cetera, et cetera. So of course that's a very important factor. But and of course also, you know, what the competition pays. And of course, in the US electricity is relatively cheap. So I would say at at 30 of, I think that everyone is doing fine. I mean, that's now a low power price. If you ask me

Richard Sverrisson - Editor-in-Chief, Montel: 9:38

30 euro

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 9:39

per megawatt hour, 30 euro per megawatt hour and then, 40. That is also, that's where we are today, but if you look at entering into, let's say 10 or 20 year power PPAs, now you will probably see a higher prices. I think, if we get at 50 or in real term power prices and above, I think that then some really good struggle.

Richard Sverrisson - Editor-in-Chief, Montel: 9:57

Yeah, Some of the big industrials.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 9:58

Yeah some of the big industrials. But take hydro for instance, they have a consumption of 17 tart hours, but they have their own captive hydro primarily. So they probably have two third cover and also the rest covered with the long-term PPA. So they would be fine. But I think an advice there is to make sure that you don't sit and wait too long before you enter into new. Long-term PPA, because then of course power prices could be very much higher at that point in time.

Richard Sverrisson - Editor-in-Chief, Montel: 10:24

Or they could be lower.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 10:25

They could be lower. But if the assumption that the power surplus of maybe 15 to 17 tet hours is gonna disappear over the next five, six years. There shouldn't be a reason why the power price is lower.

Richard Sverrisson - Editor-in-Chief, Montel: 10:37

Yep, absolutely. That's clear. But I've even heard, we, Montel has reported that the CEO of Hydro said, that the era of long-term PPAs is over. Would you agree with that?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 10:46

I saw, I actually, I heard him say that I was actually there at that time. Well, yeah. But Statkraft is and another call it hydro Power Producer and Nordic Power Producer are also keen to, of course, secure long-term prices to basically reduce the volatility in their earnings. I wouldn't totally agree, but I think it's not what it used to be when hydro were like especially in when the wind kicked off because then they used that situation to enter into a lot of PPAs on wind farms, especially in Sweden. And of course we don't see that right now because the banks are not. To the same extent forcing these players into long-term PPA as they did that time to get financing. And also many of the projects in Sweden have now entered into difficulties either from being blocked by the municipality because they have Vito rights. But also the defense and the defense is not getting less important these days, it's not easy.

Richard Sverrisson - Editor-in-Chief, Montel: 11:46

But then the challenges are there. And I think, you know, you mentioned some of the difficulties some companies are facing. Is it harder to get financing in this kind of environment as well for these kind of PPA projects?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 11:57

No I think that very much depends, but in general the the debt market is actually very good. For instance on on call it high yield the high yield space has been fantastic throughout the years. 2024 was was all time high in that. I think there are a lot of funds that have attracted a lot of capital to be invested into this. So I think actually it's not that difficult to get obtain the debt.

Richard Sverrisson - Editor-in-Chief, Montel: 12:20

And I've also heard at your conference here, Lavia, that there's a lot of money out there, but there's not the same amount of opportunities to where to invest in, but would is, is that also an issue?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 12:30

Yeah, and I would also say that the money that is out there is somewhat more pickier than it was. Maybe the peak, the spike, if you like was in end of January. 2021, that's where we had all time high for the clean tech renewable space. But that time we had insane pricing. And of course, now investors like more they like assets in production relative from development. And especially if you have development where you expect it to make an FID in three years time, that's a long time for many. And to burn devex until that point is maybe not the popular most popular thing out there today.

Richard Sverrisson - Editor-in-Chief, Montel: 13:07

For those listeners who, that's final investment decision and development expenditure. Yeah, so Lars Ove, we're talking a little about the sort of large industrial the sort of legacy demand side in, in Norway and all over the world, really big tech. We've got the meta, the Google, the Microsoft, Amazon being major players now in the world of energy signing big deals in the US with nuclear plants and besides, and what's happening in the Nordic region?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 13:33

No, I think the same thing is happening. They aren't signing deals with the nuclears and SMRs here in this market. But what they are, of course is to try and get power and it's of course then more down to grid, the grid access than to power itself. Because the power is there, but it's difficulty to have enough capacity in the grid. And that's why we are now having a relatively long queue waiting for grid. And of course, the data centers are the one with the highest willingness to pay. And also the TSOs, meaning sta net. They are gonna put more pressure on the companies in that queue, making sure that they have a viable business instead of not just standing in the queue and hoping to get the business when they have access to grid.

