The key long-term challenge facing the Norwegian and Nordic electricity markets is the basic and growing imbalance between production capacity and expected demand, Norsk Hydro president and CEO Eivind Reiten stated in his speech at the First Securities' Nordic Energy Summit in Oslo on Wednesday.
"With continued economic growth in the Nordic region the demand for electricity must be assumed to increase. The Norwegian outlook is such that the power system even in years with normal precipitation is highly dependent upon imports to cover domestic consumption," Reiten pointed out.
He underlined that the solutions are not to be found through tinkering with the energy legislation, but in consistent and concerted efforts by government and other market actors to help bridge the expected gap between supply and demand.
"The challenge is to improve the supply situation through improved transmission systems and by encouraging new generation capacity. The deregulated Nordic electricity market is basically working quite well, even in very tight situations as we saw last winter. It is, however, important to improve handling of security of supply issues and in this connection clarify the different roles to be played by the government and the market's commercial players. Possible new extreme situations should be dealt with primarily through market related mechanisms."
Renewable energy may contribute to bridging the supply demand gap, but rapid clarification of the future framework conditions, including the implementation of "green certificates", is necessary to secure implementation of new projects, Reiten said.
"The energy intensive Norwegian industry is facing a period of structural change. This change will happen even more rapidly if Norwegian authorities implemented regulations for greenhouse gas emissions and electricity taxation that adds to the burden of these industries."
Hydro is well positioned to take advantage of growth opportunities in the deregulated European markets for gas and electricity, Reiten concluded.