2 Electricity generation – Hydropower – Wind power – Gas-fi red power – Other forms of electricity generation – Taxes and fees in the power sector – The role of the electricity supply sector in the Norwegian economy

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Electricity production in 2005 was 138 increase electricity output, water is com- TWh, the highest since 2000 due to monly transferred from one part of a abnormally high levels of precipitation. river system to another or even between Power production in a normal year in neighbouring river systems. In many Norway is estimated to be 121 TWh, cases, several power stations have been including wind, hydropower and ther- built in the same river system. mal power. Hydropower accounts for Great variations in topography, around 99 per cent of production. precipitation and climate in Norway mean that its river systems include a wide range of types. Rivers in western 2.1 Hydropower Norway, Nordland county and parts of Troms county are generally short and Norway’s river systems are very impor- steep, with many waterfalls, while east- tant both for commercial interests and ern Norway, the Trøndelag region and for public interest generally – in con- Finnmark county have much longer nection with outdoor recreation, for systems which carry a large water vol- instance. Electricity generation is the ume but drop more gently to the sea. most important commercial use of Nor- Volume and head of water determine wegian river systems. the potential energy of a waterfall. A river system comprises a river and The head of water is the height dif- all its tributaries from source to sea, ference between reservoir intake and including any lakes, snowfi elds and gla- power station outlet. Water is directed ciers in the catchment area. There are into pressure shafts leading down to about 4 000 river systems in Norway. a power station, where it strikes the In some counties, almost all the larger turbine runner at high pressure. The rivers have been developed. Seven of kinetic energy of the water is transmit- Norway’s 10 highest waterfalls have ted via the propeller shaft to a generator, been developed, and the remaining which converts it into electrical energy. three are permanently protected against Low-head power stations often utilise such developments. See table 2.1. To a large water volume but have a small

Table 2.1 Norway’s highest waterfalls (vertical head) Waterfall Height (m) Phase Licensed/protected Tyssestrengen 300 Built 1964 Tyssefaldene A/S Ringdalsfossen 300 Built 1964 Tyssefaldene A/S Skykkjedalsfossen 300 Built 1973 Statkraft Vettisfossen 275 Permanently 1923 Natural Environment protected Protection Act Austerkrokfossen 256 Built 1966 Elektrokjemisk A/S Søre Mardalsfossen 250 Built 1973 Statkraft Storhoggfossen i Ulla 210 Built 1973 Statkraft Vedalsfossen 200 Permanently 1980 Protection plan II protected Feigefossen 200 Permanently 1986 Protection plan III protected Glutrefossen 171 Partly built 1973 Statkraft Source: Watercourse Act Committe

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head, as in a run-of-river power station. period. High-head power stations are Since regulating the fl ow of water is dif- often excavated near the reservoirs fi cult, it is generally used as and when used to regulate the volume of its water available. The amount of electricity supply. Power station and reservoirs generated therefore rises considerably are connected by tunnels through the when the river is carrying more water rock or pipes down the mountainside. during the spring thaw or when precipi- Power stations with an installed tation is very high. Most run-of-river capacity of up to 10 MW are designated power stations are situated in lowland as small, and usually sub-divided into areas, particularly in eastern Norway the following categories: and Trøndelag. Several run-of-river • micro (installed capacity below 0.1 MW) power stations stand along the Glomma • mini (installed capacity from 0.1-1 MW) river. Solbergfoss power station at • small (installed capacity from 1-10 MW) Askim in Akershus county has the larg- est low-head turbine in Norway. Small power stations are often installed High-head power stations are gen- on streams and small rivers without erally constructed to utilise a large regulation reservoirs. Their output will head but smaller volume of water than then vary with the level of water fl ow. run-of-river installations. Many of this type of power stations store water in 2.1.1 Water infl ow reservoirs and are referred to as power Water infl ow is the volume of water stations with reservoirs. The reservoirs fl owing from the entire catchment area allow water to be retained in fl ood peri- of a river system into the reservoirs. A ods and be released in drought periods, catchment area is the geographical area typically in the winter. Reservoirs allow which collects the precipitation which a larger proportion of runoff to be used runs into a particular river system. Use- in power production. They usually have ful infl ow is the amount of water which a larger installed capacity than run-of- can be used for hydropower generation. river stations, but a shorter utilisation Precipitation levels vary from one