Richard Sverrisson - Editor-in-Chief, Montel: 14:19

Queue speculated speculation in a sense.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 14:21

Exactly. Because now, we are in the times where access to grid and power has a value in itself, and that's new. We haven't seen that before.

Richard Sverrisson - Editor-in-Chief, Montel: 14:29

But there is. A core or a huge amount of data centers wanting to come to Norway, would you say?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 14:34

Exactly. Yeah. I mean, take the may be mo most known that I mentioned today in my presentation is, of course Google. They are looking at 850 megawatt. I think they now have secured 120. They're probably getting the two 40 by the end of this year. And if the, and then they are staying waiting in the line to get up to the eight 50. When at eight 50, they will actually consume as much as seven terawatt hours. TikTok. At Hamar, which is actually hosted by the data center, green Mountain, who's by the way, presenting here today. They have now connected three of the buildings, 90 megawatt in total. They're gonna connect two more buildings. That's another 60 megawatt. So when that is all up and running people can use. Then TikTok and all the data is now stored in inland, just outside ide. That is actually then gonna consume roughly 1.3 Tw hours of electricity. So of course, those two alone taking us up to, to maybe nine. That's the size of the consumption in Oslo, as an example.

Richard Sverrisson - Editor-in-Chief, Montel: 15:38

Extraordinary. I think, it just, we're going from producing aluminum paper and pulp or fish to now videos of cats jumping around.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 15:46

Exactly. That's, but that's, but of course that's putting it a little bit yeah. That's crudely, of course it's crudely and and but I guess the reason why that example was used is that actually, today the grid companies and the TSO start not they actually have no possibility of picking winners in that queue. It's like first come, first serve. And I guess I, what I said today is that maybe that is right because I'm not sure if these are the best one. Picking and looser and industries going forward.

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

That's always very problematic if you have regulators or authorities picking winners, isn't it?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 16:20

Exactly. And we tend to do a little bit too much of that in Norway.

Richard Sverrisson - Editor-in-Chief, Montel: 16:24

Yeah, absolutely. That, but it, you're not facing a situation like for example, in Ireland where they put a stop to data centers because the demand was so high in the area around Dublin. We're. We're nowhere near that yet. I know.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 16:35

No. And we saw actually the similar area happening in Amsterdam. So the flap DI call it cities as we call them. So that's, that make it nearly impossible to expand with huge data centers in this, those cities. And you mentioned Dublin and we're not there yet. And I don't think they honestly we're gonna get there. But the data center is probably not gonna get everything they want. They would have to stand in line. They will get maybe a hundred first or 200 because, again, back to Google eight 50, that's a lot of power.

Richard Sverrisson - Editor-in-Chief, Montel: 17:04

Absolutely. And I think before I move on to asking you about the supply side we've had big news this week with deep seek and massive developments in ai. There's much more efficient ways of programming or generating. What kind of impact do you think that. Can have, do you think that will drive power demand in the same way that Big Tech does or that nor standard AI has done or would that transform it?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 17:29

I must say that of course deep seek changed a little bit because it seems that training of this requires less power, like really requires less heavy GPUs, but also using those. Going forward, probably less electricity than we have for instance, seen a chat, GTP. When you ask chat, GTP what the consumption of electricity is for that versus for instance, a Google search, then it's about 10 to 20 times more. And, it can see, seem like a deep seek is somewhat lower, but still. I've also now noticed that the biggest Nvidia Blackwell, you know, the rack here that consumes 120 kilowatt hours, but we're now actually looking at rack that could potentially consume twice that power going forward. And it's this high frequency and high power GPUs that I guess we will see that going forward. So I expect that the data center will take a lot of the capacity and the growth that's gonna be there and stock net themself. And that's one year now since they estimated that to grow with 400% over the next five to four years.

