Norway 2022
Energy Policy Review

INTERNATIONAL ENERGYAGENCYThe IEA examines thefull spectrumof energy issues
including oil, gas andcoal supply anddemand, renewableenergy technologies,
electricity markets,energy efficiency,
access to energy,
demand side
management andmuch more. Throughits work, the IEA
advocates policies
that will enhance thereliability, affordability
and sustainability ofenergy in its
31 member countries,
10 association
countries and beyond.

Please note that thispublication is subject tospecific restrictions that limit
its use and distribution. The
terms and conditions areavailable online atwww.iea.org/t&c/

This publication and any
map included herein arewithout prejudice to thestatus of or sovereignty overany territory, to thedelimitation of international
frontiers and boundaries andto the name of any territory,
city or area.

Source: IEA. All rights
reserved.
International Energy Agency
Website: www.iea.org

IEA member
countries:

IEA association
countries:

Australia
Austria
Belgium
CanadaCzech Republic
Denmark
Estonia
FinlandFranceGermany
GreeceHungary
Ireland
Italy
Japan
Korea
Lithuania
Luxembourg
MexicoNetherlands
New Zealand
NorwayPolandPortugal
Slovak Republic
Spain
SwedenSwitzerland
TurkeyUnited Kingdom
United States

Argentina
Brazil
China
Egypt
India
Indonesia
MoroccoSingapore
South Africa
ThailandThe European
Commission also
participates in thework of the IEAThe International Energy Agency (IEA) has conducted in-depth peer reviews of its member
countries’ energy policies since 1976. This process supports energy policy development
and encourages the exchange of and learning from international best practices. By seeing
what has worked – or not – in the “real world”, these reviews help to identify policies thatdeliver concrete results.
Since the last IEA in-depth review in 2017, Norway has remained a global pillar of energy
security, providing the world with stable supplies of oil and gas produced in anenvironmentally responsible manner. Thanks to its ample reserves of oil and natural gas,
Norway remains a significant international supplier, with close to 90% of its energy
production exported.

FOREWORD

Foreword

I am grateful to Norway’s Minister of Petroleum and Energy, Terje Aasland, for his
government’s leadership on energy and climate issues and support for key IEA initiatives.
In particular, I commend Norway’s efforts to augment its near-term oil and gas production
in response to Russia’s invasion of Ukraine, helping to stabilise global supplies, especiallyto its European neighbours. At the same time, Norway has advanced efforts to reducegreenhouse gas emissions, including methane, from oil and gas production, especiallyusing electrification of offshore platforms.
Norway has updated its already ambitious climate targets with plans to reduce greenhousegas emissions by 90-95% from 1990 levels by 2050, excluding carbon sinks. The country’s
robust carbon pricing system provides a solid basis for delivering on this goal.
Nonetheless, Norway has considerable work ahead to meet its ambitious climate targets.
Since its electricity generation from hydropower already produces zero emissions and thecountry has substantially electrified its buildings sector and almost half of industry, manyof the easy wins for reducing emissions have already been achieved. The remaining
reductions will be more complex, challenging and costly, notably in transport and industry.
Norway has an opportunity, therefore, to show the world how to undertake complex
emissions reductions, as all countries will eventually face this issue.
Norway’s existing expertise can help it achieve a successful energy and climate transition.
And its longstanding work supporting economic development and poverty eradication
around the world, notably in Africa, puts it in a strong position to help advance clean energy
transitions in emerging and developing economies. If the right policies and incentives are
put in place, Norway is well placed to lead the world in decarbonising a wide range ofsectors through technologies such as electric vehicles, carbon capture, utilisation andstorage, and hydrogen. Norway is already a leader in carbon capture, and its impressive
Longship project will further help to advance this technology for the world. Leveraging its
renewables-based electricity system, Norway can further support sectoral transitions by
developing detailed, long-term roadmaps backed by specific policy measures.

Dr. Fatih Birol
Executive Director
International Energy Agency
3

IEA. All rights reserved.

I sincerely hope that the recommendations proposed in this report will help Norway in its
energy system transformation, resulting in clean energy progress that spreads well beyond
its borders.

Foreword........................................................................................................................... 3
1. Executive summary .................................................................................................... 9
Overview ........................................................................................................................... 9
Climate change policies .................................................................................................. 10
Energy efficiency ............................................................................................................ 11
Electricity in the energy transition ................................................................................... 11
Oil and gas sector ........................................................................................................... 12
Energy research and innovation ..................................................................................... 13
Key Recommendations: .................................................................................................. 14
2. General energy policy .............................................................................................. 15

TABLE OF CONTENTS

ENERGY INSIGHTSCountry overview ............................................................................................................ 15
Energy supply and demand ............................................................................................ 17
Assessment .................................................................................................................... 28
Recommendations .......................................................................................................... 33

ENERGY SYSTEM TRANSFORMATION
3. Energy and climate change ..................................................................................... 35
Overview ......................................................................................................................... 35
Energy-related CO2 emissions ........................................................................................ 36
CO2 emissions drivers and carbon intensity ................................................................... 37
Climate change targets ................................................................................................... 38
Climate change policies .................................................................................................. 39
Climate adaptation and resilience ................................................................................... 49
Assessment .................................................................................................................... 50
Recommendations .......................................................................................................... 54
4. Energy efficiency ...................................................................................................... 57
Overview ......................................................................................................................... 57
Industry ........................................................................................................................... 59
Buildings and district heating .......................................................................................... 62
Assessment .................................................................................................................... 68
Recommendations .......................................................................................................... 71

5

IEA. All rights reserved.

Transport ........................................................................................................................ 65

TABLE OF CONTENTS

5. Renewable energy .................................................................................................... 73
Overview ......................................................................................................................... 73
Renewable electricity ...................................................................................................... 74
Renewable energy policies ............................................................................................. 75
Assessment .................................................................................................................... 81
Recommendations .......................................................................................................... 85
6. Energy research, development and innovation ..................................................... 87
Overview ......................................................................................................................... 87
Key actors in Norway’s energy innovation landscape ..................................................... 88
Energy innovation priorities and guiding documents ....................................................... 89
RD&D spending .............................................................................................................. 91
Monitoring, evaluation and tracking of results ................................................................. 96
Noteworthy RD&D projects ............................................................................................. 96
International collaboration ............................................................................................... 97
Assessment .................................................................................................................... 98
Recommendations ........................................................................................................ 100

ENERGY SECURITY
7. Electricity................................................................................................................. 103
Overview ....................................................................................................................... 103
Electricity supply and demand ...................................................................................... 104
Electricity generation outlook ........................................................................................ 106
Transmission and distribution ....................................................................................... 107
Cross-border interconnections ...................................................................................... 108
Market structure and regulation .................................................................................... 110
Electricity prices ............................................................................................................ 112
Electricity security and emergency response ................................................................ 114
Assessment .................................................................................................................. 117
Recommendations ........................................................................................................ 119
8. Oil and natural gas.................................................................................................. 121
Overview ....................................................................................................................... 121
Upstream policies and regulations ................................................................................ 122
Natural gas supply and demand ................................................................................... 129
Oil products supply and demand .................................................................................. 130
Biofuels ......................................................................................................................... 132
6

IEA. All rights reserved.

Oil and gas exports ....................................................................................................... 129

Oil market structure ...................................................................................................... 132
Oil infrastructure ........................................................................................................... 134
Oil emergency policies .................................................................................................. 135
Assessment .................................................................................................................. 137
Recommendations: ....................................................................................................... 139

ANNEXESANNEX A: Review team and supporting stakeholders ................................................. 141
ANNEX B: Energy balances and key statistical data .................................................... 143
ANNEX C: Glossary and list of abbreviations ............................................................... 147

TABLE OF COTENTSTABLE OF CONTENTS

LIST OF FIGURES, TABLES AND BOXES

Figure 2.1 Map of Norway ............................................................................................. 16
Figure 2.2 Overview of energy production, supply and demand in Norway, 2020 ......... 17
Figure 2.3 Energy production by source in Norway, 2000-2020 .................................... 18
Figure 2.4 Norway’s energy import self-sufficiency, 2000-2020 .................................... 19
Figure 2.5 Total energy supply by source in Norway, 2000-2020 .................................. 19
Figure 2.6 Total final consumption by source in Norway, 2000-2020 ............................ 20
Figure 2.7 Energy demand per sector and per fuel, and electricity generation by fuel.......
in Norway in 2020 ......................................................................................... 20
Figure 3.1 Greenhouse gas emissions by sector in Norway, 2000-2019 and targets .... 36
Figure 3.2 Energy-related CO2 emissions by sector and fuel in Norway, 2000-2020 .... 36
Figure 3.3 Energy-related CO2 emissions by energy source in Norway, 2000-2020 ..... 37
Figure 3.4 Energy-related CO2 emissions and main drivers in Norway, 2000-2020 ...... 38
Figure 4.1 Energy demand and drivers in Norway, 2000-2020 ..................................... 58
Figure 4.2 Total final consumption by sector in Norway, 2000-2020 ............................. 58
Figure 4.3 Total final consumption in industry by source in Norway, 2000-2020 ........... 60
Figure 4.4 Total final consumption in the building sector by source in Norway,
2000-2020 .................................................................................................... 62
Figure 4.5 Total final consumption in transport by fuel in Norway, 2000-2020 .............. 66
Figure 4.6 Registered electric vehicles and public charging points in Norway,
2012-2021 .................................................................................................... 66
Figure 5.1 Renewable energy in total final energy consumption in Norway,
2000-2020 .................................................................................................... 73
Figure 5.2 Renewable energy by sector in Norway, 2020 ............................................. 74
Figure 5.3 Renewable energy in electricity generation in Norway, 2000-2020 .............. 75
Figure 6.1 Energy-related public RD&D budget by sector in Norway, 2009-2020 ......... 91
Figure 6.2 Energy-related public RD&D spending per GDP in IEA countries, 2020 ...... 91
Figure 6.3 Top 10 countries for selected technologies in RD&D budget per thousand
units of GDP, 2020 ....................................................................................... 92
Figure 7.1 Electricity generation by source in Norway, 2000-2020 .............................. 104
Figure 7.2 Electricity demand by sector in Norway, 2000-2020 ................................... 105
7

IEA. All rights reserved.