Figure 2.1 Variations in water infl ow and electricity output during a year Source: Nord Pool 16 2 part of the country to another, between or somewhat earlier in coastal areas. seasons, and between years. Precipita- Precipitation varies substantially from tion is highest in coastal and central year to year and is more than twice as high parts of western Norway. There is also in the wettest years as in the driest ones. a clear tendency for precipitation to From 1980 and 1993, precipitation increase with elevation above sea level. in several years was high and ensured Mean annual precipitation is lowest in high water infl ow for power generation. the upper Otta valley (300 mm) and in There was relatively little precipitation inland parts of Finnmark county (mean in 1993 and 1994, while infl ow in 1995 annual precipitation 250- 300 mm). The was very high. Infl ow was considerably mean annual precipitation in much of below normal levels in 1996. Infl ow was western Norway is 3,000-3,500 mm. relatively high in the period 1996-2000, Infl ow is high during the spring thaw, particularly in 2000. Infl ow in both 2002 but normally decreases during sum- and 2003 was below the normal level. mer. High rainfall generally results in an However, variations through the year increase before the onset of winter, when were considerable in 2002. From Janu- infl ow is normally very low. It also var- ary-July, infl ow was 89 TWh or 12 TWh ies during the year, depending on local above the normal level. However, the geographical and climatic conditions. autumn was unusually dry with very The spring thaw is later in inland regions low infl ow. It was no more than 22 TWh, and in the mountains than near the coast or 19 TWh below normal. Infl ow was and in lowland areas. In much of lowland very high in 2005. Total utilisable infl ow eastern Norway, western Norway and was around 140 TWh. This was 22 TWh Trøndelag, the rivers run highest during more than the average for 1970–1999. May. The highest water levels near the Variations in actual power generation coast occur at the end of April, but are from year to year over the past decade delayed until June or July in inland and can be attributed primarily to differ- upland regions. In northern Norway, ences in infl ow, as generating capacity discharge volumes reach a peak in June, increased very little.

Figure 2.2 Reservoir fi lling 2005 Source: Norwegian Water Resources and Energy Directorate 17 2

In addition to variations in infl ow, elec- sumption high, stored water can be drawn tricity demand fl uctuates over the year from the reservoirs and used to generate and is much higher in winter than in electricity. Regulation reservoirs are gen- summer. In fact, the pattern of demand erally situated in sparsely populated areas, – and thus the amount which must be and usually at high altitudes in the moun- generated – is generally the reverse of tains in order to make the fullest possible infl ow variations. When infl ow is high, use of the head of water. The difference output is often low – and vice versa. Fig- between the highest and lowest permitted ure 2.1 shows the relationship between water levels in a reservoir is stipulated in mean output and useful infl ow over a a watercourse regulation licence (rules year. Consumption can also vary con- for reservoir drawdown), which takes into siderably between years because tem- account such factors as topography and perature changes affect the amount of environmental considerations. electricity needed for heating. Storing water in the summer for use in winter months, when the demand 2.1.2 Regulation reservoirs for power peaks, is known as seasonal The potential energy of water can be regulation. stored in regulation reservoirs con- Dry- or multi-year regulation is made structed either in natural lakes or in possible by large reservoirs which can artifi cial basins created by damming a store water in wet years for use in years river. Water is collected in the regulation when precipitation is low. Short-term reservoirs when infl ow is high and con- regulation involves a daily or weekly sumption low. When infl ow is low and con- fi lling and emptying cycle.

Power and capability balance

In a power market, there must always be a balance between the power supplied to the power grid (power availability) and the power withdrawn (consumption). The domestic power balance is defi ned as being the relationship between annual production and total annual consumption of power. When evaluating the power bal- ance, the relationship between consumption and normal year production (produc- tion in a year with normal precipitation) is often focussed on. Where infl ow to domestic hydropower plants is high, domestic production is often greater than consumption. The situation will be the reverse in years with low infl ow. Transmission links with other countries reduces the dependence of con- sumption on domestic production. The capability balance represents the balance between availability and utilisation of power at a specifi c point in time. The development of the power balance and the capabil- ity balance are interlinked. A gradual tightening of the power balance due to little new production capacity availability increases the risk of a short term over demand situation. New power consumption (withdrawal) records have been continuously set in the last few years, without an increase in production and transmission capacity. This means that the power balance is developing tighter margins. The last record was set on the morning of 5 February 2001. The consumption maximum was 23,054 MW between 9 and 10 am.

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Figure 2.3 Installed capacity Source: Norwegian Water Resources and Energy Directorate and Stastistics Norway

A reservoir’s energy capability is the sumption. The degree of fi lling of the amount of power which can be gener- reservoirs is a measure of how much ated when it is full. An upper and lower water (potential energy) they contain regulation limit is usually set for reser- at any given time. Figure 2.2 shows voirs. Since 1980, the energy capability changes in the degree of fi lling dur- of Norway’s reservoirs has risen by ing 2005, and the minimum, median just over 29 TWh. At the start of 2006, and maximum degree of fi lling in the total energy capability was about 84.3 1990–2005 period, expressed as a per- TWh, which is equivalent to around centage of the total energy capability of two-thirds of the annual electricity con- the reservoirs.

