The Norway Solution

di CAROLINA GAMBINO

The 400 stakeholders attending the Saudi Arabia Energy Forum in Riyadh were left quite surprised by Saudi Energy Minister Khalid Al-Falil’s opening words at the meeting.

“We’re undertaking an in-depth study on what it would take to invest in charging stations, to modify the grid in the Kingdom, so that we have thousands of cars on our roads - but we need to know the cost-benefit analysis”, he told delegates.
Was he disavowing the oil doctrine? Quite the contrary. More simply, he was just announcing the strategic decision to channel the massive revenue flows that this commodity can secure (and will keep securing, at least up to 2040 and beyond) into funding the country’s transition towards a low-carbon economic model, embodied in both e-mobility and electric power generation.

Call that the Norway Strategy, if you will.
Norway is the closest we have to a Middle Eastern country in Europe: the oil sector accounts for 14 per cent of its GDP, secures 17 per cent of its government revenues, mobilizes 19 per cent of its investments, and reaches 40 per cent, in value terms, of its exports.
Despite that, Norway is also taken as a model, with its decarbonization policies, its strong support to the spreading of e-mobility (not only in road transport), a high renewable energy penetration rate that remains unrivalled (not only in Europe); but also for being able to see a (possibly long-term) role for electrification and the interconnections with its neighbouring markets.

In Norway, oil barrels and green kWh are not each other’s enemies: they just fight as allies on two separate battlegrounds. And they both win.
In March, Norway’s oil, LNG and condensate reached an average of 1,765,000 barrels/day, which is equal to an increase of 19,000 barrels a day as compared to the previous year. The Norwegian Petroleum Directorate (NPD) almost apologized for such a modest growth, admitting to having had “technical issues in a few oil fields”, without which figures would have been two percentage points higher.

After half a century of exploitation of fossil fuel sources, NPD estimates show that about 55 per cent of oil and gas reserves are still to be extracted, while there are still 4 billion standard cubic metres of oil equivalent in undiscovered oil&gas resources. The raw value shows an amazing increase of 40 per cent as compared to 2016. This is due to several recent discoveries in the Barents Sea, whose Norwegian areas might alone hold a total of 2,535 million scmoe.
“In 2018 every 1,000 kroner invested in exploration has yielded 2,100 kroner in return”, said quite openly NPD director general Bente Nyland”.

“The Snøhvit gas field and the Goliat oil field have already begun production, now we are waiting for the Johan Castberg field planned production start in 2022; but surely most of the resources are yet to be discovered”, added Torgeir Stordal, NPD explorationn director. And there is certainly no intention to leave them resting in the underground, unused.
Norway, therefore, has every intention to keep making money on international markets right from fossil resources, and to use it to fund an energy transition that is going to be neither easy nor quick... not even for a country whose economy can boast a renewable energy generation/consumption ratio above 100 per cent. According to the IEA, in 2018 hydro, wind, and biomass power generation combined amounted to some 143.4 TWh, as compared to a total consumption of 128.6 TWh.

“The path towards a low emission society will take time, and that’s why I do not believe there is one silver bullet solution”, said Rikard Gaarder Knutsen, the Norwegian Secretary of State, at the Chatham House in London during the Energy Transitions Conference 2019. “Furthermore, I believe this paradigm shift should go hand in hand with economic opportunity. We need to work with the market, not against it. Electrification is a key solution that goes in that direction”.

Already today, Norway’s production is equal, on average, to 27,850 kWh/year per capita (a good 27,280 of which come from renewable sources) as compared to a an annual consumption totalling 24,450 kWh. These are record figures, not only for Europe.
Last year the net exports of power Made in Norway remained stably above 1,000 GWh/month throughout the year, with the exception of a few weeks between March and April in which the trade curve took a sharp downturn. But that was, indeed, an exception. And it promises to be all the more so in the years to come, considering the investments Norway is making in the wind sector. Solar energy has, quite naturally, to come to terms with the constraints of northern latitudes, which leaves little room for it in the energy mix if the Scandinavian peninsula. Not a big problem; in the case of solar, technology exports provide a precious safety valve.

Exports, indeed, seem to be the new Eldorado. The renewable energy sector currently generates export revenues for a total amount of 1.2 billion dollars a year. According to recent research (Scandinavian Investments in Renewable Energy in Developing Countries) this figure is set to grow up to 7 to 9 billion dollars in 2030, thus becoming the third most important exporting industry in Norway, after fisheries and, quite obviously, oil&gas.

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