Richard Sverrisson - Editor-in-Chief, Montel: 18:39

So that's those are also very big numbers Lars Ove. And and I think, do you think this is a short blip in the AI market the way that the stocks fell this week in standard ai companies versus deep seek? Do you think there's a short lived thing, or was this is more long term? That's the billion dollar question of course, isn't it?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 18:56

Yeah, but it's a good question. And I think that of course you might say it could be that this was a hype. It probably is, but if this is definitely a long term. Trajectory that the data center will be needing more and energy and will, we will see more of them going forward. I guess it came in a economist article that came out on Thursday, but the market didn't capture it before Monday, where Nvidia then lost 600 billion in market capitalization. So it's, it is just, this is just out of the, the street.

Richard Sverrisson - Editor-in-Chief, Montel: 19:29

The power of journalism, eh, Lars Yeah. Yeah. But yeah, for those listeners who are unable to attend the political conference I'm sure I'll be inviting these people on and we could discuss these matters in future episodes. But I think rounding off I think would be important to discuss the supply side here, because. These are huge users of power. Where's it gonna come from? And you also highlighted in your presentation earlier that pretty much new capacity coming online has almost come to a standstill. Where. It's the supply. Where is it gonna, where is it gonna be generated? And who's building and where.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 20:03

Hey that's a very good question. And to be honest, not much is on the table because you saw the list of new permits being issued by the the regulator NVE, but we have never seen this low activity at last decade. But they are gearing up. Talked to them yesterday, they are hiring more people. They have now 20 more. That is is is basically going through training in order to be able to process the permits faster than they have been up to today because as you saw from my presentation earlier today. 10 years, it can easily take 10 years to get a permit for a wind power park. And of course, EU through its directive, is looking at capping this at three years. And I think that three years should be enough. If you are a little bit more, if you're spending a little bit more resources on it right now to get just you know, the person that's going to basically process your case. That person is not appointed maybe for one to two years before he even starts processing the case. So I use the example today, empire State Building was built in one year and 45 days. It took eight, less than eight years before Kennedy said we're going to the moon, until Armstrong planted the flag there. I think this is doable. It's just about prioritization.

Richard Sverrisson - Editor-in-Chief, Montel: 21:21

Yeah. And permits. And I think what you're talking about here is gaining the permits, which is, extraordinary length of time it takes to do that. Then you have the involvement of local communities, which is also fairly problematic. And of course they have to have their say and feel included in the decisions,

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 21:37

and now they have a veto. They didn't have that before.

Richard Sverrisson - Editor-in-Chief, Montel: 21:39

Yeah, which makes it almost impossible. Some countries are moving in the way of, removing that Vito or the power of Vito for crucial infrastructure. And then you've gotta build the facility as well. So you're talking, I think 10 years is probably quite optimistic under the current circum circumstances. But what form of capacity are we talking about wind, solar, hydro. Everything?

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 21:58

I think everything, but of course, onshore wind would make most sense because of the low level loss, cost of energy, and the very good resource we have in Norway. We have, in reality, offshore wind condition up north. So that definitely makes sense. Offshore is of course, more expensive. We don't have the right. Depth take solar OSHA two the 1.4 gigawatt there, probably 60 to 70 meters. It's deep floating is at least twice as expensive as as bottom fixed. So I think onshore wind clearly. We also be, have to be more aggressive on hydro and solar, believe it or not five years ago, everyone would've laughed if we said solar or Norway. But now it probably makes sense. It's not very profitable, but, and it probably, for some stock I said that, solar in Norway isn't profitable, but we have a lot of companies waiting to, to invest in solar. So onshore wind, hydro solar. Nuclear of course, but we don't have really a long tradition for nuclear. And most importantly, it's gonna take time. It's gonna be our earliest in 2035.

Richard Sverrisson - Editor-in-Chief, Montel: 23:01

That's yeah, that's a long way away. And if it's any reassurance I have solar panels on my roof Lars, but I don't know if that's making such a big contribution to Norway's energy mix. But we've all gotta do our bit. I know you're a very busy man, Lars Ove and thank you very much for your time today and your insights and the views on the current state of Norway and the global energy situation. So thanks again.

Lars Ove Skorpen - Director Power & Renewable Energy, Pareto Securities: 23:20

Thank you very much.

Richard Sverrisson - Editor-in-Chief, Montel: 23:22

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