Table 2.2 The 10 largest power stations in Norway at 1 January 2006. Power Station County Max capacity Average annual production MW GWh/year Kvilldal Rogaland 1 240 3 517 Tonstad Vest-Agder 960 4 169 Aurland I Sogn og Fjordane 675 2 407 Saurdal* Rogaland 640 1 291 Sy-Sima Hordaland 620 2 075 Rana Nordland 500 2 123 Lang-Sima Hordaland 500 1 329 Tokke Telemark 430 2 221 Tyin Sogn og Fjordane 374 1 398 Svartisen Nordland 350 1 996 * Pump fed power station Source: Norwegian Water Resources and Energy Directorate 19 2

Normally, water will be drawn off dur- addition of new production capacity ing the autumn and winter when electric- has been consistently low. Capacity ity demand is highest. Demand reaches increased by 800 MW from 1993 to its lowest level in spring and summer, 2005. The increase in the 1990s was and the reservoirs refi ll. Changes in the primarily due to refurbishment and degree of fi lling of the reservoirs refl ect upgrading of old power stations, which variations in electricity generation and resulted in better utilization of existing water infl ow during the year. power stations. A large proportion of An economic gain can be obtained the capacity increase in recent years by pumping water uphill to a reservoir has come from refurbishment and with a greater head of water, because upgrading of hydropower stations. the potential energy of water increases We however see that new wind power in proportion to its head. If electricity plants now account for an increasing prices are low, it may be profi table for proportion of this increase. Figure 2.3 operators to use power to move water shows the growth in installed capacity. to a reservoir at a higher altitude, so The 10 largest power stations in Nor- that the water can be used for genera- way account for about a quarter of the tion when prices rise again. country’s generating capacity. Statkraft SF is Norway’s largest power producer 2.1.3 Electricity generation providing around 30 per cent of total Norway now has a total installed capac- production capacity. Table 2.2 lists the ity of about 28 300 MW at 620 hydro- 10 largest power stations in Norway at power stations larger than 1 MW. In 1 January 2006. addition to this, 255 MW is supplied Kvilldal power station in Rogaland from thermal plants2 and 280 MW from county is Norway’s largest, with a maxi- wind power stations. The mean annual mum generating capacity of 1 240 MW. generating capability of a hydropower This corresponds to about 4.5 per cent station is calculated from its installed of the Norwegian total. Table 2.3 shows capacity and the expected annual infl ow the numbers and installed capacity of in a year of normal precipitation. Thirty hydroelectric power stations in various years is the standard period used to cal- size groups at 1 January 2006. culate normal values for meteorological Electricity output in western and south- and hydrological variables. Generation ern Norway and in Nordland county from the Norwegian electricity system exceeds local consumption. In eastern – hydro, wind and thermal power – in Norway, on the other hand, electricity a normal year is now calculated to be consumption is much higher than the about 121 TWh. amount generated in the region. This The largest hydropower development means that power must be transmitted projects were carried out between from western and northern regions to 1970 and 1985, when installed capacity the south and east of the country. increased by 10 730 MW, or an aver- The fl ow of electric power between age of 4.1 per cent per year. Towards regions of Norway is also infl uenced by the end of the 1980s, Norway’s rate power exchange with Denmark, Swe- of hydropower development declined. den and Finland. Current transmission Since the beginning of the 1990s, capacity from Norway to its neighbours is about 4 000 MW. The connections 2 Thermal power station is a general term used for are used for both import and export of power stations which produce electricity from fossil power (see Chapter 7). fuels, biofuels or nuclear power. 20 2

Installed capacity, mean output and utilisation period The maximum power output (MW) of a hydroelectric power station increases in pro- portion to the product of the head of water and the water volume per unit time, but is limited by the installed machine capacity. The amount of electricity generated (MWh) in a given time period is equal to the product of the average power output and the time. For example, a power station which operates on average at an installed capacity of one MW for one year (8 760 hours) will generate 8 760 MWh (8.76 GWh). Variations in water infl ow and electricity consumption mean that a hydropower sta- tion does not operate continuously at maximum capacity. The average utilisation period for a power station is defi ned as the number of hours required to generate electricity equivalent to mean annual output when operating at maximum capacity. Thus, a power station with a mean annual infl ow equivalent to 200 GWh and an installed capacity of 50 MW has a utilisation period of 4 000 hours. The average utilisation period for most Norwegian power stations is between 3 500 and 5 000 hours per year.

