Norwegian Electricity Research Articles

The Short-Term Price Elasticity, Temperature Elasticity, and Wind Speed Elasticity of Electricity: A Case Study from Norway

Energy production using hydropower has a 150-year history in Norway. High mountains, lots of rain, and a well-developed technology laid the foundation for low and stable electricity prices. The Norwegian electricity market is unique and different from any other country. Nearly all electricity produced (98.3 percent) comes from renewable energy sources and 75 percent of the energy used for heating is electricity. From autumn 2020, major changes have been observed in the electricity market in Norway. In 2021, Norway opened two transmission cables, one to Germany and one to England. Both cables have a capacity of 1400 MW. The average price per MWh was NOK 263 in southern Norway in the period 2013–2020, which more than quadrupled to NOK 1192 per MWh in the period 2021–2023. We have investigated how the market reacted to the large price increase. We found that price elasticity is low even when the price is very high. It is the temperature that controls the consumption. When it is cold—below zero degrees Celcius—the temperature elasticity is close to zero; the temperature elasticity is not constant. When the temperature is above zero, the temperature elasticity is about −0.7. Price variations or changes in wind speed only lead to minor adjustments in electricity consumption. It is the variations in temperature that result in the observable fluctuations in electricity consumption. Since Norway exports electricity to Sweden, Denmark, Finland, Germany, the Netherlands, and England, knowledge of the Norwegian electricity market is relevant for many market participants. The Norwegian electricity market differs from those in other countries. Therefore, there is a risk that conclusions drawn about the Norwegian electricity market based on research conducted in other countries may be incorrect or inaccurate. Our contribution with this case study is to deepen the knowledge of how the electricity market in Norway operates.

The tipping point of electricity price attention: When a problem becomes a problem

We study the relationship between Norwegian electricity prices and the public’s attention towards these using data from i) all Norwegian newspapers, ii) Norwegian Tweets, and iii) (Norwegian) Google searches over a sample period from 2014-2022. Our results suggest that attention is non-linearly related to both the electricity price level and its volatility. Using threshold auto-regressive models, we estimate ‘tipping points’ for all attention measures in the €50-60/MWh range. The results have important policy implications, pointing to specific price levels for which society becomes increasingly concerned about electricity prices.

Life cycle assessment of lithium iron phosphate and electrochemical recuperator cells for city buses in Finland

The study investigates the environmental impacts of electric city buses based on the storage technologies applied and the degree of electrification within the Finnish context. Lithium iron phosphate (LFP) and electrochemical recuperator (ECR) were selected as storage technologies. ECR can be an alternative to the lithium-ion battery; however, little is known regarding its environmental performance when applied to electrify city buses. The study focused on diesel buses, battery electric buses (BEB) and plug-in hybrid buses. Life cycle assessment (LCA) was used to assess the potential environmental impacts between storage technologies and the degree of electrification. Primary data from the industry was used to assess the impacts of manufacturing ECR. The results showed that manufacturing a kWh of ECR generated a global warming potential (GWP) of 178 kg CO2-eq, higher than LFP. However, its application indicated that ECR performed better. The impacts of using ECR and LFP in BEB were 385 g CO2-eq/km and 441 g CO2-eq/km, respectively. The hybrid system generated 652 g CO2-eq/km and 670 g CO2-eq/km for ECR and LFP, respectively. The study also showed no consistent pattern between the degree of electrification and environmental benefits. Scenario analysis revealed that BEB provided the best GWP when assessed using a Finnish and Norwegian electricity mix, while the hybrid system performed the best when Polish electricity was applied. This study demonstrated that storage technologies, degree of electrification, fuel consumption, and electricity sources affect environmental performance. Careful assessment is needed before deciding to electrify the city's transport system.

Energy demand distribution and environmental impact assessment of chitosan production from shrimp shells

Step towards resilience and sustainability through exploring renewable biomass and waste streams to produce higher-added value products and energy is among key aspects for closing the loops, saving resources, and reducing the resource and emission footprints. In that respective, crustacean shells waste can offer rich spectre of valuable compounds such as proteins, chitin, carotenoids. This waste is produced in large quantities worldwide, thus allowing for commercial valorisation. An overview of technologies is undertaken for more sustainable and environmentally friendly chitosan production via chitin isolation and conversion and compared to the conventional processes. Furthermore, an assessment of the environmental burden and energy demand distribution for conventional and more sustainable alternative processes was performed, based on lab-scale experimental data. Three different chitin extraction routes and three distinct chitosan conversion processes were considered and compared for their greenhouse gas footprint, abiotic depletion, acidification, eutrophication and other potentials. Finally, the energy demand distribution was analysed considering electricity production patterns from three European countries, Slovenia, Portugal and Norway. The results showed that alternatives 3-A and 3-B (conventional eco-solvents - conventional deacetylation with 40 % and 50 % NaOH) generate the lowest environmental burden (184 g CO2 eq./g chitosan). Electricity was the main hotspot of the processes, used either for extraction, plasma treatment or deacetylation. The sensitivity analysis proved that the Norwegian electricity mix has the lowest environmental impact (4.2 g CO2 eq./g chitosan). This study highlights the impact of blue biorefineries by transforming marine waste to valuable biopolymers such as chitin and chitosan.

