Norwegian policy on renewable energy

Speech by the Minister of Petroleum and Energy Terje Riis-Johansen at the North European Renewable Energy Convention, 28.09.2010.

Your Royal Highness, Excellencies, ladies and gentlemen.

We are all much honored to have His Royal Highness Crown Prince Haakon with us at the opening.  

Climate change is a major challenge for modern society. According to the IPCC, limiting global warming to two degrees demands that the world’s greenhouse gas emissions must peak in 2015 at the latest and be reduced by 50-85 per cent by 2050, compared with 1990 levels. This represents a considerable challenge. According to the IEA (the International Energy Agency), primary energy demand may increase by 40 percent in 2030 in the reference scenario, compared to 2007. More than 80 percent of this increase will be met by fossil fuels. Developing countries, China and India included, account for ¾ (three quarters) of the projected increase in energy demand. Our challenge is to meet this energy demand in a sustainable manner.

Earlier this year, the IEA presented Energy Technology Perspectives 2010. The message is clear. The agency points out that a global technology revolution is needed to meet the climate change and the energy security challenges.

According to the IEA, improvements in energy efficiency would account for the bulk, 54 per cent, of the required emission reductions. Furthermore, we need continued efforts on policy frameworks to promote renewable energy in electricity, heating and cooling as well as transport. We also have to recognise carbon capture and storage as one of the mitigating options that we have to pursue.

The climate change and the energy security challenges we are facing today are global in nature, and therefore need to be met by global action. I believe it to be crucial that we all work towards an ambitious and effective international response to meet these challenges.

The Norwegian Government has high ambitions when it comes to energy efficiency and renewable energy. Also, Norway sees carbon capture and storage (CCS) as an important tool to mitigate greenhouse gas emissions. With our national CCS projects, the Norwegian Government is taking concrete action to further develop and advance this technology.

Norway has the world’s highest per capita hydropower production, and is ranked as number one in Europe and number six in the world in absolute terms.

In 2009, electricity production in Norway consisted of 127.1 terra watt hours of hydropower, 4.7 terra watt hours of thermal power (including gas-based power) and 1.0 terra watt hours of wind power.

Hydropower therefore accounted for about 96 percent of electricity production in Norway in 2009 as compared with 11 per cent for the EU.

But our reliance on hydropower also makes us vulnerable for variations of weather conditions. Dry summers may be challenging in wintertime when demand is high. Security of supply is therefore a concern, also in Norway.

The Norwegian Government’s vision is that Norway shall be an environmentally friendly energy nation, and a leader in renewable energy. We still develop considerable amounts of hydropower, but we also promote other types of renewable energy production. And we promote energy efficiency through general and specific measures.

Nine years ago, the Norwegian Government established Enova, a public agency. Enova has become the Government’s most important instrument for reaching targeted goals of energy efficiency and renewable energy production

Enova administers a series of programmes and support schemes (in the form of investment aid) covering various business areas. These include wind power, district heating, and energy efficiency in industry and in buildings.

We have given Enova specific goals, quantified in terra watt hours of energy. We have set specific dates for these goals to be reached. And we have provided long-term financing. Since 2002, we have supplied Enova with nearly 1.2 billion Euros. Enova has an independent board of directors and an independent administration. They decide on the best way to manage the available funds to achieve the set goals. This leads to results!

This summer, the Ministry has evaluated Enova. It has been a good reminder of the long term character of promoting renewable energy and energy efficiency. It has been a challenge for the agency to develop good support-schemes, to recruit projects and after that to avoid cancellations. It takes time before the district heat system, or the wind mill, produces energy – sometimes as much as five years. This reminds us that promoting the development towards a more environmentally friendly energy sector requires long term policies and a predictable framework.

This is important both for the agency to learn, experience, and continuously improve their support schemes, and for the investors. Today Enova has contracted 13.8 terra watt hours, of which 5.1 terra watt hours has been completed. It now seems possible to reach a target of 18 terra watt hours in 2011, which is the agreed target between Enova and the Ministry.      

The model we have chosen with Enova gives a number of advantages. It allows financial resources to be allocated to sectors with the best results. Enova is to find practical solutions and manage the fund in a way that ensures that the energy policy targets are achieved in the most cost-efficient way possible.

Through Enova we are also supporting full-scale demonstration projects, by providing investment support for implementation of new energy technology and development of new energy markets. Enova has supported tidal power projects (Hydro Tidal and Kinetic Energy), the world’s first floating wind turbine (Hywind) and the world’s first salt-power plant. Enova has also supported the world’s largest wind turbine, Sway. Exciting developments are happening in Norway!

Our ambition is to replace the investment support given by Enova to wind power with a common green certificate market with Sweden in 2012. An agreement of understanding between Sweden and Norway establishing the principles for a common green certificate market was signed in September 2009. The agreement establishes some key principles: equivalent ambitions in both countries, the time of implementation and non-discrimination between technologies, meaning not only support to wind power, but also hydro- and bio-power. 