Power output was generally above 2.1.4 Hydropower potential average in the second half of the 1980s Norway’s hydropower potential is the and the beginning of the 1990s because amount of energy in its river systems infl ow was high. It was below the mean which is technically and fi nancially avail- level in both 1996 and 1997. In the able to generate electricity, and was cal- period 1998–2001, hydropower output culated to be 205 TWh/year at 1 January was generally relatively high. Precipita- 2006. These calculations are based on tion was above normal for several years the 1970–99 reference period. Figure 2.5 in a row, with hydropower output high shows hydropower production potential as a result. A new production record as at 1 January 2006. was set in 2000 at 143 TWh. Production Around 44.2 TWh/year of the total in 2005 was almost 137 TWh. Figure 2.4 hydropower potential is located in pro- shows trends in mean annual generat- tected watercourses. This potential is ing capability and actual hydropower therefore not available for development. A output in Norway from 1980 to 2005. potential of around 41.3 TWh/year is not protected and is available for development.

Table 2.3 Hydropower stations in operation as at 1 January 2006 by size and total installation*) MW Quantity Total power, MW Average annual production GWh/year 0 – 0.1 164 6 29 0.1 – 1 192 91 375 1 – 10 293 1 035 4 850 10 – 100 250 9 256 41 419 100 - 77 17 977 73 455 *) Power station less than 1 MW based on SKM’s survey from 2000 with update from 2005. Quality control work is on going. Source: Norwegian Water Resources and Energy Directorate 21 2

Figure 2.4 Trends in hydropower output and mean annual generating capability Source: Norwegian Water Resources and Energy Directorate

As at 1 January 2006, the developed enlarging existing regulation reservoirs mean annual generating capability or constructing new ones, increasing was 119.7 TWh. In addition, projects the head of water or expanding techni- with a capacity of 1.3 TWh were under cal installations to increase the available construction, and the development of a power output. Refurbishment combined further 1 TWh had been licensed. with upgrading generally yields a bigger Most large hydropower projects were increase in electricity generation and classifi ed in the White Paper on a Man- better profi tability than refurbishment agement Plan for Water Resources. The alone. various categories used in this Manage- Most refurbishment and upgrading ment Plan indicate the order in which projects are classifi ed as category I in river systems should be developed. Giv- the Master Plan for Water Resources. ing priority to the lowest-cost projects Some fall into category II, while others and those with the fewest confl icts of are not dealt with in the Management interest is considered important. The Plan or were exempted from it. Management Plan is further discussed Developers themselves take the initia- in Chapter 4.2.1. tive on new projects, and also bear the Refurbishment of hydropower sta- economic risk. The latter can be par- tions involves modernising them to ticularly high for hydropower develop- use more of the potential energy of ments because projects are very capital- the water. In addition, operating costs intensive, the future price of electricity can be reduced and operating reli- is uncertain, and their costs vary widely. ability improved. The head loss can be reduced by widening water channels 2.1.5 Small hydropower plants and increasing tunnel cross section, for Small hydropower plants include power instance. Utilisation rates can also be plants with installed capabilities of up improved by using more modern tur- to 10 MW. These can in turn be sub- bine and generator technology. divided into the following sub groups: Examples of upgrading are the trans- micro power stations (installed capabil- fer of water from other catchment areas, ity up to 0.1 MW), mini power stations 22 2

Figure 2.5 Norway’s hydropower potential at 1 januar 2006, TWh/year Source: Norwegian Water Resources and Energy Directorate

(installed power output up to 1 MW) taken into consideration. Licences were and small power stations (installed issued for 34 small hydropower sta- capability up to 10 MW). tions in 2005, with a total production of Conventional small power stations around 490 GWh per year. A resolution are not regulated and are therefore on licence exemption for 70 smaller only handled in accordance with the power stations with a total production Water Resources Act. Micro and mini of around 200 GWh was also passed. power stations can have so little impact The Ministry of Petroleum and that they do not require a licence. The Energy has prepared a strategy for competence to issue licences to develop increased small hydropower station up to 10 MW installed capability has development. This can be found on the now been delegated to NVE, if the ministry’s webs site. undertaking is only subject to the Water Resources Act. A power station with an 2.1.6 Environmental impact of installed capability of up to 10 MW is hydropower development also exempted from the Management Converting hydropower to electricity is Plan for Water Resources. Parliament’s a clean process. Hydropower in Norway processing of Royal Proposition no. 75 accounts for 99 per cent of generated (2003-2004) on supplementing the pro- electricity. However, the development of tection plan for watercourses opened river systems does have an environmen- the possibility for licensing micro and tal impact, directly in the form of land mini power stations in protected water- use and more indirectly in the fragmen- courses. tation of areas of the natural environ- NVE has mapped the nationwide ment and in the regulation of lakes. In small hydropower station resources addition to the actual generating instal- and found that the potential is around lations, facilities such as access roads, 25 TWh. It is stressed that this is a quarries and rock tips are generally theoretical potential. Environmental needed. Access roads tend to increase impact and other factors which reduce traffi c and may result in changes to land development opportunities are not use. 23 2

