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Lowering Energy Prices Is Not Always a Great Idea

By Edited Feb 13, 2014 0 0

In Norway, the government is committed to using as much wind power as possible.  This will help them to meet their targets for emission reductions.  Another thing that happens in Norway, however, is that power prices are very low and the government is also providing an underfunded subsidy plan.

Norway

Norway is the second largest supplier of gas in Europe, after Russia.  It is committed to reducing its greenhouse gases and emissions by 30% below their emissions in 1990 and they want to achieve this by 2020.  Besides this, they also want to diversify their power supply and they want to power up their many offshore oil platforms by using a grid that is onshore.

The problem in Norway, however, is that it is dependent on hydro-power generation.  This means that if the rain changes and the weather is unusually cold or dry, power prices shoot up and there is even a risk of power shortages.  Hence, they are looking at options for wind power as well and this is subsidised by the government.

Subsidised Plans

If a plan is not subsidised, the price of power is around £70 for each megawatt per hour.  If there is a lot of wet weather, however, the energy prices from the gas sources will go down so far that they are lower than those of renewable energy.  This means that wind power becomes less interesting.  In fact, at present, the cost of all the other power in Norway is lower than the cost of wind power.  So, many wind farms are not getting those desperately needed green certificates.

Investment Problems

When the plan was first started, a lot of investors expressed an interest in the wind farms.  Now, however, they are learning that there is no financial viability in these plans and they are pulling out.  The green certificates could be sold, making production profitable, but because so very few are getting this certificate, these profits aren’t being made either.  It also seems that licenses have been issued for the construction of wind farms that subsequently don’t get built.  Some were simply too ambitious, others can’t connect to grids.

Because of all of this, Norway is lagging far behind the likes of Sweden and Denmark, when its geography makes it perfect to actually be fully ahead.  The government, however, remains optimistic.  They are sure that the wind farms will get built by the end of this decade and that the power they create will surpass the power created by conventional electricity or nuclear power plants.

Lower Power Prices

We have had an exceptionally wet summer across Europe and the water reservoirs in Norway have been filled beyond capacity.  As a result, energy prices have come right down.  This means that investing in wind power is even less attractive, as it becomes far too expensive.  And, it certainly is true that green certificates are being issued even less now.  This is a shame, because Norway is a perfect candidate for renewables.  Perhaps after the next drought…

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