Spatio-temporal smoothing and dynamics of different electricity flexibility options for highly renewable energy systems—Case study for Norway

In this article, we investigate the mismatch of renewable electricity production to demand and how flexibility options enabling spatial and temporal smoothing can reduce risks of variability. As a case study we pick a simplified (partial) 2-region representation of the Norwegian electricity system and focus on wind power. We represent regional electricity production and demand through two stochastic processes: the wind capacity factors are modelled as a two-dimensional Ornstein–Uhlenbeck process and electricity demand consists of realistic base load and temperature-induced load coming from a deseasonalised autoregressive process. We validate these processes, that we have trained on historical data, through Monte Carlo simulations allowing us to generate many statistically representative weather years. For the investigated realisations (weather years) we study deviations of production from demand under different wind capacities, and introduce different scenarios where flexibility options like storage and transmission are available. Our analysis shows that simulated loss values are reduced significantly by cooperation between regions and either mode of flexibility. Combining storage and transmission leads to even more synergies and helps to stabilise production levels and thus reduces likelihoods of inadequacy of renewable power systems.

Learning From the Norwegian Electric Vehicle Success: An Overview

Learning From the Norwegian Electric Vehicle Success: An Overview

Prospects for the 2040 Norwegian electricity system: Expert views in a probabilistic modeling approach

This study examines expert opinions on power demand and supply developments for 2040 in Norway based on a combined survey and modeling approach. The survey responses show that production and consumption will likely increase, with most respondents assuming a positive energy balance in 2040 Norway. Capacity expansion uncertainty between expert opinions is particularly high for offshore wind on the production side and electricity demand from hydrogen electrolysis on the consumption side. The survey results are combined with a Monte Carlo modeling approach to estimate solution spaces for electricity prices, value factors, and market values for power generating technologies in the energy system model Balmorel. The model results show that electricity prices are strongly influenced by the energy balance, with a negative exponential relationship between the electricity price and an increase in the energy balance. The value factors for hydropower with reservoirs are consistently the highest across the model runs, while solar PV and hydro run-of-river have the lowest value factors. An increasingly positive energy balance increases hydropower with reservoirs' value factor and decreases the value factor for all other technologies. This indicates an additional competitive advantage for hydropower with reservoirs if production development outpaces demand and vice versa.

Efficiency Measurement in Norwegian Electricity Distribution: A Generalized Four-Way-Error-Component Stochastic Frontier Model

In this paper, we introduce a new model to estimate efficiency by generalizing the state-of-the-art panel stochastic frontier model, the salient feature of which is decomposition of inefficiency into a persistent and a transient component. The proposed model introduces an autoregressive process to allow for temporal dependence in transient inefficiency. Both firm heterogeneity and persistent inefficiency components are allowed to be correlated with some exogenous and endogenous covariates in the model. Our model solves the endogeneity problem and it also introduces determinants of both persistent and transient inefficiency. Since the transient component is autoregressive, the likelihood function is not available in closed form. To address this problem we use the Maximum Simulated Likelihood and (Simulated or Bayes) Generalized Method of Moments method to estimate the parameters and several other quantities of interest, including transient and persistent inefficiency. Since the model is dynamic and accommodates determinants of inefficiency, it is useful to production managers who wish to identify how much of their present inefficiency is affected by past inefficiency, as well as how and in what ways efficiency can be improved. We use Norwegian electricity distribution data to showcase an application of our model.