The interventions can reduce the 2.1.7 Norwegian expertise in the experience of being in the countryside. hydropower sector At the same time, several of the older Norway is the sixth largest hydro- power stations are considered to be power generator in the world and the important cultural and industrial histori- biggest in Europe. The Norwegian cal monuments. hydropower industry is more than a Hydropower development and gen- century old. During this period, Nor- eration can have various impacts on the way has developed expertise covering fl ora and fauna in and around river sys- all stages of hydropower develop- tems. Rapid changes in generation and ment, from planning and design to the therefore in water volumes discharged delivery and installation of technical are characteristic outcomes. Changes equipment. The authorities have in in discharge volume can affect fi sh addition through almost 100 years of stocks and other freshwater organisms. development, accumulated expertise in The environmental disadvantages, regulating and managing hydropower both the aesthetic impact on the land- resources. scape and the impact on biological The companies within the supply diversity, are the main reasons why industry, except contractors (con- many watercourses are protected from struction), have a total annual sales power development as specifi ed in of around NOK 8 billion. There are chapter 4.2.1. around 3,500 employed in these compa- An application for a licence for power nies. development in watercourses must pass Norway has already developed a through a comprehensive process. This large proportion of the available hydro- includes a thorough review of the envi- power potential. Norwegian industry ronmental impact. An application may has therefore and to an increasing be refused on environmental grounds. extent competed for assignments in The authorities may also require meas- other countries. These include consul- ures to mitigate the impact of a devel- tancy services within planning, design opment project to be implemented. and engineering and the supply of tur- Examples include requirements to bines and electro-mechanical products. establish a fund for stock enhancement In addition, demand for Norwegian or rules on the minimum permitted expertise in system operation and rate of fl ow if regulation harms fi sh power market development is growing. and other fl ora or fauna in and around the watercourse. The legislative frame- work for hydropower developments is 2.2 Wind power described in more detail in Chapter 4. A licence to develop a watercourse A wind power station comprises one or which is protected by the protection more wind turbines and the necessary plan can only be granted where the electrical installations. When several protected object is not harmed. Where turbines are installed, it is often called a the watercourse’s unspoilt nature is the wind farm. aspect being protected, a licence will The wind turbine consists of tower, not normally be granted. In general, rotor and blades, and a turbine head only very careful development with containing a generator and control limited water withdrawal will be permit- system. The turbine blades are driven by ted. the wind in the same way as an aircraft 24 2

wing in motion provides lift to an aircraft. such facilities necessarily operate when Energy is transmitted from the turbine the wind is blowing, they can only via the propeller shaft to a generator cover part of electricity requirements. inside the turbine head. The generator The annual utilisation period for a converts kinetic energy to electrical wind turbine in Norway is expected to energy, which is then transmitted to exceed 3 000 hours at favourable sites. transformers out on the network. In many places, the average annual A modern wind turbine generates wind speed over a year period is six electricity when the wind speed at hub to eight m/s at a height of 10 m above height reaches four to 25 metres per ground. The wind speed will typically second (m/s) – from gentle breeze to be 10-20 per cent higher at the relevant storm. At wind speeds exceeding 25 m/ operating height for wind turbines, s, the blades lock and the turbine shuts depending on the local topography. down. The available wind power is pro- See the box in section 2.1.3 for a more portional to the cube of the wind speed. detailed explanation of the utilisation Energy production is therefore very period. dependent on wind conditions. In prac- At the beginning of 2006, 280 MW tice, a wind turbine utilises up to 40 per of wind power was installed in Nor- cent of the kinetic energy of the wind way, distributed across 138 turbines. which passes across the blades. The This represents a production capacity maximum theoretical energy utilisation of around 0.85 TWh, which is equiva- rate is about 60 per cent. Wind power lent to the electricity consumption of is a variable energy source and unlike around 40,000 households. NVE has, hydropower, cannot be regulated. Since in addition, awarded licences to a fur- 25 2

