Environmental Technology, News

Norway’s global energy advantage

“Lack of money is no obstacle. Lack of an idea is an obstacle.” The cryptic wisdom of American entrepreneur Ken Hakuta neatly summarizes the situation facing many developing countries as they seek to quench the ever growing thirst for electricity...
Fortunately, ideas are something the Norwegian energy industry has in abundance. Despite its tiny population, Norway is the world’s fifth-largest hydropower producer, and the only industrialized nation able to meet its domestic power demand almost exclusively through hydropower. Norway was one of the first countries in the world to operate in the free energy market. It became a pioneer in renewable energy after more than a century of research, and founded the world’s first, largest and leading power stock exchange, Nord Pool. By any estimation, these achievements are staggering.
As more and more developed countries around the world seek to meet their environmental energy targets, and more and more developing countries need the cheapest available methods of energy production, Norwegian expertise is fast becoming an invaluable – and eminently exportable – commodity. The consultancy divisions of Norway’s leading energy companies are experiencing demand like never before. Norway’s coastal position and small population give it a natural advantage, but the efficiency with which it has manipulated those qualities cannot be underestimated. From Uganda to Japan – the poorest to the richest – Norway has access to a global energy market that is as hungry for ideas and solutions as it is for technology.

The World’s Leading Power Market

According to their Annual Report (2006), Nord Pool’s physical market accounts for 63% of power consumption in the Nordic region. Established in 1993 under the name of Statnett Marked AS (Statnett still owns 50% of the company, together with Svenska Kraftnät), it is to date the world’s only multinational exchange for the trading of electrical power. Consequently, it has become a model for excellence wherever its expertise has been sought.
Nord Pool Consultancy’s solutions have become increasingly popular. In 2001, Japan’s Techno Research Institute commissioned Nord Pool to propose solutions for a national power exchange. France’s Powernet chose Nord Pool as a technology supplier that same year. In 2005, Romania joined the list of beneficiaries by signing a partnership deal that includes an initiative to establish a South-Eastern European market on a similar scale to Nord Pool. The contract has now been extended into 2007.

Nord Pool’s share of the European market is massive. Rival exchange, Powernext, consulted Nord Pool as a technology supplier in France in 2001.

Power & Emissions in the Developing World

The largest regional project to win Nord Pool’s attentions is the Southern African Power Pool (SAPP). This will cover twelve nations, and provides Nord Pool with another opportunity: the reduction of emissions. “Only a wide-ranging and international market for emission allowances will be able to solve the environmental challenges facing the world,” says Torger Lien, Nord Pool’s President. “Investment in developing countries will help to reduce emissions at a lower cost than would have been the case in industrialized nations,” (Nord Pool Annual Report, 2006). Accordingly, the benefits of energy infrastructure projects overseas provide Norwegian companies not only with an opportunity to showcase their knowledge, but also to contribute to global environmental targets.
As Nord Pool’s sphere of influence expands, developing countries can take confidence from the stable market values that it aims to produce. As a physical market, Nord Pool’s primary function is to provide a balanced relationship between supply and demand for electricity on the day after it is produced. The socio-economic cost of power shortages – a more common event in the developing world, where the effects may also be more keenly felt – is in this way limited.
Statnett, in an agreement funded by the Norwegian Agency for Development Cooperation (NORAD), is currently involved in such a partnership with Uganda Electricity Company Limited (UETCL). The deal is part of a larger cooperation between the Norwegian and Ugandan governments involving petroleum and energy. The aim is to establish an effective power infrastructure, supported by a Nord Pool-inspired stable energy market in the region. The arrangement is mutually beneficial, allowing Statnett to affirm its position as an advanced supplier and advisor of exportable energy solutions, whilst simultaneously contributing to the development of local communities and reducing poverty.
Statnett, as it is organized for the Ugandan project, is comprised of the Corporate Strategy, Efficiency Improvement, Economic and Technological Planning and Communications Management divisions. UETCL is to manage and implement these strategies, with Statnett limited to the role of advisor. Consequently, Statnett’s Nils Ole Kristensen confirms, there are no Norwegians currently operating within Uganda, although the leadership of Statnett Consultancy is planning an investigative trip in the coming weeks.

Another Daily Life

“There are a lot of challenges in Uganda,” says Kristensen. “There is another daily life there. They are short on electricity. In many places there is none at all. That has never been our challenge to meet in Europe. Their policy has to be an emergency policy.” Statnett estimates that, with a population of 25 million in Uganda, there is currently a power production capacity of just 300 MW. In Norway, a population of 4.5 million has access to a capacity of 28,000 MW.
Nevertheless, Kristensen believes that there is reason to be optimistic. “This is a very good and effective program,” he says. “We can offer them our experience and expertise, which we have from our model in Europe – our home base. We are encouraging the Ugandans to move away from day-to-day measures, and think more of long-term successes.” Statnett’s twinning arrangement with UETCL is unlikely to see out those long-term results. The current deal expires next year, subject to a mid-term review in October. But Statnett Consultancy hopes that its involvement will lay the foundations for long-term change.
Nord Pool’s competency in the stock market allows it to act as an authoritative advisor on law, technology and economy. As a Norwegian company, Statnett shares a common historical advantage. Norway’s authoritative hydropower solutions are cheap next to other methods of production, and this is an attractive consideration for a poor country like Uganda. Hydropower is cheaper than nuclear energy or coal, oil and gas-fired power. Uganda, economically limited but with relatively abundant natural resources, can with great confidence follow in the footsteps of the Nordic countries. According to Nord Pool’s estimates, Scandinavia has collectively dared to commit around 50.3% (192.1 TWh) of its annual electrical output to hydropower (Annual Report, 2006). Statnett’s links to Norway’s historical prowess in this area are furthermore far from tangential. Statnett is not a private company, but is owned by the Norwegian state through the Ministry of Petroleum and Energy, which is its supreme authority, and regulated by the State Enterprise Act. In such a respect, it carries the full weight of Norway’s hundred years of experience in the hydropower industry.