Determinants of Norwegian Electricity Prices

Determinants of Norwegian Electricity Prices

Life cycle environmental analysis of a hydrogen-based energy storage system for remote applications

Energy storage systems are required to address the fluctuating behaviour of variable renewable energy sources. The environmental sustainability of energy storage technologies should be carefully assessed, together with their techno-economic feasibility. In this work, an environmental analysis of a renewable hydrogen-based energy storage system has been performed, making use of input parameters made available in the framework of the European REMOTE project. The analysis is applied to the case study of the Froan islands (Norway), which are representative of many other insular microgrid sites in northern Europe. The REMOTE solution is compared with other scenarios based on fossil fuels and submarine connections to the mainland grid. The highest climate impacts are found in the diesel-based configuration (1,090.9 kgCO2eq/MWh), followed by the REMOTE system (148.2 kgCO2eq/MWh) and by the sea cable scenario (113.7 kgCO2eq/MWh). However, the latter is biased by the very low carbon intensity of the Norwegian electricity. A sensitivity analysis is then performed on the length of the sea cable and on the CO2 emission intensity of electricity, showing that local conditions have a strong impact on the results. The REMOTE system is also found to be the most cost-effective solution to provide electricity to the insular community. The in-depth and comparative (with reference to possible alternatives) assessment of the renewable hydrogen-based system aims to provide a comprehensive overview about the effectiveness and sustainability of these innovative solutions as a support for off-grid remote areas.

Performance Effects of Network Structure and Ownership: The Norwegian Electricity Distribution Sector

Transmission and distribution networks are capital intensive segments of the electricity sector and are generally considered natural monopolies. Due to their non-competitive nature, these are subject to independent regulation to prevent the abuse of monopolistic power and to induce competitive behaviour. Effective economic regulation of the electricity networks has become a key target in most developed economies after the 1980s. In Norway, incentive regulation and efficiency benchmarking were introduced in 1997. In Norway, the electricity grid is divided into three levels, namely, central, regional and distribution networks. In this paper, we study two overlooked aspects when analysing the performance of electricity networks: vertical integration and ownership structure. We use a stochastic frontier analysis approach to analyse the performance of Norwegian electricity distribution utilities for the period 2007–2014. We observe that vertical integration between distribution and regional transmission implies higher cost inefficiencies. This indicates that the efficiency gains due to separate management of the networks exceed the economies of coordination from vertical economies of scope. In addition, we find that council ownership entails higher efficiencies. This could be explained by the state having an interest in high-voltage electricity networks, rather than low-voltage ones, and the decentralised model from which the now centralised system was once developed.

Growth and Economic Performance of the Norwegian Wind Power Industry and Some Aspects of the Nordic Electricity Market

Electricity has been produced in Norway in hydropower plants since 1877. The first wind power plant was put into operation in 1986. The growth in wind power production was weak in the first years after the turn of the millennium, but after Norway joined the Swedish subsidy scheme Tradable Green Certificates in 2012, there was significant growth in the wind power industry. While most of the hydropower production in Norway is owned by the public sector, the majority of wind power production is owned by foreign investors. Since wind power has been very much discussed in Norway, a levelized cost of energy (LCOE) model that can be well suited for this type of discussion is presented. The point here is that one must include all the costs, including the externalities. The Norwegian electricity market is dominated by a single player: Nord Pool. Ninety-six percent of all the electricity produced in Norway is sold through the power exchange Nord Pool, and the prices set by Nord Pool affect the finances of all the electricity producers in Norway, as well as producers in Scandinavia and the Baltic countries. This paper is a survey of the growth, development of production and economic performance of the Norwegian wind power industry and some aspects of the electricity market in the Nordic countries.

CO2 Footprint of the Norwegian Longship Project

An analysis of the CO storage efficiency of the Longship project has been performed using a spreadsheet based LCA tool. Results are presented in terms of the CO2 footprint for each value chain measured in units of “tonnes of CO2 equivalent emissions per tonne of CO2 stored underground”. In other words, the results from the tool show the impact of the implementation and operation of the chain on the CO2 storage efficiency. The work was commissioned by Gassnova, the Norwegian State Enterprise for Carbon Capture and Storage. The work was performed by DNV GL and Carbon Limits The method used is consistent with the principles of ISO 14040 “Life Cycle Analysis – principles and framework” and ISO 14044 “Life Cycle Analysis – requirements and guidelines” and has been designed to calculate CO2 equivalent emissions to atmosphere in a 100-year perspective. The functional unit of the system studied is 1 tonne of CO2 stored, where storage refers to permanent geological storage .as defined in ISO 27914 “Carbon dioxide capture, transportation and geological storage – Geological storage”. The tool is capable of accounting for direct and indirect greenhouse gas emissions of each building block of the Carbon Capture and Storage (CCS) chain for the life cycle of the project. As such, for each building block, all project phases are included (construction, operation, decommissioning for capture and transport – construction, injection, post injection, decommissioning and post closure for storage) and for each phase CO2 emissions from the use of fuel, energy, chemicals, materials and transport are considered. In the Longship project, CO2 is captured from two capture sites, the cement factory of Norcem in Brevik and the waste to energy facility at Klemetsrud in Oslo, transported by ship to a receiving terminal at Naturgassparken near Bergen and further transported in a subsea pipeline to the Aurora CO2 storage license area near the Troll field in the North Sea for final geological storage. Three main value chains have been investigated corresponding to each of the two capture sites individually and one combining the two capture sites all with the same sort of transport and storage. Calculation results are then presented as total CO2 footprint measured in tonnes of CO2 equivalent per tonne CO2 stored for the value chain of each capture site separately and for both capture sites combined. In other words, the results from the tool show the impact of the implementation and operation of the chain on the CO2 storage efficiency. In addition, all three alternatives above are estimated when utilizing the full capacity of the storage infrastructure, 1.5Mt/y by introducing CO2 from other sources. The capture from these other sources are not included in the footprint calculations presented. Generally, the Longship project shows very low CO2 footprint compared to projects studied elsewhere. The 3 main reasons for the low CO2 footprint are 1) waste heat or internal steam is utilized for the CO2 capture processes,,2) the Norwegian electricity mix have a very low CO2 footprint and 3) the project has had high focus on using low footprint energy and fuel alternatives wherever possible. Since both capture sites have an element of biologically based raw materials the impact of BioCCS is also discussed as Longship can lead to net negative emissions.