ther 10 projects, with a total installed ture are moderate. Wind power devel- capacity of around 840 MW. If all these opment is today not commercially via- projects come to fruition, total produc- ble, and therefore continues to require tion capacity will be just over 3 TWh/ some form of fi nancial support. year. 507 GWh was generated during Development of wind power plants and 2005. This is almost a doubling on the associated infrastructure can come into previous year. confl ict with other business interests, In Europe, signifi cant investment is such as tourism, reindeer husbandry and being made in wind power and other other interests such as military radar renewable energy, to reduce releases installations. These confl icts are evalu- from electricity production and from ated in NVE’s licence processing. non-renewable energy sources. The In Report No. 29 (1998-1999) to wind power industry has experienced the parliament on Norwegian energy signifi cant growth. Global installed policy, a target of building wind power power has increased from 2,500 MW in stations with a generating capacity of 1992 to over 40,000 MW in 2004, which three TWh by 2010 was set. Refer also represents an annual growth of around to chapter 3.4 on Enova SF. 30 %. More than 75% of this capacity is installed in Europe. 2.2.1 Environmental impact of wind Technology development and indus- power developments trialisation within wind power produc- Wind power is a renewable energy tion has increased unit performance source which does not result in the and a reduction in investment costs per release of pollutants such as green- MW. Production costs are estimated to house gases or particles. Development currently lie around NOK 0.30/kWh of wind power and associated infra- at sites with good wind conditions and structures however lead to land use where costs linked to the construction changes and environmental impact. of the plant and associated infrastruc- The environmental impact primarily

Table 2.4 Wind power production which as at 1 January 2006 is licensed but not on line. Power Annual production Licence MW GWh/year Bessakerfjellet, Sør-Trøndelag 51 150 November 2004 Harbaksfjellet, Sør-Trøndelag 90 200 November 2004 Valsneset, Sør-Trøndelag 12 30 November 2004 Skallhalsen, Finmark 65 190 October 2004 Ytre Vikna, Nord-Trøndelag 249 870 October 2004 Høg-Jæren, Rogaland 80 260 September 2004 Gartefjellet, Finnmark 40 120 August 2003 Hundhammerfjellet 3, Nord-Trøndelag 45 160 February 2002 Kvitfjell, Troms 200 660 February 2001 Valsneset Teststasjon, Sør-Trøndelag 5,75 16 August 2001 TOTAL 837.75 2656 Source: Norwegian Water Resources and Energy Directorate

26 2 relates to visual effects, changes to the units. In CCGT stations, steam turbines landscape, animal life and fl ora. A wind are used to generate electricity from power plant is often located in an open the waste heat given off by the gas landscape near the coast, where wind turbines. Where used together, these resources are best. This position makes turbines can give a net effi ciency for wind farms well exposed and visible in electricity generation of up to 60 per the landscape. A licence to build and cent. operate a wind farm is granted for a A cogeneration facility produces both period of 25 years. Wind park construc- electricity and heat – for space heating, tion is a highly reversible intervention for example. Surplus heat from steam in the landscape. turbines or in gas turbine exhaust The environmental consequences, fumes is carried to a heat distribution which are revealed by a consequence system. A cogeneration plant produces report and associated consultative less electricity than a CCGT plant for statements, will be included in the the same level of gas consumption. licence process. If the total environ- However, it converts a larger propor- mental impact is shown to be consid- tion of the energy content of the gas to erable, the likelihood that the wind usable energy (more than 80 per cent) farm is granted a licence is reduced. in the form of both electricity and heat. Through the licence process, the inten- Norway generally has a limited tion is to arrive at counter measures potential for using heat from electric- which can reduce the negative impacts ity generation. The district heating of wind farm construction. infrastructure is not as well developed in the large cities than in other Euro- pean countries. A high concentration 2.3 Gas-fi red power of users is required to make a district heating network or industrial utilisation The term ‘gas-fi red power station’ is of the heat profi table. However, cogen- often used as a general designation for eration stations could be relevant for all facilities which use natural gas to industrial applications in Norway. generate electricity and possibly heat. A number of plans currently exist Several types exist. One in which gas for building gas-fi red power stations turbines generate all the electricity is in Norway, and fi ve projects have so known as a simple-cycle gas turbine far been licensed. Naturkraft AS has station. Such facilities can be started received licences for two gas fi red up and closed down at short notice, facilities, Industrikraft Midt-Norge AS and are therefore suitable for provid- has received one licence and Statoil ing peak-load power. Running costs are has received one licence in accordance relatively high. Plants of this type are with the Energy Act for an integrated currently found on fi xed installations in gas-fi red power plant at its Snøhvit gas the North Sea. liquefaction plant in northern Norway Electricity generation using gas tur- and a gas fi red power plant at Tjeldber- bines also produces heat. Combined- godden. Both plants at Snøhvit LNG cycle gas turbine stations (CCGT) and Kårstø are under construction. The and cogeneration (combined heat and gas fi red power plant CCGT at Kårstø power – CHP) stations exploit this is planned to have an installed capacity heat, making them considerably more of about 420 MW, corresponding to an effi cient than simple-cycle gas turbine annual output of about 3.5 TWh. The 27 2