FiguresTABLE OF CONTENTS

Figure 7.3 Norway’s electricity net trade with neighbouring countries, 2000-2020 ...... 106
Figure 7.4 Map of Norway’s cross-border electricity interconnections ......................... 109
Figure 7.5 Electricity prices for industry and households in IEA member countries, .........
2020 ........................................................................................................... 113
Figure 7.6 Electricity prices in Norway and neighbouring IEA countries, 2000-2020 ... 113
Figure 8.1 Division of responsibilities for the Norwegian upstream sector ................... 123
Figure 8.2 Map of Norway’s gas infrastructure ............................................................ 126
Figure 8.3 Oil product demand by sector in Norway, 2000-2020 ................................. 130
Figure 8.4 Oil products production in Norway, 2000-2020 ........................................... 131
Figure 8.5 Norway’s oil products net trade by country, 2000-2020 .............................. 132
Figure 8.6 Price comparison for automotive diesel in the IEA, Q4 2021 ...................... 133
Figure 8.7 Price comparison for unleaded gasoline (95 RON) in the IEA, Q4 2021 .... 133
Figure 8.8 Map of Norway’s oil infrastructure .............................................................. 134
Figure 8.9 Total industry oil stocks components in Norway, December 2021 ............. 136
Table

8

IEA. All rights reserved.

Table 5.1 Electricity generation capacity growth projections in Norway (MW),2021-2030 .................................................................................................... 76

Overview
Norway has set ambitious targets for reducing greenhouse gas (GHG) emissions andestablishing a low emissions society by 2050. As an energy-rich country, Norway is in aunique starting position with respect to the energy transition. An abundance of affordablehydropower has enabled the development of energy-intensive industries and a high levelof electrification of homes and businesses with limited GHG emissions. At the same time,
as a major oil and gas producer and exporter, Norway will need to support an evolution of
its energy sector amid a global energy transition.

ENERGY INSIGHTS

1. Executive summaryThanks to its ample reserves of oil and natural gas, Norway is a net energy exporter:in 2020, 87% of its energy production was exported. From a global perspective, Norway is
the seventh-largest natural gas producer in the world, supplying 3% of global gas
consumption. Norway is also a significant oil producer, accounting for 2.3% of global oil
production in 2020. As a reputable and reliable producer, Norway has played a stabilisingrole in the world’s oil and gas supply, particularly in meeting European demand.
In addition, its extensive hydropower resources covered 92% of electricity generation,
supporting an almost completely renewables-based power sector. Moreover, Norway’s
energy demand is highly electrified: in 2020, electricity covered almost half of the country’s
total final consumption (TFC), the highest share among IEA member countries. Norway
has tremendous potential to further leverage its clean electricity system to decarbonise
other sectors of the economy through additional electrification.

Overall, Norway has many natural advantages that can help it achieve a successful energy
and climate transition. In particular, it can be well-positioned to lead the world on newtechnologies for decarbonising hard-to-abate sectors, such as electric vehicles (EVs),
carbon capture and storage (CCS), and hydrogen, if the right policies and incentives are
put in place. Leveraging its renewables-based electricity system, Norway can further
support its goals by developing detailed, long-term sectoral transition road maps,
underpinned by specific policy measures, to lay out a well-defined pathway for sectoralchange.
9

IEA. All rights reserved.

Nonetheless, to meet its ambitious target of being a low emissions society by 2050,
Norway has considerable work ahead, especially since electricity generation is alreadyzero emissions and the country already has substantial electrification of the buildings
sector and almost half of industry, thereby also achieving low emissions in these sectors.
As a result, many of the easy wins for reducing emissions have already been achieved
and the remaining emissions reductions will be more complex, challenging and costly,
notably in transport and industry.

1. EXECUTIVE SUMMARY

Climate change policies
Norway has, through its enhanced nationally determined contribution (NDC) under theParis Agreement, committed to reduce emissions by at least 50% and towards 55%
by 2030 compared to 1990 levels. In June 2017, the Norwegian parliament adopted the
Climate Change Act, which establishes by law Norway’s NDC target as well as the targetof becoming a low emissions society by 2050. The target is equivalent to reducing
emissions by around 90-95% from 1990 levels.
As part of its Agreement on the European Economic Area, Norway participates in theEuropean Union’s (EU) internal energy market and, therefore, co-operates closely with the
EU on energy and climate matters. Norway has an agreement with the EU to participate
in EU climate legislation for the period 2021-2030, covering the EU Emissions Trading
System (EU ETS); the Effort Sharing Regulation (ESR) for non-ETS emissions; and theland use, land-use change and forestry regulation (LULUCF). Under the current
agreement with the EU, the EU’s Fit for 55 package will update all three regulations, which
Norway plans to continue to follow domestically.
The polluter-pays principle is a cornerstone of the Norwegian policy framework on climatechange. Norway was one of the first countries in the world to put in place a carbon tax,in 1991, covering the combustion of fossil fuels and the petroleum sector. Today,
approximately 85% of domestic GHG emissions are either covered by the EU ETS or
subject to a CO2 tax (or other GHG taxes), or both. The national CO2 tax is currently around
766 Norwegian krone per tonne of CO2 equivalent (NOK/t CO2-eq) (76 EUR/t CO2-eq) for
emissions outside the EU ETS.
In January 2021, Norway’s former government presented a white paper to parliamentdescribing an economy-wide Climate Action Plan for 2021-2030 to reduce emissions by atleast 50% and towards 55% by 2030. The action plan’s main emphasis is on emissions
from sectors not covered by the EU ETS, including from transport, buildings, waste andagriculture. The plan includes policies and measures aimed at cutting emissions from
non-ETS sectors, which account for around half of Norway’s total emissions, by 45%
by 2030 from 2005 levels. It also addresses EU ETS emissions as well as CO2 emissions
and removals from LULUCF.

CO2 pricing levels are robust from an international perspective and can drive meaningful
emissions reductions in relevant sectors. However, even such a high carbon price isunlikely to achieve the level of emissions reductions needed to meet Norway’s climate
targets. The government would benefit from more detailed projections of the levels ofcarbon prices needed to motivate technological shifts to cut emissions, and consider
supplementary incentives and support for sectors that may need them.

10

IEA. All rights reserved.

The main policy instruments in the Climate Action Plan are GHG taxation, regulatory
measures, climate-related requirements in public procurement processes, information forthe public on climate-friendly options, financial support for the development of newtechnologies, and initiatives to promote research and innovation. The white paper
announced a gradual increase in the national carbon tax rate to 2 000 NOK/t CO2-eq(196 EUR/t CO2-eq) in 2030, which would be one of the highest levels in the OECD.

Energy efficiency
As in all countries, energy efficiency has an important role to play in Norway. In the past
decade, economic growth has been decoupled from energy consumption. The government
has set a target to lower the overall energy intensity of the economy by 30% in 2030
compared to 2015. However, from 2015 to 2019, energy intensity fell by only 4%.
Enova is Norway’s main provider of financial support for energy efficiency projects acrossvarious sectors, as well as projects targeted toward households and consumers.
In the industry sector, which has the highest share in TFC, from 2003 to 2018, Enova
provided support to projects for energy efficiency and for the replacement of fossil fuelswith renewable energy. In 2018, Enova’s focus changed to innovative measures more
specifically targeting emissions reductions and the shift to a low emissions society.
Since 2019, therefore, Enova’s mandate no longer directly targets energy efficiency inindustry.

