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The EU does not require Norway to use income from foreign cables to build new cables

The EU does not require Norway to use income from foreign cables to build new cables
The EU does not require Norway to use income from foreign cables to build new cables
Neither the EU nor Acer has a target or regulations that state that there must be investment in cable capacity until the prices become equal. The aim is to increase trade between the EU countries in order to reduce the overall system costs, write the post’s authors. Illustration photo: Ole Berg-Rusten, NTB

This is what the rules say.

This is a debate post. Any opinions expressed in the text are the responsibility of the writer. If you want to participate in the debate, you can read how here.

Social economist and researcher Eric Nævdal claims in a debate article in Aftenposten on 16 January that the development of power in Norway cannot result in lower prices than on the continent. This is because “Norway, through its association with the EU’s 3rd energy work package, has committed itself to continuing to develop power connections abroad until the price differences between Norway and the continent have disappeared”. The rationale for the conclusion is that the EU requires Norway to use the bottleneck revenues from the cables to build more cables.

The debate entry has been countered by, among others, Statnett’s communications director Henrik Glette and Fornybar Norge’s Toini Løvseth. They point out, among other things, that it is the Norwegian regulatory authority for energy that approves the use of the bottleneck revenues and the development of new cables.

To inform the debate, it may be appropriate to take a closer look at what the EU’s current regulations say about the use of bottleneck revenues.

Does not trigger an automatic duty

Bottleneck revenues must be prioritized for two goals:

  • To ensure that existing cable capacity can be utilized as best as possible without hindrance.
  • For measures to maintain or increase capacity.

The latter includes network investments within the countries that help to reduce bottlenecks on the cables.

When these prioritized goals are sufficiently addressed, the bottleneck revenue can, after approval from the national regulatory authority, be used to reduce the customers’ network tariffs.

In other words, the EU’s rules for the use of bottlenecks require Statnett to ensure that existing cables are used so that power can flow from low to high price areas and to increase the capacity in the domestic network if necessary to ensure that the cable capacity can be used optimally.

Since the flow of cables from Norway to abroad is limited to a small extent, Statnett can use the income to reduce the internet rent that customers pay, which they have been approved by the Norwegian authorities and are actually doing.

The fact that Norway already has significant transmission capacity through existing cables means that the rules do not trigger an automatic obligation to invest in new cables.

There is room for action

So what does it mean that Statnett must ensure unhindered use of the cable if the prices are lower on the Norwegian side?

Here, the EU decided in 2019 that at least 70 percent of the capacity of the cables must be made available for trade.

This rule has not yet been incorporated into the EEA Agreement. But it means that there is room for maneuver when it comes to the utilization of cable capacity if it is necessary for reasons of operational security in the network.

Until 2026, you can apply to the EU for an exemption from the 70 percent rule if bottlenecks in the internal network limit how much power can be sent through the cable. The reason for this is that they will have time to carry out the necessary investments to fulfill the prioritized requirements.

Not determined by the bottleneck revenues

Is it the case that the EU has no provisions on investments in cables between countries?

Yes, but it is not determined by the bottleneck revenues.

In 2014, the EU adopted a target that by 2030 all countries must have capacity for transfer to neighboring countries equivalent to at least 15 per cent of the country’s total production capacity. This target was set to ensure the energy supply to all countries in Europe and to facilitate the countries to invest in more renewable energy.

Norway exceeds this target by a good margin.

Aim for equal prices

Neither the EU nor Acer has a target or regulations that state that there must be investment in cable capacity until the prices become equal.

The aim is to increase trade between EU countries in order to reduce overall system costs.

It is not considered good economics, neither in Norway nor in Europe, to build out so much transmission capacity that bottlenecks and thus price differences never occur.

The article is in Norwegian

Tags: require Norway income foreign cables build cables

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