plant is planned to come on line in the years. The maturity of the various solu- second half year of 2007. An applica- tions varies. In some cases, substan- tion has also been submitted for a gas tial development work remains to be fi red power plant at Mongstad and one done, not least in relation to turbines. in Hammerfest. NVE has in addition However, a common feature of these

received an advance notifi cation of two technologies is that the CO2 reduction gas fi red power projects in Grenland process is energy-intensive, and will and Elnesvågen. therefore be expensive in comparison Energy requirements for the Snøhvit with other forms of power generation. gas liquefaction project are to be met In the winter of 2006 the government by an integrated gas-fi red power station implemented comprehensive work

providing 215 MW of electricity and on establishing a value chain for CO2. 167 MW of heat, which was licensed Appendix 2 reviews the government’s

in 2003. An annual output of about work on the CO2 chain and the chal- 1.5 TWh is planned. The gas-fi red lenges associated with this work. power station is due to be completed before the Snøhvit gas liquefaction plant comes on stream in 2006, and is 2.4 Other forms of electricity specially adapted to the energy require- generation ments of the Snøhvit facility. In accordance with the new Climate Production processes in many industrial Quota Act, compulsory quotas apply companies generate waste heat which to gas fi red power stations. The three can be used to generate electricity. The planned gas fi red power stations which opportunities for and costs of this vary have been granted licences (Kollsnes, from company to company, depending Kårstø and Skogn) will be allocated a on process technologies and location. quota if they are built before 2008. A A proportion of the heat generated in

CO2 tax will be levied on the Snøhvit district heating plants can be used for energy plant for the period under the power production, so called co-genera- previous Norwegian quota system. tion. About 155 GWh was generated in Small quantities of electricity are this way in 2004. generated by gas turbines at petroleum Total heating production was just over plants along the Norwegian coast. 1 TWh in 2005. Some sites also produce small amounts of electricity using gas turbines and gas engines. Gas from the Grønmo landfi ll 2.5 Taxes and fees in the power in Oslo is used to generate electricity, sector for instance. Electricity consumption is subject to

2.3.1 Sequestration of CO2 a consumption tax which is currently Research into separation and deposi- NOK 0.1005/kWh in 2006. This tax was

tion (sequestration) of CO2 from power NOK 0.0988/kWh in 2005 and NOK stations is currently being pursued in 0.0967 in 2004. The consumption tax

the USA, Japan and Europe. CO2 can added NOK 5.6 billion to the national be separated out either before or after treasury in 2005. Consumers in the being burnt for electricity generation, county of Finnmark and some munici- and several different technological palities in the county of Nord-Troms concepts have been presented in recent are exempted from this tax. With effect 28 2

Just Catch

Gassnova has, in cooperation with Aker Kværner Engineering & Technology launched the Just Catch project for CO2 capture technology from gas fi red power stations. Gassnova provides fi nancial support to the project. Aker Kværner Engineering & Technology is joined by the following leading Norwegian and international companies within the energy industry: Gassco, Fortum, Hydro, Lyse Energi, Petoro, Shell, Skagerak Energi, Statkraft, Statoil and Østfold Energi. Gas- sTEK is involved as main supplier. The project’s goal is to:

• Reduce technical and fi nancial risk by building a full scale plant for CO2 capture from gas fi red power stations.

• Establish a cost effi cient design for a demonstration plant for CO2 capture based on technology which will be available in 2010. • Develop descriptions, technical specifi cations and cost estimates for the recom- mended plant. The quality level and level of detail should be suffi cient to form a basis for a decision on whether the project and the building of a demonstration plant should proceed.

The project should run for two years, have two phases and a total budget of NOK 32 million. Phase 1 consists of theoretical calculations, qualifi cations and verifi - cations, development of technology and laboratory scale tests. These test can be carried out at research institutes such as Sintef or equivalent. The budget for phase 1 is NOK 18.5 million. Phase 2 includes testing of equipment and chemicals in a pilot plant, probably in the existing rig at Kårstø.

The selected technology in Just Catch is based on the absorption of CO2 from gas fi red power station exhaust in a chemical solution (amine). This is called post combustion technology. The selected capture method in the Just Catch project has the following character- istics. • Completely new technology elements are not required. The technology must however be developed to become cost effi cient. • The technology can be used and installed in the near future (2010). • The method can be used in conventional gas fi red power stations and can also be retro fi tted to existing power stations and for industrial releases. • Power production is not affected of the capture system.

• The biggest challenge are the exhaust’s low CO2 concentrations (3-4%), which requires the processing of large volumes of exhaust.