ENERGY INSIGHTS

1. EXECUTIVE SUMMARY

In the buildings sector, which accounts for 34% of TFC, Norway has a target to reduceenergy use in existing buildings by 10 terawatt hours (TWh) by 2030 relative to 2015 levels.
The main energy efficiency measure in the buildings sector is the adoption of building
codes. Since 2010, energy performance certificates are required when buildings are built,
leased or sold. The government also banned the installation of fossil fuel-based heating
systems since 2016 and the use of heating oil since 2020. Most buildings nowadays haveelectric heating systems.
In the transport sector, which accounts for 21% of total demand, Norway is pursuing an
ambitious policy on EVs. Fossil fuel cars are subject to a high registration tax on purchaseas well as to a CO2 tax and road use tax on gasoline and diesel. Meanwhile, zero
emissions vehicles are heavily subsidised. Support includes no value-added tax (VAT),
exemption from a one-off registration tax as well as reduced toll roads, ferry and parking
fees. As such, Norway had the highest share of zero-emission vehicles in both car stock(16%) and car sales (64.5%) in 2021.
Though Norway has been blessed with affordable energy for a long time and has largely
decoupled economic growth and energy consumption for many years, substantial costsavings could be made by reducing consumption. Improving the efficiency of energy
consumption warrants even greater attention in the current context of high electricity pricesthat prompted the government to issue across-the-board price reductions. These sizeable
outlays could have instead focused on efficiency measures with longer-lasting results. To
underpin its energy efficiency target, the government should establish a national energy
efficiency strategy that includes cost-effective sectoral targets as well as policy measures
to help end users lower consumption.

Norway has an almost entirely renewables-based electricity system, with renewable
resources accounting for 98% of generation in 2020, of which hydro is the dominant source
at 92%.

11

IEA. All rights reserved.

Electricity in the energy transition

1. EXECUTIVE SUMMARY

Norway is also historically a net exporter of electricity to neighbouring countries, reachinga record 20.5 TWh of net exports in 2020, making it one of the largest exporters in Europe.
Norway is therefore well-integrated in the Nordic and European electricity markets.
Moreover, as electrification forms a central part of any country’s energy transition, Norway
finds itself in an enviable starting position. Its energy demand is already highly electrified:in 2019, electricity covered almost half of the country’s TFC, the highest share among IEA
member countries.
Still, more electrification will be needed across sectors to meet Norwegian climate targets,
which will require additional renewable generation capacity, such as continued expansionof hydro capacity (including upgrades of existing plants).
The share of wind in Norway’s electricity system has increased tenfold in the last decade,accounting for 6.5% of total electricity generation in 2020, making it the second-largest
electricity generation source in the country. However, Norway has faced local opposition
to onshore wind power projects, based on the perceived impact on landscapes andecology. Following a pause on new licences for onshore wind in 2019, the government
announced in April 2022 that it would resume licencing for new projects where local
municipalities are supportive.
The Norwegian government also has ambitions to build-out offshore wind capacity andsupply chains. Norway is currently building the world’s largest floating offshore wind farm(Hywind Tampen), based on Equinor’s floating wind technology, with a total installedcapacity of 88 megawatts (MW). Beyond this project, two areas have been assigned foroffshore wind power development to date, one on deep waters with high-cost floating
technology and one with a bottom-fixed solution. However, the government is still in theprocess of creating a licencing framework for offshore wind. It is working to make thelicencing process more efficient, to facilitate offshore wind projects in operation before
2030. As such, offshore wind will not make much of a contribution to Norway’s power mix
this decade.
The country will also benefit from expanding the national grid (or assisting Sweden in
enforcing its grid) to ensure that surplus generation in the north of the country can moreeasily make its way south. Increased use of flexibility mechanisms to balance the grid will
also be needed, and existing hydro storage capacity provides a good base.

The oil and gas sector is Norway’s largest one based on value added, revenues,
investments and export value. As such, the sector plays a critical role in the Norwegian
economy and in financing the Norwegian welfare state. The country’s export revenues
from the petroleum industry are estimated to be over NOK 800 billion (EUR 80 billion) in
2021 and expected to double in 2022. The Government Pension Fund Global, financed by
the revenues from oil and gas production, finances public pension expenditures, provides
benefits to both current and future generations from petroleum revenues, and protects thecountry’s long-term economy from volatility in oil and gas revenues.

12

IEA. All rights reserved.

Oil and gas sector

The Norwegian government remains confident that Norway can compete on a smaller
global market for oil and gas over time. With relatively low production costs and emissions
intensity of upstream operations, Norway is well-positioned as a provider of oil and gas to
the world market. Nonetheless, the government should plan for a scenario in which oil
demand falls faster than expected as a result of many countries having net zero by 2050
targets.
Moreover, in terms of national emissions reductions, the oil and gas industry is one of theleading sources of GHG emissions in Norway, accounting for around a quarter of thecountry’s total emissions. The industry has ambitions to further reduce emissions in the
upstream petroleum sector up to 40% by 2030 compared to 2005, and to achieve net zero
emissions by 2050. While some of the planned emissions reductions will be achieved
through Norway’s participation in the EU ETS, steeper emissions cuts will be needed tomeet 2030 and 2050 targets, implying that the next tranche of emissions reductions in the
sector to meet climate targets will be more challenging and costly. Results can come not
only from the escalating carbon price, but also from additional electrification andtechnologies such as CCS in the longer term. However, these options need to bethoroughly and holistically assessed with an eye to not only cost competitiveness, but also
the development of planned new industries – including batteries, hydrogen and data
centres – that will also need to draw power from shore.

ENERGY INSIGHTS

1. EXECUTIVE SUMMARY

Energy research and innovation
Energy technology and innovation will play an important role in Norway’s energy transition,in particular to leverage the existing strengths of its energy sector in new areas, such as
CCS and hydrogen.
Building on the 2030 Climate Action Plan, in June 2021, the government presented a white
paper on energy policy and long-term value creation from Norwegian energy resources,
including through new industries such as hydrogen and offshore wind, strengthening thepower grid, and a future-oriented oil and gas industry with low emissions from upstream
activities.

CCS is a priority area for Norway’s climate action, and is identified as an importantmeasure in Norway’s NDC. The Langskip (“Longship”) project, currently underconstruction, is a central part of the government’s policy for CCS. The project comprises
state support to two full-scale capture facilities and one storage facility in the North Sea.
Langskip aims to facilitate learning and cost reductions for subsequent projects in aninternational perspective. The carbon tax introduced in 1991 has also been one of the key
drivers of CCS on the continental shelf. In addition to several pilot projects, there are
currently two large-scale CCS projects operating in Norway and one under development.
As such, Norway has established itself as a leading country for CCS deployment and ishome to a number of companies with CCS expertise. The technology can notably play arole in decarbonising the industry sector (such as upstream oil and gas production,
cement, and waste incineration) and also facilitate the production of low-carbon hydrogen,along with offering vast CO2 storage capacity for other countries.
13

IEA. All rights reserved.

Innovation in Norway’s energy sector is spearheaded by Enova, an entity owned by the
Ministry of Climate and Environment. It supports new energy and climate technology inindustry and transport, and the introduction of new technologies.

1. EXECUTIVE SUMMARYThe Norwegian government also offers several R&D-related support measures for thedevelopment of low-carbon hydrogen. The government published a Hydrogen Strategy inJune 2020, followed by a white paper in 2021 that assessed the entire energy sector andincluded a road map for hydrogen. The road map includes signposts for the production
and use of hydrogen in the 2025, 2030 and 2050 horizons. An important point in thegovernment’s vision is to develop a coherent value chain where production, distribution
and use are developed in parallel.

Key recommendations
The government of Norway should:
 Establish national emissions reduction strategies for key sectors to 2030 and 2050 that
include specific targets and define supporting policy measures.
 Assess various scenarios for future global oil and gas demand as part of a longer-term
strategy for transformation from oil and gas revenue dependency, including
diversification into low-carbon energy carriers.
 Consider measures to supplement carbon pricing to achieve harder to abate, costlier
emissions reductions, especially in the industry sector.
 Prioritise energy efficiency as a policy area, including through sectoral targets, actionplans and supporting measures, especially in the buildings and industry sectors.
 Promptly advance a robust regulatory framework that provides long-term investment
signals and supports strong deployment of offshore wind generation.

14

IEA. All rights reserved.

 Increase ambitions to jump-start clean technologies where Norway may havecompetitive advantages and means, such as hydrogen, green shipping, carbon
capture and storage, and offshore wind.

