Why Norway has Europe’s lowest electricity prices

According to E24 in January, Norway’s electricity price was at record levels, with more people seeing a NOK 800 increase on their bills, compared to January 2017, making it the highest annual average price of electricity since 2010.

Despite the increase, Norway’s electricity prices are still significantly lower than other European countries, but why is that?

Norway’s power production is renewable energy, almost exclusively hydro-based, and as such is quite cheap. There are 1,600 hydropower plants across Norway that deliver electricity throughout a normal year, providing tough competition for customers, which helps to keep prices down.

However, when there is insufficient rain, wind or sun, there are disadvantages to renewable technologies and power has to be produced or imported from other sources. According to Energi Norge, Norway’s water reservoirs stored less electricity than usual last year, equating to 13 terawatt hours.

A dry Summer in 2018 led to substantially lower precipitation levels than normal in Norway and subsequently low reservoir levels, as well as the cold Winter weather and weak wind, which all contributed to the high electricity prices in January, despite high rainfall in the Autumn. Higher prices for CO2 emissions from fossil power plants and higher coal prices in Europe were also transmitted to the Nordic power market, closely linked to Europe through power lines and power cables.

Recently we worked with Energi Norge to pull together an overview of the average purchase prices for electricity in Norway and Europe for the years 2000 to 2018. Our research showed that the average price of Nord Pool was 3.6 euro cents per kilowatt-hour in the period between 2000 and 2018, however, prices in the UK were almost 50 percent higher, and prices in Italy over 80 percent higher than in Norway.

Last year, the power price was on average about 5.1 cents per kilowatt-hour in Germany, 6.2 cents in the UK and just over 5.0 cents in France. In 2017, prices were even lower across Europe, with levels between 3.4 and 5.5 cents per kilowatt-hours, with Norway being the cheapest with just over 2.8 cents kilowatt-hours.

Countries that can afford to establish extensive renewable power sources (hydro, photovoltaic, wind, bio-fuels, geo-thermal, etc.) will benefit from a similar model to Norway in the long term. However, the challenge with this type of technology is that investment costs have been so high that public subsidies have been a prerequisite, at least until now.