• Similar technology is in use to separate naturally occurring CO2 from natural gas. This method is use by facilities such as the Sleipner platform, to clean and

produce sales quality natural gas for the export market. The CO2 cleaning proc- ess is also used industrially in the pre-treatment of LNG production. • The method can also be adapted to coal fi red power stations.

29 2

from 1 January 2004, the grid compa- resource tax does not represent an addi- nies took over responsibility for col- tional fi nancial burden to the compa- lecting the tax. This job was previously nies, as it can be deducted from income discharged by the electricity suppliers tax and, in the event of a difference, via their invoicing. A new consumption can be carried forward with interest. A tax system for industry was introduced basic interest tax of 27 per cent is levied on 1 July 2004 This system levies a on hydropower producers that achieve tax on part of electricity consumption. returns that are greater than the normal The electricity tax is structured so that return. As for other taxes, the basic it follows the EU directive on tax on interest tax contributes to a large pro- energy products (the Monti directive), portion of the potential basic interest in which power intensive industries are being included as public income. The exempted from electricity taxes. municipality can also levy a property Activities at the state-owned Enova tax on the production plant. This is cal- company are fi nanced through an culated primarily on a profi tability basis energy fund. The fund receives income intended to refl ect the market value of from a grid tariff supplement of NOK the property. Property tax can also be 0.01 per kWh in 2006. Enova should levied on the distribution system. About take the initiative to promote more NOK 3.8 billion was raised from natural effi cient energy consumption, the pro- resource and basic interest taxes in duction of new renewable energy and 2004. the environmental use of natural gas Licence fees represent compensation as stated in the description of Enova in for damage caused to districts in which chapter 3.4. water resources are exploited. They are VAT is charged on electricity at the also an instrument for allowing these standard rate of 25 per cent that is lev- districts to share in the fi nancial return ied on other goods and services subject on hydropower development. Within to this tax. Household customers in the specifi ed maximum and minimum lim- Nordland, Troms and Finnmark coun- its, fees are determined by assessment. ties are exempt from VAT on electricity. This evaluation gives weight to such As for other industries, a tax of 28 per factors as the degree of environmental cent is levied and paid to the state on disturbance and the profi tability of the profi ts earned by all power companies. development. As the licensing author- A profi tability independent natural ity, NVE is entitled to adjust the licence resources tax of NOK 0.013/kWh fee every fi ve years. Licence fees pro- paid to the municipality and county vided NOK 515 million to local authori- municipality is in addition levied on ties and NOK 125 million to central hydropower producers. Of this, NOK government in 2005. 0.011 is allocated to the local authority Local authorities affected by hydro- and NOK 0.002 to the county council. electric development are also entitled This ensures that local authorities and to buy a proportion of the power gener- county councils have a minimum tax ated. The licensee can be required to income level. The calculation base for sell up to 10 per cent of the electricity the tax on natural resource extraction is generated to the local authorities con- determined for each power station, and cerned. If this exceeds general power is the average of the plant’s total output consumption in the local authority, of electricity in the income year and the county council is entitled to buy the six preceding years. The natural the surplus. The licensee can also be 30 2 required to sell fi ve per cent of the 2.6 The role of the electricity power generated to the central govern- supply sector in the Norwegian ment, but the latter has not exercised economy this right so far. The price paid by the power recipient must correspond The gross product in the electricity roughly to generating costs or the full supply sector in 2005 was NOK 37.7 bil- cost of delivery. Today, there are two lion, or roughly three per cent of gross price setting regulations. For licences domestic product for mainland Norway. issued before 1959, the price is nego- Real capital in the electricity supply tiated between the licensee and the system amounted to NOK 190 billion in municipality, limited to a maximum 2005, corresponding to 5.3 per cent of price. For licences issued after 1959, fi xed real capital in mainland Norway. the price is set by the Ministry of Petro- Investment in the power supply sec- leum and Energy in accordance with tor totalled about NOK 9 billion in 2005. full costs for a representative selection Figure 2.6 shows the development of of power stations. The fi nancial signifi - gross investment in electricity supply cance of the obligatory sale of power since 1980. Net investment in the sec- is equivalent to the difference between tor fell towards 2000, but has increased the price for the power in the market in recent years. Employment in the and the price for obligatory power electricity supply sector rose steadily including the input tax. Deliveries during the 1980s and stabilised after under these provisions total about 8.5 1989. The number of people employed TWh/year. has declined in recent years. About 13 000 people worked in the electricity supply sector in 2005.

Figure 2.6 Gross investment in the electricity supply system. Fixed 2005 NOK Source: Norwegian Water Resources and Energy Directorate and Ministry of Petroleum and Energy 31