Key data (2020)
TES: 27.4 Mtoe (hydro 44.3%; oil 31.9%; natural gas 16.6%; bioenergy and waste 7.1%;
solar, wind and tide 3.1%; coal 3.0%; heat 0.4%; electricity trade -6.2%), -15.6% from 2010
to 2019, -0.9% from 2019 to 2020

ENERGY INSIGHTS

2. General energy policy

TES per capita: 5.3 toe/cap, -20.6% since 2010 (IEA average: 3.8 toe/cap)
TES per GDP: 87 toe/USD million, -23.7% since 2010 (IEA average: 91 toe/USD million)
Energy production: 207.9 Mtoe (natural gas 47.2%; oil 45.8%; hydro 5.8%; bioenergy andwaste 0.8%; solar, wind and tide 0.4%; heat 0.1%), -6.6% from 2010 to 2019, +7.0%
from 2019 to 2020
TFC: 20.5 Mtoe (electricity 47.5%, oil 36.1%, bioenergy 6.8%, natural gas 4.3%, coal 2.1%,
heat 2.3%), -0.5% from 2010 to 2019, -3.2% from 2019 to 2020

Country overview
The Kingdom of Norway covers a total area of 365 000 km2, situated in Northern Europe,bordered by Finland, the Russian Federation (‘Russia’, hereafter) and Sweden. The
country is dominated by mountainous terrain and has an indented coastline along theNorth Sea, the Norwegian Sea and the Barents Sea in the Arctic Ocean, with thousandsof fjords and about 50 000 islands.
Norway’s population was 5.4 million in 2020, 10% higher than in 2010. Its total populationis steadily growing, but the growth rate has slowed due to a decline in immigration overthe last decade. Norway is the second-least populated country in Europe after Iceland,with 15 people per square kilometre (World Bank, 2021). Norwegian and Sami are the two
official languages and its currency is the Norwegian kroner (exchange rate of NOK 0.098
per EUR 1 in 2021).

15

IEA. All rights reserved.

Norway is a constitutional monarchy, with a full representative parliamentary democracy.
Executive power is vested formally in the king, but is exercised through the government,
headed by the prime minister. Legislative power is held by the Storting (the Norwegianparliament). As a member of the European Economic Area (EEA), Norway shares internalmarket legislation with the EU and has therefore implemented several EU directives andregulations related to energy.

2. GENERAL ENERGY POLICY

Figure 2.1 Map of Norway

In 2020, Norway’s GDP per capita was USD 67 370, and ranked fourth in the OECD after
Luxembourg, Switzerland and Ireland. The employment rate in the fourth quarter of 2021
was 77%, which is the sixth-highest among OECD countries (OECD, 2021). The Covid-19
pandemic caused GDP to fall by 0.7% in 2020; it then grew by 3.9% in 2021. OECD
projections expect yearly real mainland GDP growth of 4.2% in 2022.

16

IEA. All rights reserved.

EconomyIn 1990, Norway created the Government Pension Fund Global, financed by the revenues
from oil and gas production. Since 2001, a fiscal rule has guided withdrawals from the fundwhereby spending must, over time, follow the expected real return of the fund. Emphasis
is placed on smoothing out economic fluctuations to contribute to sound capacity utilisationand low unemployment. The framework aims to preserve the real value of the fund for the
benefit of future generations. It also isolates the budget from short-term fluctuations inpetroleum revenue and leaves space for fiscal policy to counteract economic downturns.
To ensure risk diversification and good financial return, the fund only invests abroad andits investments (as of the end of 2021) consist of equities (72.0%), fixed income (25.4%),
real estate in a selected number of major cities (2.5%) and renewable energy infrastructure(0.1%). In addition, the fund aims to ensure sustainable investments, and environmental
and social issues are taken into consideration when taking investment decisions.
Parliament also took a decision in 2019 for the fund to divest from companies only focusedon producing oil and gas in order to reduce oil price risk for the Norwegian economy (aprevious decision divested from coal for environmental reasons). It is one of the world’s
largest funds, owning around 1.3% of all the world’s listed companies (in 2021). The fundhas generated an annual return of 6.6% since 1998. Each year, though the Norwegian
government can spend only a small part of the fund (equivalent to expected real return),
this still amounts to almost 20% of the government’s budget. At the end 2021, the fund’s
market value was NOK 12.34 trillion (EUR 1.23 trillion) (NBIM, 2021).

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

Energy supply and demand
Thanks to its natural reserves of oil and natural gas, Norway was a net energy exporter:in 2020, 87% of its energy production was exported (Figure 2.2). Also, its extensivehydropower resources support an almost completely renewable electricity generation
system. Emissions-intensive fuels are exported abroad and cover only half of the country’s
total energy supply (TES), the fifth-lowest share among IEA member countries. Norway isalso one of the IEA countries with the highest share of electricity in TFC, given its clean
and affordable profile.
Figure 2.2 Overview of energy production, supply and demand in Norway, 2020
Wind and solar

30

180

Transformation andlosses25

130

Exports

80

20
Industry

15
10

Transport

530

Buildings

0- 20

Production

TES

-5

District heat
Electricity
Bioenergy and
waste
Hydro
Natural gas
Oil

TES

TFC (by fuel)TFC (by sector)

Coal
IEA. All rights reserved.

Norway exports a large share of the energy it produces, mainly natural gas and oil.
Source: IEA (2022).

17

IEA. All rights reserved.

Mtoe

2. GENERAL ENERGY POLICY

Domestic production and energy surplus
In 2020, 93% of Norway’s domestic energy production consisted of natural gas and oil. In
the same year, total energy production amounted to 208 million tonnes of oil equivalent(Mtoe), 7% higher than in 2019, but in line with the average value of the past ten years(0.1% lower than in 2010) (Figure 2.3). Gas production overtook oil production in 2012 andgas is now the largest source of domestic energy production (98 Mtoe, or 116 billion cubic
metres [bcm] in 2020), accounting for almost half of total production in 2020. The
production of oil was 95 Mtoe in 2020 (1 950 thousand barrels per day [kb/d]) and has
declined consistently in the last decade; in 2020, it was 5% lower than in 2010 and 43%
lower than its peak in 2000.
Figure 2.3 Energy production by source in Norway, 2000-2020
250

Mtoe

200

Bioenergy and waste
Wind

150

Hydro

100

Natural gas

50

Oil

0

Coal
IEA. All rights reserved.

Energy production is dominated by natural gas and oil, as natural gas overtook oil production
in 2012.
Source: IEA (2022).

Coal production in Norway has been minimal since 2017. The only coal mine (Svalbard)
employs around 80 people and produces coal for the local power plant (Longyearbyen).
In 2020, the Covid-19 pandemic and a water intrusion further lowered production, whichreached 63 000 tonnes. Because of expected economic losses, coal production has been
subsidised since 2020. A grant of NOK 51 million (EUR 5 million) was proposed to cover
expected operating losses in 2022. Around 25% of the coal extracted in the Svalbard minefuels the Longyearbyen power plant, while the remaining 75% is exported due to its lower
quality. In 2020, the government decided to shut down the coal power plant by 2023. The
mine will also be closed in the same year.

18

IEA. All rights reserved.

The size of Norway’s energy surplus is significant; domestic production was seven times
higher than total domestic energy supplied in 2020 (Figure 2.4). In the same year, thecountry produced 10 times more oil and 21 times more natural gas than its domestic needs,
with an increasing trend over the past 20 years.

Production/TES

Figure 2.4 Norway’s energy import self-sufficiency, 2000-2020
25
Natural gas

20
15

Oil

10
Total energy

5
0
2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Coal
IEA. All rights reserved

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

Total energy production in Norway was seven times higher than domestic energy needs
in 2020, while the share of production for oil and gas to domestic supply was even higher.
Source: IEA (2022).

Total energy supply
TES has decreased over the past ten years, from 33 Mtoe in 2010 to 27 Mtoe in 2020, due
to a slight reduction in oil and natural gas supply (Figure 2.5). Fossil fuels account for only
52% of Norway’s energy supply, thanks to hydropower resources covering 44% of TES,
the highest share among IEA countries.
Figure 2.5 Total energy supply by source in Norway, 2000-2020
35

Mtoe

30

Oil

25

Wind

20

Heat
Bioenergy and waste

15

Coal

10

Natural gas

5

Hydro

0

Electricity trade-5
IEA. All rights reserved.

Total energy supply is largely covered by hydro (44% in 2020), as fossil fuels are mainly
exported abroad.

19

IEA. All rights reserved.

Source: IEA (2022).

2. GENERAL ENERGY POLICY

Energy demand
In the past 20 years, TFC has been stable at around 20 Mtoe (Figure 2.6). Norway’s energy
demand is highly electrified: in 2020, electricity covered almost half (48%) of the country’s
TFC, the highest share among IEA member countries, followed by oil (36%), bioenergy
and waste (6.8%), natural gas (4.3%), and coal (2.1%). Electricity dominates demand in
the residential sector (84%), and covers almost half of the energy demand of the industry
sector (45%). Oil is mainly used in the industry and transport sectors, representing 86% in
the transport sector, the second-lowest among IEA member countries (Figure 2.7). The
relatively low share in transport is due to the country’s immense success in increasing thesales of EVs. Bioenergy is used in industry, buildings and transport, ranging from 5% in
industry to 9% in transport. Natural gas is used mainly in the industry sector, notably foroil and gas production. Most coal consumption also comes from the industry sector, whichuses around 0.6 million tonnes (Mt) of imported coal every year.
Figure 2.6 Total final consumption by source in Norway, 2000-2020
Mtoe

20

District heat
Electricity

15

Bioenergy and waste

10

Natural gas
5

Oil
Coal

0

IEA. All rights reserved.