Heat and electric vehicle flexibility in the European power system: A case study of Norwegian energy communities

This paper investigates sector coupling between the central power system and local energy communities, including heat supply for buildings and charging of electric vehicles. We propose a stochastic linear programming framework to study long-term investments under uncertain short-term operations of nationally aggregated assets. We apply the model to a case study assuming European power sector decarbonization towards 2060 according to a 1.5 degree scenario, and we investigate the impact of coupling building heat systems and electric vehicle charging in Norway with the European power market. The case study focuses on the role of Norway in a European perspective because: (1) Norwegian electricity production is mainly based on flexible and renewable hydropower, (2) Norwegian building heating systems are currently mainly electric, and (3) Norway is already introducing electric vehicles at large. We focus on the European power market to test our hypothesis that it is more cost-efficient to decarbonize when the central power system is coordinated with building heat systems and electric vehicle charging. For Europe as a whole, results show that the average European electricity cost reduces by 3% and transmission expansion decreases by 0.4% when Norwegian heat systems are developed in coordination with the European power system. The average Norwegian electricity cost decreases by 19%. The strategy includes supplying up to 20% of Norwegian buildings with district heating fueled by waste and biomass, and the remaining electric heating supply is dominated by heat pumps.

Determinants of allocative and technical inefficiency in stochastic frontier models: An analysis of Norwegian electricity distribution firms

Recent econometric advances have made it possible to distinguish between persistent and transient technical inefficiency along with allocative inefficiency in stochastic frontier models for panel data. Kumbhakar et al. (2020) and Lai and Kumbhakar (2019) introduce a methodology that allows for the estimation of these inefficiency components and costs therefrom, while including determinants of both components of technical inefficiency. We extend these models to include technical change and determinants of allocative inefficiency (input misallocation). Including a set of variables that influence input misallocation, we are able to determine the effects of these variables on the cost of allocative inefficiency. We provide empirical evidence on the costs of all three types of inefficiency using data on 149 Norwegian electricity distribution firms between 2000 and 2016. We find that the cost of input misallocation is only slightly lower than that of technical inefficiency. Our results reject a commonly imposed modeling assumption that firms are fully allocatively efficient.

Impact of Long-Term Water Inflow Uncertainty on Wholesale Electricity Prices in Markets with High Shares of Renewable Energies and Storages

Renewable energy shares in electricity markets are increasing and therefore also require an increase in flexibility options. Conventional electricity price modelling with optimisation models in thermally dominated markets is not appropriate in markets with high shares of renewable energies and storages because price structures are not adequately represented. Previous research has already identified the impact of uncertainty in renewable energy feed-in on investment and dispatch decisions. However, we are not aware of any work that investigates the influence of uncertainties on price structures by means of optimisation models. Appropriate modelling of electricity price structures is important for investment and policy decisions. We have investigated the influence of uncertainty concerning water inflow by applying a second stage stochastic dual dynamic programming approach in a linear optimisation model using Norway as an example. We found that the influence of uncertainty concerning water inflow combined with high shares of storages has a strong impact on the electricity price structures. The identified structures are highly influenced by seasonal water inflow, electricity demand, wind, and export profiles. Additionally, they are reinforced by seasonal primary energy source prices and import prices. Incorporating uncertainties in linear optimisation models improves the price modelling and provides, to a large extent, an explanation for the seasonal patterns of Norwegian electricity market prices. The paper explains the basic pricing mechanisms in markets with high shares of storages and renewable energies which are subject to uncertainty. To identify these fundamental mechanisms, we focused on uncertainty regarding water inflow, but the basic results hold true for uncertainties regarding other renewable energies as well.

