Norway: A Petro-Industrial Complex Leaving Little Room for Structural Change?

Abstract

There is little political will in pursuing any kind of energy transition in Norway due to the significant influence of the Petroleum industry in the energy policies. The lack of incentive to invest in other new renewables is due to the vested interest in hydropower and petroleum sector. In 2012, Norway was the 6th largest hydropower electricity provider in the world and a net exporter of electricity (REN21). However, hydropower expansion is limited as a third and a half of all Norwegian waterways have already been fully exploited. In the context of rising demand for electricity, instead of developing new renewables like solar and wind, the govt preferred to rely on natural gas as an alternative option. Norway’s system of preference for phasing in RE is based on whichever renewable technology is cheapest, rather than maturity of technology. Norway treats solar PV as an export industry. Its policy is geared towards industrial development and commercialization of Norwegian technology and industry, not about increasing energy supply nor reducing GHG emissions. Norway’s energy political economy is mostly market-based. It emphasizes cost effectiveness and technologyn neutrality. Reducing emissions at home would mean domestic energy-intensive industries may be affected. Therefore, the preferred solution to reduce GHG emissions is through flexible mechanisms to reduce GHG emissions via the green certificate system. Since Norway does not offer differentiated FiTs, there is less incentive for development of new RE such as solar PV and offshore wind. Neutrality and cost-effectiveness preserves the existing system rather than act as stimulus for structural change. There’s a lack of consistency in RE policy making and refusal to link energy policy and industrial policy. Wind power was developed for energy supply purposes only, while PV and offshore wind are being developed exclusively for export purposes. Willingness to support projects that are long-term in scope has decreased. Support comes in the form of investment programs…meaning that in order for a project to be supported, it has to first be shown that it is cost-effective. Athough CCS has not been proven to be cost-effective, governments are supportive of it because it helps to preserve exisiting structure. it is the “political glue” that unifies Norwegian energy and climate policy. It allows Norway to keep emitting carbon but at a slightly lower environmental cost. However, CCS project ran by Statoil made little progress and cost the government NOK25 billion in subsidies…the cost is significantly higher vs US and Canada who made more progress at less cost. Sagas Norge was also able to finish its CCS project at 1/6 of Statoil’s costs. RE beyond hydrowpower is traditionally funded not from a deployment perspective but from an export perspective. Industries that are inside the existing structure has more advantage over those who don’t have important links to other actors. Example is solar PV versus wind power. Most research funding is allocated to research centers and universities, rather than to the commercialization of technologies - whereas basic needs of industry are about funding and assistance for pre-commercial technology testing and commercialization, and support for demonstration and test projects. To break into the system: 1) Potential closeness to petroleum industry could play be an asset to promote certain type of RE 2) Norway as a green battery for Europe - the more tightly integrated Norway energy market is with the Continent through interconnectors, the greater the utility of norwegian renewable power and greater the contribution of global emissions reductions.