Norway’s energy demand is the most electrified among IEA countries.
Source: IEA (2022).

Energy demand

10
9
8

Hydro

Electricity

7

Wind

Solar

6
5

Bioenergy and waste

4

Natural gas

Natural gas

32

Bioenergy and waste, oil and solar

Oil

1
0

Electricity generation
Heat

Industry

Buildings Transport

Coal

0

20

40

60

80

100

120

140

160 TWh

IEA. All rights reserved.

The buildings and industry sectors are highly electrified, and electricity is produced almost
entirely through hydropower, which in 2020 covered 92% of electricity generated.
Source: IEA (2022).

20

IEA. All rights reserved.

Mtoe

Figure 2.7 Energy demand per sector and per fuel, and electricity generation by fuelin Norway in 2020

In 2020, electricity in Norway was generated mainly from hydro (92%), with some smaller
shares of wind (6.5%) and natural gas (1.0%). Other sources include very small shares ofbioenergy and waste (0.28%), oil (0.14%), coal (0.03%), and solar (0.02%).

Energy and climate strategies
As an energy-rich country, Norway is in a unique starting position with respect to theenergy transition. An abundance of affordable hydropower has enabled the developmentof energy-intensive industries and a high level of electrification of homes and businesses
with limited GHG emissions. At the same time, as a major oil and gas producer andexporter, Norway will need to carve out a new role for its energy sector amid the global
energy transition.
Norway has, through its enhanced NDC under the Paris Agreement, committed to reduce
emissions by at least 50% and towards 55% by 2030 compared to 1990 levels. Norway’s
NDC is economy-wide, covering all sectors and GHGs. In June 2017, the Norwegianparliament adopted the Climate Change Act, which establishes by law Norway’s NDC
target as well as the target of becoming a low emissions society by 2050. The target is
equivalent to reducing emissions by 90-95% from 1990, which is very ambitious given thesizeable role that CO2 removals from Norway’s forestry sector play in lowering its total
emissions. In comparison, a net zero target for Norway as applied in the EU (i.e. including
LULUCF) would still allow for more emissions than Norway’s current 2050 target.

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

Alignment with EU climate and energy policy
As part of its Agreement on the EEA, Norway participates in the EU’s internal energy
market and therefore co-operates closely with the EU on energy and climate matters.
Norway has an agreement with the EU to participate in EU climate legislation for the period2021-2030, covering the EU ETS, the ESR for non-ETS emissions and the LULUCF
regulation. Under the current agreement with the EU, Norway has a 2030 nationalemissions reduction target for non-ETS emissions of 40% below 2005 levels. The EU’s
Fit for 55 package will update all three regulations, and the Norwegian government’s
political platform states that the government wants to continue climate co-operation with
the EU.
As Norway’s climate strategies are aligned with the EU’s, Norway has adopted a numberof EU climate and energy directives into its domestic regulation (Energy Facts Norway,2018). Beyond climate legislation, Norway has also adopted the EU Renewable Energy
Directive, the Energy Performance of Buildings Directive, the CHP Directive on combined
heat and power, as well as the Ecodesign and Energy Labelling Directives. In addition,
Norway has adopted the Third Energy Market Package and subsequent EU regulations
covering the electricity market and system. Nonetheless, the time between adoption by
the EU and finalisation of equivalent regulations in Norway can be lengthy, at times up to
several years.

In January 2021, the former government presented a white paper to parliament describing
an economy-wide Climate Action Plan for 2021-2030. The plan outlined how Norway willachieve its target to reduce emissions by at least 50% and towards 55% by 2030. The
main emphasis of the action plan is on emissions not covered by the EU ETS, includingfrom transport, buildings, waste, agriculture, and some minor emissions from industry
21

IEA. All rights reserved.

Climate change white paper2. GENERAL ENERGY POLICY

production and the oil and gas industry. The plan includes an aim to cut emissions from
non-ETS sectors, which account for around half of Norway’s total emissions, by 45% from2005 levels by 2030. It also addresses EU ETS emissions as well as CO2 emissions andremovals from LULUCF.
The main policy instruments in the Climate Action Plan are GHG taxation, regulatory
measures, climate-related requirements in public procurement processes, information on
climate-friendly options, financial support for the development of new technologies, andinitiatives to promote research and innovation (Norway, Ministry of Climate andEnvironment, 2021a). On carbon pricing, the white paper announced a gradual increasein the national carbon tax rate to NOK 2 000 (EUR 196) per tonne of CO2 equivalent(t CO2-eq) in 2030, one of the highest levels in the OECD (see Chapter 3).

White paper on long-term value creation from Norway’s energy
resources
Building on the 2030 Climate Action Plan, in June 2021, the former government presented
a white paper on energy policy and long-term value creation from Norwegian energy
resources, entitled Putting Energy to Work (Norway, Ministry of Petroleum and Energy,
2021b). It outlines how Norway can use its energy resources for job creation and growth,
including through new industries such as hydrogen and offshore wind, strengthening thepower grid, and a future-oriented oil and gas industry with low emissions from production.
The paper outlines a strategy for how renewable energy and the power grid can form thebasis of further electrification of the economy and a fossil fuel phase-out.
The white paper highlights the challenges the oil and gas industry is undergoing as a resultof maturing fields on the Norwegian continental shelf (NCS) and heightened attention toemissions reduction. As such, it emphasises the Norwegian government’s petroleum
policy that will promote profitable long-term production of oil and gas in the context of
Norway’s climate change goals, including through stable investment frameworks andsupport for research and development (R&D) to increase efficiency and lower emissions.
In doing so, the government will continue to pursue exploration policy with regularconcession rounds that ensure new areas are available to the industry. The government
will also continue its acquisition of knowledge through the continued survey of petroleum
resources, including in those areas that are not open to petroleum operations.
At the same time, the white paper outlines a strategy to leverage existing strengths in the
Norwegian oil and gas industry to develop a range of new industries and technologies such
as CCS, offshore wind and hydrogen. The white paper also introduces a road map forhydrogen that includes concrete plans for maritime hubs, industrial production and several
pilot projects to develop new and cost-effective solutions and technologies in Norway.

The white paper also presents a strategy for electrification, building on Norway’s
renewables-based power system. It highlights the need for additional generation and grid
expansions, which will be balanced against the need to preserve nature and local
ecosystems, both in the short and long terms.

22

IEA. All rights reserved.

Norway also plans to leverage its clean power system to set up new industries, such asbattery production, where access to renewable energy can present an advantage. The
government will attempt to promote such business activity by creating synergies andpredictable investment frameworks.

In April 2022, the government presented a supplementary white paper (Meld. St. 11[2021-2022]) to the previous government’s white paper on energy policy and long-termvalue creation from Norwegian energy resources (Meld. St. 36 [2020-2021]). The
supplementary white paper presents an updated energy policy that aims to provide
abundant and affordable access to power, to continue a stable oil and gas production on
the NCS, and to contribute to lower GHG emissions. The white paper also presents
policies to facilitate new green industries such as offshore wind, hydrogen and CCS(Norway, Ministry of Petroleum and Energy, 2022).

Energy efficiency
Economic growth has been mostly decoupled from energy consumption in Norway.
Between 2009 and 2019, Norwegian GDP grew by 16% while TFC of energy increased
only by 3%. Norway’s main target for the efficient use of energy is to reduce the overall
energy intensity of the economy by 30% in 2030 compared to 2015. From 2015 to 2019,energy intensity fell by only 4%.

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

Enova is Norway’s main provider of financial support for energy efficiency projects acrossvarious sectors, as well as for projects targeted toward households and consumers.
In the industry sector, which has the highest share in TFC (44%), from 2003 to 2018,
Enova provided support to projects for energy efficiency and for replacing fossil fuels withrenewable energy. In 2018, the scheme was replaced by measures more specificallytargeting emissions reductions rather than energy efficiency. Between 2012 and 2018,
Enova also provided support for industry to implement energy management systems.
Norway is also preparing the implementation of the 2012 EU Energy Efficiency Directive,
requiring mandatory energy audits for companies using more than 5 gigawatt hours (GWh)per year.

In the transport sector, which accounts for 21% of total demand, Norway is pursuing an
ambitious policy on EVs, mainly through vehicle taxation. Fossil fuel cars are subject to aregistration tax upon purchase. Furthermore, fossil fuel cars are subject to a CO2 tax androad use tax on gasoline and diesel. In contrast, zero-emission vehicles (ZEVs) are heavily
subsidised in Norway. Support includes a reduced annual road tax; zero VAT; exemption
from the one-off registration tax; as well as reduced toll road, ferry and parking fees. In
addition, plug-in hybrid vehicles (PHEV) have for several years benefited from a reduced
one-off registration tax. As such, Norway had the highest share of EVs globally (including
both pure battery and PHEVs) in both car stock (22%) and car sales (86%) in 2021. Tax
expenditures for EV incentives were around NOK 18.7 billion (EUR 1.9 billion) per year, or
NOK 6 200 (EUR 620) per tonne of saved CO2. Based on progress to date, the Norwegian
23

IEA. All rights reserved.

