Norway Electricity Security Policy

Norway’s extensive hydropower resources power more than 90% of electricity generation, supporting an almost completely renewables-based power sector. Electricity covers almost half of the country’s total final consumption, the highest share among IEA member countries. Norway has tremendous potential to leverage its clean electricity to decarbonise other sectors of the economy through additional electrification. This is greatly supported by ample interconnection capacity and well organised emergency preparedness system, led by the state-owned transmission system operator (TSO), Statnett.

The electricity sector faces several challenges. First, Norway will see its electricity consumption grow significantly due to further electrification of the economy and the emergence of new energy-intensive businesses, such as data centres. Secondly, due to its geography and concentration of the population in cities in the south, the country needs significant investments in new generation sources and grid expansions to remove network congestion problems, which would also reduce the large electricity price differences between regions. Other challenges, including needed demand side security measures, establishing the first offshore wind projects and regulatory support for onshore wind and solar developments, add additional pressures to the future development of Norway’s electricity market.

Organisation

The Ministry of Petroleum and Energy has overall responsibility for managing the power sector in Norway. The legislation for security of electricity supply and emergency preparedness is outlined in Chapter 9 of the Energy Act and the Regulation on Security and Emergency Preparedness in the Power Supply System. The former requires any grid company to keep its grid in good condition and sufficiently modernised, while the latter describes requirements to ensure electricity security and effective restoration in cases of outages. NVE produces regular sector reports, analysing the current state of the electricity sector and related risks, and conducts oversight over whether grid owners comply with the regulations. In case of a crisis, NVE would coordinate between government and market participants acting as an Emergency Management Authority, as indicated by the regulation.

The TSO, Statnett, is responsible for system operation and operational security, and is responsible for developing measures to deal with highly strained supply situations. These are known as ‘SAKS measures’, and their purpose is to reduce the likelihood of rationing.

The regulator (NVE-RME) is responsible for cybersecurity in the metering value chain, which includes smart metering systems and Elhub. The Metering Settlement and Billing Regulation includes detailed security requirements for smart metering systems and Elhub. As with general electricity security, grid owners and power producers are also responsible for their own cybersecurity, including security of their supply chains.

In an emergency, Statnett is responsible for the continuous operation of the power system. The Energy Act includes rules on electricity rationing, including enforced reductions of supply and requisitioning. Rationing can be introduced if required by extraordinary circumstances upon decision of the Prime Minister. NVE heads the preparedness and emergency planning of power supply and is also the rationing authority. Regulation relating to power system operation regarding handling of extreme situations came into force on 1 January 2005. This regulation aims to secure extreme situations and is not relevant for normal operation of the system. Through this regulation, Statnett is given an extended responsibility to continuously investigate and develop necessary measures to ensure that there is momentary balance at all times and to ensure the energy balance during the winter season and that adequacy can be sustained over crisis situations.

According to Norwegian regulations, Statnett can develop different remedial actions within the terms of the regulation on system operation, based on the following set of terms:

• to reduce risk of electricity rationing as much as possible
• to effectively handle extreme situations, and at the same time not influence the electricity market or investment decisions with respect to production or the network
• maintain TSO neutrality and its independent position in the power market
• contribute to a socio-economic handling of extreme situations and maintain the efficiency of the physical power market
• take into consideration the already existing flexibility in production, transmission and consumption.

In 2020, an amendment to the Grid and Energy Market Regulation made it possible for grid companies to give customers a non-firm connection to the grid. This non-firm connection enables the grid companies to curtail consumption on terms that are agreed upon between the parties.

Generation adequacy 

In its analysis for 2021-2026, Statnett assumes that the Norwegian power system adequacy, although strained at times, poses no risk of power rationing within the next five years.

Through legislation, however, Statnett is given an extended responsibility to continuously investigate and develop necessary measures to ensure that supply and demand are balanced at all times, especially during the winter season. The TSO can require mandatory participation in the balancing market, require power production (even when not part of the balancing market), and impose load shedding. System protection mechanisms in the transmission network can only be installed and operated based on decisions made by the TSO. Permanent and operational costs of the different measures undertaken by the TSO for ensuring security of supply, are handled within Statnett’s revenue cap.

Currently, Statnett is preparing changes to its operational model (Nordic Balancing Model), also with the aim of preparing for expected greater shares of variable renewables on the grid. The main amendments are the switch from 60-minute to 15-minute market resolution, to change the manual processes on the operator’s side to automated system response, and a change from control based in a synchronous area to control based within each of the five bidding zones.

While flexibility in the national power system has historically been provided by abundant dispatchable hydro generation, increased consumption in some important areas (including the Oslo area), reduces the availability of flexible supplies. In the future, flexibility will also have to come from the demand side. The Norwegian electricity system does not have capacity available outside of the market (i.e., strategic reserves) ready to react when the market cannot meet demand. However, Norway for a long time had a reserve market, connected to large industry consumers. Currently, Statnett is developing and testing a new set of products to be offered to the market that will allow for some additional demand flexibility in the system.

To meet its legal requirements for supply stability, Statnett has access to at least 2 000 MW of capacity in the balancing power market every hour. If the bids in the balancing power market are insufficient, Statnett can conclude contracts for reserve capacity with producers and also major consumers in the balancing options market. These contracts help make sufficient reserves available to balance the market. The power reserve contracts specify how much capacity, and when and at what price each individual player can make power available to the balancing market.

Statnett also has two mobile 150 MW gas turbine plants to be used in case of electricity scarcity, for example because of hydrological conditions. A precondition for initiating reserve power generation is the probability of electricity rationing of more than 50%.

Demand side response

Norway’s peak demand is managed through market mechanisms, where price signals for the day ahead, intraday and balancing markets provide incentives for market participants to adjust consumption and production.

Norway does not have electricity system reliability standards set by legislation, such as loss of load expectation (LOLE). Nonetheless, the TSO complies with a set of internal indicators; for instance, a 200 MW loss for 30 minutes standard is seen by the TSO as a manageable system failure. A standardised system for registering and reporting faults and interruptions (FASiT, Fault and Interruption Statistics in the Total network) is used to monitor system performance. It includes both long interruptions (of more than three minutes) and short ones (of up to three minutes). All network companies are obliged to report specific interruption data to NVE once a year.

Norwegian continuity of supply is stable at close to 99.99% in years without extreme weather events and it has never dropped below 99.96% in any year since 1996. Consumers in Norway experience on average about two short interruptions and two longer interruptions per year, where the average duration is less than two minutes for short interruptions and approximately two hours for long interruptions. However, the security of supply varies from region to region and is generally better at higher grid levels.

Climate resilience

The large share of hydropower production makes the Norwegian power system vulnerable to variations in water inflow and precipitation. Every week, water level in the 489 largest hydropower reservoirs are measured – accounting for 96% of the total reservoir capacity.

Norway, like almost all countries in the world, has to deal with the impact of climate change and related impacts on its electricity infrastructure. Although the TSO and DSOs comply with their internal standards in this regard, Norway lacks legally binding climate resilience standards for now. Extreme weather events and changing precipitation patterns, in addition to gradual warming of the climate, are likely to have adverse effects on the resilience of electricity supply and networks and can potentially lead to interruptions of the power supply.