Norway and Europe are inextricably linked in industrial and energy policy

The energy crisis showed us how intertwined Norwegian industry and energy policy are – for better or for worse. When energy prices in Europe exploded, we also set new Norwegian price records. When parts of European industry shut down, it had consequences for deliveries from Norwegian industrial companies. Norwegian industry is dependent on European industry, and European industry is dependent on access to energy.

What will happen to European industry if Europe does not succeed in the transition to a low-emission, robust energy system? What consequences will it have for the Norwegian export industry and their employees and the districts in which they are located? And how will energy access in Europe be affected when our gas supplies gradually begin to decrease?

Closed industry in Europe means closed industry in Norway

When Russia hit Europe by throttling energy supplies in autumn 2021, the result was that much European industry was shut down beyond 2022 and 2023. Some have not yet started up again. In the EU, over 850,000 industrial jobs have been lost in the last four years.

Energy nationalism is the wrong answer!

This crisis has also affected Norwegian businesses – not only because of high electricity prices in Norway, but also because their market in Europe disappeared when customers had to shut down. Norwegian industry, especially the power-intensive process industry, lives by delivering its products for further processing in the European car industry, technology industry, mechanical industry, etc.

The most important framework condition is power, but the actual prerequisite is access to a market

Export industry is the backbone of District Norway. Over 70% of Norwegian mainland exports go to Europe, and a significant proportion of this comes from the processing industry located along the coast. These are cornerstone companies in several of our most important regional centers with great importance for health, trade, culture and other services for the population in a much larger surrounding area than the industrial site itself.

The framework conditions for the industry, and especially the access to power for the power-intensive industry, are important. At the same time, we must never forget that without markets that buy the products, framework conditions such as long-term and favorable power contracts are of little help. Without markets, our export industry dies!

Our market needs energy, both in the short and long term

A viable European market for Norwegian industry is also about energy. Secure energy access will become increasingly important as clean energy replaces fossil resources for energy purposes. In the very first instance, Europe must ensure a secure gas supply that can cover the loss of Russian deliveries, keep energy prices in check, and prevent increased use of coal and heavy oil.

You must be quite well placed within your own professional silo if you have not realized that the world is no longer moving towards more free trade.

Today, gas supplies are by far Norway’s biggest contribution to Europe’s energy policy objectives. We supply the equivalent of 1,200 TWh of energy to Europe, through pipes from the North Sea and LNG from Hammerfest. Some are processed at Norwegian refineries.

At the same time, we know that gas deliveries from the Norwegian continental shelf will eventually decrease. First and foremost because in the future we are unlikely to find fields as large as before. It is also uncertain whether political opposition will prevent exploration activity, particularly in the far north of the Barents Sea. In addition, the loss of Russian gas deliveries, in the wake of the war in Ukraine, has meant that we have had to increase our own production. This means that already established fields are emptied more quickly. In such a situation, resistance to continued exploration activity is problematic. If we do not explore, develop and produce, our energy contribution to Europe will weaken faster.

Energy nationalism is the wrong answer!

European industry is not only dependent on Norwegian gas, but increasingly also on renewable energy and functioning power markets. For Norway, it is not enough just to secure favorable power contracts for its own industry. If Europe does not manage the enormous changeover, our industry is also in a bad place.

If we think that “Europe must fend for itself, then we can secure our own industry”, the opposite will happen. Norway must contribute to European energy cooperation and trade in gas, power, hydrogen and CO2 for storage, both for our own and for Europe’s industry.

On the other hand, the idea that “Norway can secure its interests by dismantling the energy-intensive industry and investing in cheap energy exports to Europe” is today only promoted by a small number of economists who have read up on theories of perfect markets and equilibrium junctions.

You must be quite well placed within your own professional silo if you have not realized that the world is no longer moving towards more free trade.

We have no other alternative and at the same time realistic markets for our production and exports.

Geopolitics and an increased understanding of preparedness mean that more and more people have opened their eyes to the security policy consequences of moving resource extraction and industrial production to low-cost countries, and see both the value and necessity of actively facilitating industrial development. For a high-cost country like Norway, access to power is one of the most important prerequisites.

Nuclear power – if it is opened up for it – will not be able to be produced until 2040 at the earliest. In the short term, both own needs and supplies to Europe must be secured through energy efficiency, upgrading and expanding existing hydropower, solar energy, development of more onshore wind and development of wind at sea. Waiting with this necessary renewable development until nuclear power eventually becomes a real alternative will only lead to a loss of competitiveness.

The EEA is more important than ever

Europe is the only realistic market for large parts of Norwegian exports, especially the processing industry. This is a reality we have to accept, especially given the geopolitical situation we are in. Therefore, we also have to be concerned with the European market, its resilience, and its ability to buy the products we make a living selling .

If we fail to reverse the trend, it will be far more challenging for the industry to negotiate good contracts.

We have no other alternative and at the same time realistic markets for our production and exports. Africa and Central America do not have purchasing power. Australia is logistically demanding. The US is building its own industry. Canada is very much a competitor. Russia is excluded and so is China. The rest of Asia consists of demanding and varying markets.

In this picture, the EEA Agreement is absolutely central. We live by cooperating with Europe. Reducing frictions related to energy issues is a prerequisite for this cooperation to continue to be good and stable. The EEA agreement is not only the country’s most important agreement. It is the districts’ lifeline to the markets we live by exporting goods produced in the districts to.

The EU must create space for sustainable industrial power arrangements

The energy policy decisions taken towards 2030 will be decisive for the future of power-intensive business in Norway. Firstly, a large proportion of the power-intensive industry will have to renegotiate their power contracts around 2030. This is happening at the same time as the forecasts show that we are steering towards a negative power balance with the rest of the world as early as 2026 and 2027.

If we fail to reverse the trend, it will be far more challenging for the industry to negotiate good contracts. If we do not build out more power, and a negative power balance prevents favorable industrial power contracts, the consequence will be the closure of cornerstone companies. Much of our power-intensive industry will be phased out – to countries with far lower standards on everything from climate to working environment.

Today, Germany pays power producers not to produce electricity to ensure balance in the system so that there are no price differences between the regions.

At European level, we must contribute to the understanding that the industry is facing a very uncertain transition period, where politicians must have room to intervene if necessary. Through the EEA agreement, our room for action to support the industry during this period is linked to the EU’s rules of the game for the internal market.

These are rules that are constantly changing, at a time when the whole of Europe must orient itself in a new geopolitical reality and secure its industrial base through the green transition. Then we must work to create space for sustainable industrial power arrangements.

The EU must clean up the energy market. Norwegian electricity customers and businesses must have advantages – not disadvantages.

In order for the energy cooperation to provide advantages, not disadvantages, for Norwegian electricity customers and businesses, Germany and England must be pressured to introduce more price ranges and stop counter-trading. The way they operate now is not good for anything.

Today, Germany pays power producers not to produce electricity to ensure balance in the system so that there are no price differences between the regions. The consequence is that southern Norway does not get access to all the available cheap electricity they should have received when it is windy on the continent. Lack of national price areas and extensive use of counter-trade weakens confidence in the energy system and creates unnecessary resistance to the development of power and grids.

Fortunately, ACER and the European Commission are on “our” side in these matters. We must contribute to their efforts to end production being bought out by national system operators in situations where consumers in other countries demand and can receive the power.