In the buildings sector, which accounts for 34% of TFC, Norway has a target to reduce theenergy use in existing buildings by 10 TWh by 2030 relative to 2015 levels. The mainenergy efficiency measure in the buildings sector is the adoption of building codes. The
regulation requires that new buildings or buildings undergoing major renovation have
either a total net energy need lower than specified in the regulation or meet a set of energy
requirements for individual building components. The building codes were last updated
in 2016 and are currently under re-evaluation. Since 2010, energy performance certificatesare also required when buildings are built, leased or sold. The government has alsobanned the installation of fossil fuel-based heating systems since 2016 and the use ofheating oil since 2020. Most buildings have electric heating systems.

2. GENERAL ENERGY POLICY

parliament has an ambition to achieve 100% zero-emission car sales in 2025. The
government also has plans in place to expand the use of electric buses, trucks and ferries.

Electricity in the energy transition
Norway has an almost entirely renewables-based electricity system, with renewable
resources accounting for 98% of generation in 2020, of which hydro is the dominant source
at 92%. The country has an estimated 87 TWh of hydro reservoir storage capacity.
Norway is also historically a net exporter of electricity to neighbouring countries, reachinga record 20.5 TWh of net exports in 2020, making it one of the largest exporters in Europe.
Norway is therefore well-integrated in the Nordic and European electricity markets.
Nonetheless, expected electrification across the economy to meet climate targets as wellas the development of new industries is expected to drive up power demand significantlyin the coming years. As such, Norway’s power balance (the difference between generationand consumption) is expected to shrink towards 2030.
In this regard, increased electrification will require not only new renewables generation
capacity, but also expansion and strengthening of the power grid. The government expects
that part of the growth in generation towards 2030 will come from new hydro capacity,some of which is already under construction, as well as refurbishments and upgrades tothe country’s ageing fleet of existing hydro plants.
The share of wind in Norway’s electricity system has increased tenfold in the last decade,accounting for 6.5% of total electricity generation in 2020, making it the second-largest
electricity generation source in the country. However, Norway has faced local opposition
to onshore wind power projects, based on the impact on landscapes and ecology. In 2019,the former government put on hold approvals for new wind projects. In June 2020, theformer government released a white paper on land-based wind power, proposing changes
to current practice and imposing new licencing requirements. Some of the main measures
focus on increasing local and regional involvement, better ensuring that environmental
matters are taken into consideration, and introducing new deadlines to shorten the timelineof planning and building wind farms. The overall aim is to provide a reliable framework forthe long-term development of onshore wind power in Norway.

The Norwegian government also has ambitions to build- out an offshore wind capacity.
Norway is currently building the world’s largest floating offshore wind farm (Hywind
Tampen), based on Equinor’s floating wind technology, and with a total installed capacityof 88 MW, which will power offshore oil and gas operations. The government has granted
the Hywind Tampen project NOK 2.3 billion, through Enova. Beyond this project, two areas
have been assigned for offshore wind power development to date, one on deep waters
with high-cost floating technology and one with a bottom-fixed solution. Auctions will be
the main model for allocating offshore renewable energy acreage. To establish a
24

IEA. All rights reserved.

In April 2022, the government announced that the licencing of new onshore wind power
projects will resume in cases where the local municipality agrees. The new framework forlicencing, presented under the previous government’s white paper on onshore wind
(Meld. St. 28 [2019-2020]) will be used. Some of the main measures in the new framework
are increased local and regional involvement, better ensuring that environmental matters
are taken into consideration, and new deadlines to tighten the time span of planning andbuilding a wind farm.

predictable framework, the government has started the process of identifying new areas
for offshore renewable energy production. Impact assessments will need to be carried out
before any new areas can be opened. The government is still in the process of creating alicencing framework for offshore wind, with the aim for the first large-scale offshore windprojects to be completed before 2030.
Norway will also need to expand grid capacity to accommodate the growth in generation
capacity, including introducing more flexibility mechanisms to handle additional generationfrom variable renewables. Toward this end and based on reinvestment requirements andincreased electricity demand, Norway’s transmission system operator (TSO) Statnett
released a Grid Development Plan 2021 that includes plans for several major new projects,
amounting to NOK 60-100 billion in investments. Given that regulatory approvals for gridlines can be lengthy, extending project timelines up to ten years from planning tocompletion, the government nominated a public committee to recommend options tostreamline and improve the licencing regime. The committee is also tasked with looking
into principles for grid development when the demand is high and uncertain, as well as
considering improvements in the grid connection process.

ENERGY INSIGHTS

2. GENERAL ENERGY POLICYIn February 2022, the government appointed an Energy Commission to map future energy
demand and propose increased energy production, with the aim that Norway will continue
to have surplus power production and that Norwegian industry and electricity consumers
will continue to have abundant access to renewable power. The commission will also
assess challenges in Norwegian energy policy towards 2030 and 2050, and how different
policy choices affect the long-term development of Norwegian power supply. Overall, theEnergy Commission’s mandate is linked to five overarching themes: 1) how Norway isaffected by rapidly changing energy markets; 2) perspectives on the development of power
consumption; 3) the potential for socio-economically profitable power production;4) perspectives for security of supply; and 5) key conflicts of interest within the energy
policy field. The Energy Commission is expected to submit its report by 15 December
2022.

Response to high electricity prices
In 2021, especially in the second half of the year, prices for electricity in Norway followed
the trend of sharp increases experienced across Europe. According to Statistics Norway(Statistics Norway, 2022), household net electricity prices increased by 429%, reaching a
final price (including 49% taxes and charges) of NOK 1 470 (USD 164) per MWh in
Q3 2021. Prices increased the most for contracts tied to spot prices (by 551%), which areused by most households. For non-energy intensive industry, prices jumped more thansixfold, while the increase for energy-intensive sectors was limited to 34%.

Oil and gas sector
Oil and gas is Norway’s largest sector based on value added, revenues, investments andexport value. As such, the sector plays a critical role in the Norwegian economy and in
financing the Norwegian welfare state. The country’s export revenues from the petroleum
25

IEA. All rights reserved.

In late 2021 the government introduced a temporary support scheme for households
aiming to alleviate high electricity prices. It offers 80% price reimbursement for monthly
average electric spot prices exceeding NOK 0.7 per kilowatt hour (kWh) in the period from
December 2021 to March 2022. In April 2022, the government extended the support
scheme to March 2023.

2. GENERAL ENERGY POLICY

industry were estimated to be over NOK 800 billion (EUR 80 billion) in 2021, and are
expected to double in 2022. Since production started on the NCS in the early 1970s,
petroleum activities have contributed around NOK 16 500 billion in today’s prices to
Norway’s GDP, not including related service and supply industries (Norwegian Petroleum,2022). The government estimates that it has sold 49% of its total resources – spread over
the North Sea, Norwegian Sea and Barents Sea – over 50 years of oil and gas production.
One of the overarching principles of Norway’s management of its petroleum resources isthat exploration, development and production must maximise value creation for society,and that revenues must accrue to the Norwegian state and therefore benefit society as awhole. Along these lines, the Norwegian state secures a large share of the value creation
through taxation and through a system known as the State’s Direct Financial Interest(SDFI) in the petroleum industry.
In 1990, Norway created the Government Pension Fund Global, financed by the revenues
from oil and gas production, to finance public pension expenditures, provide benefits toboth current and future generations from petroleum revenues, and protect the country’s
long-term economy from volatility in oil and gas revenues. Each year, the Norwegian
government can spend only the equivalent of the real return on the fund, which is estimatedto be around 3% per year. This amounts to almost 20% of the government’s budget. At
the end of 2021, the fund’s market value was NOK 12.34 trillion (EUR 1.23 trillion),
representing around EUR 228 940 per capita.
Importantly, the oil and gas industry also supports a number of other industries through its
supply chains and technology spill-overs. The industry is estimated to employ around
160 000 workers, including spill-over effects (Statistics Norway, 2021). The government
anticipates that Norway can continue to maintain global competitiveness in oil and gas
production based on its low emissions profile, which is estimated to be around 8 kg CO2
per barrel of oil equivalent, making it among the lowest in the world. With the help of the
carbon price, a long-standing ban on routine flaring and some electrification of operations,the industry has seen steady declines in GHG emissions in recent years, though steeper
cuts will be needed to meet domestic 2030 and 2050 targets. The industry has ambitions
to further reduce emissions in the upstream petroleum sector up to 40% by 2030 compared
to 2005 and to achieve net zero emissions by 2050 (while the government’s ambition is to
reduce emissions from the sector by 50-55% by 2030). An escalating carbon price will be
the main policy driver for these cuts, supported by technology advancements, notably in
CCS.
Given the age and maturity of Norway’s existing fields, the production outlook in the
coming years indicates a steady decline. Therefore, to continue production, the industry
will need to advance new discoveries as well as extract more and extend lifespans fromexisting fields, which the government will continue to support with new licencing rounds
and an enabling upstream investment framework. Still, as the NCS is considered a mature
petroleum basin, it is anticipated that oil and gas production will decline by 65% fromcurrent levels by 2050 (Statistics Norway, 2021b).