Disentangling Costs of Persistent and Transient Technical Inefficiency and Input Misallocation: The Case of Norwegian Electricity Distribution Firms

Numerous studies have focused on estimating technical inefficiency in electricity distribution firms. However, most of these studies did not distinguish between persistent and transient technical inefficiency. Furthermore, almost none of the studies estimated the cost of input misallocation arising from non-optimal use of inputs. One reason is that the cost function (input distance function) typically used in the literature does not allow for the separation of technical inefficiency and allocative inefficiency. In this study, we estimate both the persistent and transient components of technical inefficiency and input misallocation of Norwegian electricity distribution firms, using panel data from 2000 to 2016. Our modeling and estimation strategy is to use a system approach, consisting of the production function and the first-order conditions of cost minimization. Input misallocation for each pair of inputs is modeled via the first-order conditions of cost minimization. We also estimate the costs of each component of technical inefficiency and input misallocation by deriving the cost function for a multi-output separable production technology. Our modeling and estimation strategy handles endogeneity of inputs. Finally, we allow for inclusion of determinants of persistent and transient technical inefficiency. Our results show that the costs of input misallocation of Norwegian electricity distribution firms are non-negligible.

Bidirectional linkage between a long-term energy system and a short-term power market model

This paper proposes a novel bidirectional linkage between a long-term energy system model and an operational power market model. This combined modelling framework provides long-term energy system investment strategies that explicitly consider the operational complexity of the power sector. The linkage is demonstrated using an energy system model of Norway and a European power market model with a specific high detail level of hydropower operation. For Norway, with its hydropower-dominated electricity sector, the linkage is designed to improve the modelling of hydropower generation and external electricity markets in the energy system model, and to provide consistent assumptions concerning Norwegian electricity demand and capacity in the power market model. The difference in income of hydropower producers, which is endogenous in both models, is used as a convergence criterion. The linkage is tested for various future developments of the European power market and is successful for three of the four analysed instances. However, when the linkage is evaluated in a system with a very high share of intermittent electricity generation and large variations in electricity price, it fails to converge on hydropower income. This is because the simulated Norwegian electricity prices differ significantly between the two models in this situation.

The role of practical, cognitive and symbolic factors in the successful implementation of battery electric vehicles in Norway

Reducing emissions from privately-owned cars plays a central role in reaching targets for global greenhouse gas emissions. Electrification has been one strategy to meet this goal. Norway has been a forerunner and is today the country with the highest proportion of privately-owned battery electric vehicles (BEVs) in Europe. Thus, studying Norwegian experiences with electric mobility should be useful for those working with the electrification of person transport in other countries. In this paper, we analyze user experiences with different models of BEVs, symbolic dimensions of BEV ownership and use, and the significance of incentives promoting BEVs. We argue that the total package of incentives not only provides instrumental motives to buy BEVs but represents a highly visible, national policy in support of BEVs that has been important for adoption, giving BEVs a symbolic certification as an environmentally sound mobility choice. The paper also points to the way incentives for BEVs have different meaning to different drivers according to BEV model and driving experience. Hence, we stress the importance of not treating BEVs as a homogenous technology when developing policy. We argue that the combination of the economic and symbolic value of incentives, technical and practical dimensions of BEVs and not least growing environmental concerns have fostered the successful introduction of BEVs in Norway. The paper is based on in-depth interviews with different segments of BEV drivers in 2013 and 2015, as well as data from two surveys conducted by the Norwegian Electric Vehicle Association in 2016 and 2017.

Economies of scope and scale in the Norwegian electricity industry

An important issue for multi-product firms to consider is economies of scope, i.e., whether there is any benefit from producing two or more products, or whether specializing in producing only one product would be less costly. We examined the economies of scope for Norwegian electricity companies because policy makers have decided to force companies that both generates and distributes electricity to split their operations into two companies, one engaged in generation only and the other in distribution only. We set out to test the validity of the policy makers decision on unbundling generation and distribution. Using data from Norwegian electricity companies for the period 2004–2014, we found evidence of economies of scope, meaning that policy makers’ insistence on separating generation and distribution companies will have increased costs. We also found evidence of economies of scale, meaning that there are cost savings in expanding outputs. Our findings provide important information to consider in future policy decisions in the Norwegian electricity industry, probably with implications for other countries.