Statnett’s South Norway grid. Statnett’s expertise in grid management forms part of its appeal to UETCL, on mission in Uganda.

Kristensen sounded a note of reality when he claimed that the long-term success of the project will depend on UETCL’s achievements, rather than Statnett’s. “We are working with a local transmission company, and we hope that they will be able to achieve their aims,” he says. The intricacies of cooperation in Uganda demand a delicate balancing act. UETCL is the single buyer of electricity in Uganda – a position that puts them at risk, should the electricity value fall. Infrastructure needs organization within a structure that realizes the need for co-operation with neighbouring countries, regulators, stake holders and competing businesses. The need for diplomacy and encouragement are as strong as the need for action.

Nonetheless, with these significant limitations taken into account, Statnett’s commitment to Uganda can still conceivably transform the region.

Exporting Environmentally Friendly Energy

Statkraft, which part owns SN Power Invest, a growing force in the export of Norwegian power expertise to developing countries, is another state-owned company committed to using its knowledge in emerging overseas markets. Statkraft is at work in the Balkan region, with an office in Serbia and further projects in Romania, Bulgaria and Macedonia. The common theme – Norway’s historical competence and leadership in the production of cheap, renewable fuels – once again appears prominently in their consultancy work abroad.
Statkraft’s interest is in the renewable energy field, where they produce over 40% of Norway’s renewable energy and are currently the second largest such producer in Europe. Statkraft’s European director, Oluf Ulseth, recalls Statkraft’s historical inheritance as a factor in their current expertise: “There is no doubt that the industrialization of Norway has been through the heavy power industries. It is true that petroleum is very important today, but Norway also has very rich hydropower and wind resources. Our long coast throws up many resources.”
Ulseth refers back to Statkraft’s hundred years of knowledge and experience in hydropower as a factor in its influence in the Balkans. As far back as 1895, the state bought its first power plant at Paulafossen. “We are a very focused company,” he says. “We are one of the largest generators of renewable energy and our experience working in open, liberalised energy markets over the last fifteen years has been great.”

Statkraft’s new and very shiny machinery at Kvilldal. Heavy investment has put Statkraft at the cutting edge of hydropower technology, where they rank as Europe’s second largest producer of renewable energy.

Ulseth points out that Statkraft has invested heavily in research that puts it at the cutting edge of environmentally conscious energy technology. This gives the company an advantage in the Balkan region, where its experience has put it ahead of its rivals as the most attractive proposition for regional authorities. As with Statnett’s project in Uganda, part of the allure of the Balkan region is its access to abundant natural resources. According to Ulseth, “When we are looking at investments, we are looking at areas that must be to a certain degree developed, and especially those that fit with what we know and have experienced. This is a very interesting opportunity – it is an area with untapped resources.”
Ulseth has admitted that there is still a long way to go in the Balkans, but that Statkraft’s history has not gone unnoticed: “It is early days, but we can use our market knowledge there. People we meet are interested and recognise our competence.”

SN Power Invest – Hydropower Investment Worldwide

Statkraft has also been supporting projects further afield, through SN Power Invest, which is currently working in Nepal, Laos, the Phillipines, Sri Lanka and India. There are also agreements with the governments of Chile and Peru for future investment. Most recently, SN Power signed a contract in February this year that will expand its business into Africa, through an agreement with the President of Mozambique, Armando Guebuza. The plan is similar to Statnett’s twinning arrangement in Uganda, and will link SN Power to state-owned producer, Electricidade de Mocambique.
“We look on SN Power’s projects with enthusiasm,” says Ulseth. “Markets outside Europe are very interesting, as we can use our long history and experience in hydropower. These projects do generate revenue,” he adds.
It seems that, whilst ever Norway remains in its current position at the very tip of the renewable energy iceberg, revenue overseas will never be a problem. In the twenty-first century – the new age of information – it seems that nothing exports quite so well as good advice and first-hand experience. Norway’s unparalleled level of success demands worldwide attention, and, thanks to deals brokered by its leading energy companies, it is a story that looks likely to be told more and more the world over.

Khmiti Powerhouse Area in Nepal. Many of the areas selected for investment by Norwegian companies bear geographical similarities to Norway, so that they “fit with what we know and have experienced.”
Oluf Ulseth