Energy technology and innovation will play an important role in Norway’s energy transition,in particular to leverage the existing strengths of its energy sector in new areas, such as
CCS and hydrogen.
26

IEA. All rights reserved.

Energy research and innovation

The government has set specific goals for the overall national level of R&D, where public
spending for R&D must amount to 1% of GDP, while R&D spending in the private sector
is expected to make up 2% of GDP. Since 2016, the government’s spending levels haveexceeded 1%, but the private sector’s spending has fallen short of 2%. The government
does not set any specific targets for R&D spending levels for specific sectors, including
energy.
Innovation in Norway’s energy sector is spearheaded by Enova, an entity owned by the
Ministry of Climate and Environment. It supports new energy and climate technology inindustry, new technology for buildings of the future, new energy and climate technology intransport, and the introduction of new technologies. Public funding for energy R&D ischannelled through various energy and petroleum programmes in the Research Councilof Norway (RCN). Norway is also an active participant in international R&D co-operationin the field of energy, which is a high priority and an important supplement to Norwegiannational research. Norway participates primarily in co-operation activities with the EU,
through the IEA and at the Nordic level.

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

CCS is a priority area for Norway’s climate action and is identified as an important measure
in its NDC. Langskip (“Longship”), which is under construction, is a central part of thegovernment’s policy for CCS. The project includes state aid for two full-scale capture
facilities and one storage facility in the North Sea. The carbon tax introduced in 1991 is
one of the key drivers of CCS. The government also adopted a CCS strategy in 2014-15.
Notably, CCS has broad public acceptance in Norway. In addition to several pilot projects,
there are currently two large-scale CCS projects operating in Norway and one underdevelopment. The government has assessed a theoretical potential of 80 billion tonnes of
CO2 storage capacity on the NCS.
The Norwegian government also offers several R&D-related support measures for thedevelopment of green and blue hydrogen. The former government published a Hydrogen
Strategy in June 2020, followed by a white paper in 2021 that assessed the entire energy
sector and included a road map for hydrogen. The road map includes signposts for the
production and use of hydrogen in the 2025, 2030 and 2050 timeframes. One of thestrategy’s important points is to develop a coherent value chain where production,
distribution and use are developed in parallel. In April 2022, the government presented a
supplementary white paper to the previous government’s white paper on energy policy andlong-term value creation from Norwegian energy resources, which presents an updated
policy on the development of hydrogen.

The taxation of petroleum activities is based on rules governing ordinary business taxation.
In light of the considerable return (resource rents) associated with the extraction of oil andgas, the government applies a special tax of 56% on income from petroleum extraction, in
addition to the ordinary income tax of 22%. Consequently, the marginal tax rate on excess
return in the petroleum sector is 78%. The excess return in hydropower production is taxed
at 37% in addition to the corporate income tax (the statutory tax rate is 47.4%, but theeffective tax rate is 37% due to the deduction of resource rent-related corporate incometax), resulting in a marginal tax rate of 59%.
From 2013 to 2019, the government revised tax rates. The standard corporate income tax
was reduced to 22% and the surtaxes for hydropower and the petroleum industry were
27

IEA. All rights reserved.

Energy taxation

2. GENERAL ENERGY POLICY

adjusted. The tax system for hydro shifted to a cashflow-based pure rent tax in 2021; theprevious government proposed in September 2021 to apply the same tax system for the
petroleum sector, coming into force in January 2022.
About 85% of GHG emissions, both from energy and non-energy uses, are priced, either
though the EU ETS or a tax (see Chapter 3). Most emissions from petroleum production
and domestic aviation face both a CO2 tax and are part of the EU ETS.
Revenues from CO2 taxes and ETS allowances are funnelled into the state budget without
any earmarking. Revenues from taxes on offshore petroleum are funnelled directly into theGovernment Pension Fund Global.
Environmental taxes have subsequently been introduced in a number of areas. Taxes onenergy products include: a road usage tax on mineral oil, petrol, biodiesel, bioethanol,liquefied petroleum gas (LPG) and natural gas; an electricity consumption tax; a base tax
on mineral oil; a lubricant oil tax; a CO2 tax on mineral products; and a sulphur tax. The
taxes are based on the polluter-pays principle and are designed to reflect the social costsof energy use. For example, the CO2 tax on mineral products serves to curtail the
consumption of petrol and diesel, and thereby to reduce CO2 emissions.
In addition to environmental and energy taxes, Norway also applies other taxes withenvironmental objectives, such as the motor vehicle registration tax.

Covid -19 response
In June 2020, the Norwegian parliament enacted temporary changes to the Petroleum Tax
Act to help oil and gas companies execute planned investments in light of the drop in global
oil demand and prices during the first half of 2020. The decision changes rules fordepreciation and uplift, as well as the treatment of tax losses, for a limited period of time.
In 2020, due to the consequences of Covid-19, the government increased the budget for
petroleum and energy R&D under the Ministry of Petroleum and Energy (MPE) to ensurethat activity levels in industry and at research institutes could be maintained. For theelectricity sector, hydrogen and wind power were given priority. For the petroleum sector,
the majority was allocated to demonstration projects, as these projects have a sizeable
impact on the supply industry, which was hit particularly hard by the pandemic and theensuing oil price decline.

Norway has set ambitious targets for reducing greenhouse gas emissions and establishinga low emissions society by 2050. As an energy-rich country, Norway is in a unique starting
position with respect to the energy transition. An abundance of affordable hydropower has
enabled the development of energy-intensive industries and a high level of electrificationof homes and businesses with limited GHG emissions. At the same time, as a major oil
and gas producer and exporter, Norway will need to prepare for a future where, due to theglobal energy transition, demand for its oil and gas will decline faster than the decline ofits oil and gas production potential.
Thanks to its ample reserves of oil and natural gas, Norway is a net energy exporter:in 2020, 87% of its energy production was exported. In addition, its extensive hydropower
28

IEA. All rights reserved.

Assessment

resources covered 92% of electricity generation. Together with a growing share of wind, it
supports an almost completely renewables-based power sector of 98%. Fossil fuels areexported abroad and cover only half of the country’s total energy supply, the fifth-lowest
share among IEA member countries.
In 2020, 93% of Norway’s domestic energy production consisted of natural gas and oil.
Gas production overtook oil production in 2012, and gas is now the largest source ofdomestic energy production (98 Mtoe, or 116 bcm in 2020), accounting for almost half oftotal production in 2020. Production of oil was 95 Mtoe in 2020 (1 950 kb/d) and has
declined consistently in the last decade; in 2020, it was 5% lower than in 2010 and 43%
lower than the peak in 2000.
Domestically, oil is mainly used in the industry and transport sectors, representing 84% oftransport energy demand. The share of bioenergy ranges between 5% in industry and 11%
in transport, and natural gas is used (in relatively small volumes) mainly in the industry
sector. Around 0.6 Mt of imported coal is used every year in the industry sector.

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

Norway’s 2030 target under the Paris Agreement is to reduce emissions by at least 50%
and towards 55% by 2030, compared to 1990. Through a climate co-operation agreement
between Norway and the EU, Norway participates in EU climate legislation for the period2021-30, covering the EU Emission Trading System; the Effort Sharing Regulation for
non-ETS emissions; and the land use, land-use change and forestry regulation. The mainemphasis of Norway’s Climate Action Plan for 2021-2030, presented in 2021 by the former
government, was emissions not covered by the EU ETS, including from transport,
buildings, waste, agriculture, and some minor emissions from industry production and theoil and gas industry. Under the current agreement with the EU, Norway has a 2030 nationalemissions reduction target for non-ETS emissions of 40% below 2005 levels.

To meet its ambitious targets, Norway has considerable work ahead, especially sinceelectricity generation is already zero emissions (mainly from hydro power), so emissions
reductions need to be found in other sectors, notably transport and industry. Emissions
reductions to date do not place the country on track to meet its 2030 target throughdomestic reductions. In fact, Norway relied heavily on international offsets and its
participation in the EU ETS to meet its 2020 target. As such, it would benefit from thedevelopment of national road maps for emissions reductions in key sectors such asindustry, upstream oil and gas, buildings, and transport that include the role that energy
efficiency and various technologies are expected to play in the energy transition. Such
strategies will help provide the needed investment signals to support effective longer-term
decarbonisation.
29

IEA. All rights reserved.