Norway shares the overall EU-ambitions on renewable energy reflected in the renewable directive.

Due to Norway’s fortunate situation concerning renewable energy, our starting point differs significantly from the EU countries.  Renewable electricity production in Norway constitutes around 25 percent of the total EU-27 renewable electricity production. Since almost all of our electricity production is from renewable energy, we had a renewable share of 58 percent in the base year (2005). The renewable share in EU was 8.5 percent in 2005.

The renewable directive will be dealt with in the ordinary EEA process. We have undertaken a profound analysis of the directive. This has been necessary since the revised renewable directive is wide in scope and may have larger consequences for our domestic policies.

The Norwegian government will give high priority to the further promotion of renewable energy and energy efficiency. We consider the cooperation mechanisms in the directive as interesting tools to combine national efforts with realistic possibilities for new renewable capacities.

Norway has had bilateral meetings with the Commission to discuss the Norwegian situation. We are now in a process of preparing a draft of the common EFTA position. As soon as we have a decision on this position, a national action plan will be worked out for Norway.

A reliable and efficient power system is necessary in a modern and secure society. Today, most of the potential of further increasing the capacity in the existing Norwegian transmission grid is exhausted.

The need for reinvestments in old transmission lines, expectations of more extreme weather and increased power production from renewable energy sources, all imply that we now face a time with large grid investments. It is important that we facilitate an increase in grid capacity both between regions in the country, as well as new interconnectors to other countries.

In the last 20 years there have not been enough investments in the transmission grid. As a result our TSO, Statnett, has plans of investing up to 40 billion Norwegian kroner, approximately 5 billion Euros, in the next ten years. This includes both transmission grid investments in Norway and interconnectors to other countries.

All energy usage has an environmental impact. This year, one of the politically most difficult matters here in Norway has been related to the construction of a power line in the western part of Norway. I will not go into detail on the specific case, but it has underlined the attention attracted by grid constructions due to their local environmental impact.

In order to obtain a satisfactory level of security of energy supply, a serious approach to the climate change challenge and an increase in renewable energy production, society will have to accept some negative environmental impact, locally.

There is an increased need for grid investments in the future, both in Norway, and in Europe. Having a good dialogue and a local foundation for decisions concerning large investments related to renewable energy are therefore of high importance to us.

As you might be well aware of, many of the countries in Northern Europe have ambitious plans about offshore wind energy production. It is important that the countries that have adjacent areas suitable for offshore energy generation cooperate.

With this perspective we joined the North Seas Countries’ Offshore Grid Initiative in February, an initiative where also nine other northern European countries participate. Even if an integrated offshore grid currently lies quite far in the future it is important that the governments, regulators and TSOs cooperate well, so that we can have a coordinated and efficient development of the offshore grid.

In order for cleaner energy solutions to be truly competitive, costs must be brought down and new ideas developed. I believe that a key part of the answer to that is to increase investments in research, development and demonstration.

Government funding for research, development and demonstration is a priority. We have therefore increased research budgets on clean energy through the Research Council of Norway with almost 300 per cent from 2007 to 2010 – from around 25 million dollars to around 100 million.

We have also set up new research centres for long-term R&D. Two of these focus on offshore wind, two on CCS, one on bioenergy, one on solar cells, one on zero emissions buildings and one on the design of environmentally friendly energy systems. The centres will receive funding for eight years.

I am excited on behalf of these efforts and it will be very interesting to follow the progress of these centres as well as the other research projects which have been put in motion through our increased funding and our strategic efforts.

It is the vision of this Government that we shall contribute to the establishment of green jobs.

In that respect, as an example, it is with pleasure that we received the news just before Easter that the industry company General Electric has chosen to invest around 75 million Euros in Norway on offshore wind technology development and demonstration during this decade.

The fact that GE wants to establish new business in Norway is a testament to the fact that Norway is an attractive country to invest in:

1.      We have adopted forward-leaning policies on renewable energy and offshore wind in particular. This is clearly illustrated through our budget increases.

2.      We have the offshore competence which the industry needs in order to “marinate” wind as a technology.

3.      We have excellent research institutions, which are instrumental in order to bring down costs and invent new solutions.

This is but one example. There are numerous other areas where we already have established industries. A report by the consultancy Menon which was presented to INTPOW last month clearly illustrates that the renewables industry is very important to Norway, be it within hydro power, solar energy or bio energy. The report indicates that the renewables sector employs 40 000 people.

I look forward to a continued dialogue and cooperation with industry and Norwegian R&D institutions in developing our strategies and instruments in the future in order for them to be well calibrated with our country’s advantages.

To sum up:

Norway is in a fortunate situation with regards to renewable energy. But this does not mean that we are complacent!

We have in place policies for the promotion of renewable energy as well as energy efficiency.

We are investing heavily in our power grid.

We are paving the way for new energy technologies.

With this, Norway is ready to meet a renewable future!

Thank you for your attention.