The main policy instruments in the Climate Action Plan are GHG taxation, regulatory
measures, climate-related requirements in public procurement processes, information on
climate-friendly options, financial support for the development of new technologies, andinitiatives to promote research and innovation. About 85% of GHG emissions are priced,
either through the EU ETS or a tax. Emissions from petroleum production and domestic
aviation face both a CO2 tax and are part of the EU ETS. On carbon pricing, the current
government has announced a gradual increase in national taxes on non-ETS emissions
to NOK 2 000 (EUR 200) per t CO2-eq in 2030, among the highest in the world. Revenues
from CO2 taxes and ETS allowances are funnelled into the state budget without any
earmarking. Revenues from royalties on offshore petroleum are funnelled directly into theGovernment Pension Fund Global.

2. GENERAL ENERGY POLICY

Norway’s climate strategies are well-aligned with the EU’s, and Norway has adopted anumber of EU climate and energy directives into its domestic regulation. However, the time
between adoption by the EU and finalisation of equivalent regulations in Norway can insome cases be lengthy. More rapid adoption would help jump-start investments in clean
energy solutions for Norwegian industry.
As in all countries, energy efficiency has an important role to play in Norway. Though
Norway has been blessed with affordable energy for a long time and has largely decoupledeconomic growth and energy consumption for many years, substantial cost savings could
still be made from reducing consumption. Reducing energy consumption warrants evengreater importance in the current context of high electricity prices. The government’s
compensation scheme to provide temporary relief to households can mitigate the impact
felt by consumers, but comes with a hefty price tag and will not be a sustainable solution
over the long run. In this regard, Norway’s target to improve the overall energy intensity ofthe economy by 30% in 2030 compared to 2015 is commendable. To underpin this target,
the government should establish a national energy efficiency strategy that includes
cost-effective sectoral targets as well as policy measures to help end users’ lower
consumption.
Norway’s oil and gas industry has been a mainstay of the Norwegian economy for 50 years
and an immense source of revenue generation for the state and the Norwegian people.
The country’s export revenues from the petroleum industry are estimated to be overNOK 800 billion (EUR 80 billion) in 2021 and expected to double in 2022. The Government
Pension Fund Global, financed by the revenues from oil and gas production, finances
public pension expenditures, provides benefits to both current and future generations frompetroleum revenues, and protects the country’s long-term economy from volatility in oil andgas revenues. Each year, the Norwegian government can spend only a small part of thefund, but this still amounts to almost 20% of the government’s budget. At the end of 2021,
the fund’s market value was NOK 12.23 trillion (EUR 1.23 trillion).

At the same time, the oil and gas industry is one of the leading sources of GHG emissions
in Norway, accounting for around a quarter of the country’s total emissions. There will likely
be global demand for oil and gas in the years to come, even on the global pathway to net
zero emissions. With relatively low production costs and emissions intensity of upstream
operations, Norway is well-positioned as a provider of oil and gas to the world market, if
low emissions intensity at some point becomes a valued market advantage. However, interms of national emissions reductions, continuing current production levels also implies
that the next tranche of emissions reductions in the sector to meet climate targets will be
more challenging and costly. Results can come from additional electrification as well as
30

IEA. All rights reserved.

The petroleum sector remains a cornerstone of not only the Norwegian energy sector, butalso Norwegian society and the economy, given its substantial revenues. Around half ofoil and gas reserves have so far been extracted, and the government intends to continue
production, be it in the North Sea, Norwegian Sea or Barents Sea, as long as there is
global demand. The government intends to compete for oil and gas shares on the global
market and will continue to offer new acreage for exploration. In the IEA’s Stated Policies
Scenario from the World Energy Outlook 2021, global oil demand peaks as soon as 2035
and plateaus to 2050, whereas gas demand continues to rise. The Norwegian government
remains confident that Norway can compete on a smaller global market for oil and gas,though it should plan for a scenario in which oil demand falls faster than expected as aresult of many countries having net zero by 2050 targets.

other technologies such as carbon capture in the longer term. However, these options
need to be thoroughly and holistically assessed with an eye to not only costcompetitiveness, but also the development of planned new industries – including batteries,hydrogen and data centres – that will also need to draw renewable power from shore.
As electrification forms a central part of any country’s energy transition, Norway finds itself
in an enviable starting position. Norway’s energy demand is already highly electrified:in 2019, electricity covered almost half (48%) of the country’s TFC, the highest shareamong IEA member countries. Electricity dominates demand in the residential sector(80%) and covers almost half of the energy demand of the industry sector (46%).
Still, more electrification will be needed across sectors to meet Norway’s climate targets,
which will require additional renewable generation capacity, such as continued expansionof hydro capacity (including upgrades of existing plants). However, Norway will also needto find other new sources of electricity generation to support faster electricity demand
growth, especially if it plans to maintain a power surplus domestically and its historical role
as a net exporter of electricity in the Nordic electricity market. Plans for offshore wind will
help, but given the relatively small volumes planned and long lead times, partial relianceon still-immature floating wind technology and the nascency of the industry in Norway, but
remain a longer-term prospect, post-2030. In the interim, the government should support
the development of onshore wind by expediting the planned reform of the licencing regime,
including by ensuring robust local community engagement and support. Moreover, thecountry will also benefit from expanding the national grid (or assisting Sweden to enforce
its grid) to ensure that surplus generation in the north of the country can more easily makeits way south. Increased use of flexibility mechanisms to balance the grid will also beneeded, and existing hydro storage capacity provides a good base.

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY

Building on the 2030 Climate Action Plan, in June 2021, the former government alsopresented a white paper on energy policy and long-term value creation from Norwegianenergy resources, including through new industries such as hydrogen and offshore wind,strengthening of the power grid, and a future-oriented oil and gas industry with low
emissions from upstream activities. Innovation in Norway’s energy sector is spearheaded

31

IEA. All rights reserved.

As part of its efforts to reduce emissions in non-ETS sectors, transport stands out. Norway
is a well-known leader on increasing the penetration of electric vehicles on its roads
through a combination of fuel and (the absence of) vehicle taxation as well as
non-monetary incentives that make the purchase of EVs economically attractive fordrivers. Ample charging infrastructure has also helped support uptake. The generous
incentives have not only resulted in Norway having the highest share of EVs (including
pure battery and plug-in hybrid vehicles) in both car stock (22%) and car sales (86%)
in 2021, but have also helped lower costs and advance battery technology globally. The
strategy can pay off from an emissions reduction standpoint. However, transport currently
accounts for nearly a quarter of Norwegian GHG emissions and the 2021 tax expenditureof the EV incentives was NOK 18.7 billion (EUR 1.9 billion) per year, or roughly NOK 6 200(EUR 620) per tonne of estimated saved CO2. The next phase of Norway’s transportation
sector transformation will be to ensure that the EV support is creating true displacementof internal combustion engines on Norwegian roads (rather than growing the vehicle fleet),while simultaneously reducing the incentives to avoid sustained budget erosion. Norway
is also starting to make progress on electrifying segments beyond passenger cars,
including buses, trucks and ferries.

2. GENERAL ENERGY POLICY

by Enova, an entity owned by the Ministry of Climate and Environment. It supports newenergy and climate technology in industry and transport and the introduction of newtechnologies.
Carbon capture and storage is a priority area for Norway’s climate action. The Norwegian
government’s CCS strategy spans a wide range of activities, from research, development
and demonstration to large-scale projects and international work promoting CCS. Norway
has a lot of experience with CCS technologies and has been storing CO2 on the NCS since1996. As such, it has established itself as a leader for CCS deployment and is home to anumber of companies with CCS expertise. The technology can notably play a role indecarbonising industry (such as upstream oil and gas production, cement, and waste
incineration) and facilitate the production of blue hydrogen, along with offering vast CO2
storage capacity for other countries. With the Longship project, Norway will develop a
full-scale CCS chain. Longship includes CO2 capture from two industrial sources as well
as a transport network and storage site. The storage site will be built with excess capacity
to enable the storage of CO2 volumes from other European carbon capture projects. The
goal is that the project will contribute to knowledge sharing and technology development
in an international perspective, thereby helping to lower costs.
In light of resource rents associated with the extraction of oil and gas, the government
applies a special tax on income from petroleum extraction in addition to the ordinary
income tax. As such, the marginal tax rate on excess return in the petroleum sector is 78%(with the CO2 tax being fully deductible from taxable income). The effective marginal tax
rate on hydropower production is 59%.
Based on the polluter-pays principle, environmental taxes have been introduced in a
number of areas, including: a petrol tax, an auto diesel tax, an electricity consumption tax,
a base tax on mineral oil, a lubricant oil tax, taxes on GHG emissions and a sulphur tax.
In addition to environmental and energy taxes, Norway also applies other taxes withenvironmental objectives, such as the motor vehicle registration tax.

32

IEA. All rights reserved.

Overall, Norway has many natural advantages that can help it achieve a successful energy
and climate transition. Leveraging its renewables-based electricity system, Norway canfurther support its goals by developing detailed, long-term sectoral transition road maps,
underpinned by specific policy measures, which lay out a well-defined pathway for sectoralchange.

Recommendations
The government of Norway should:
 Develop a vision for how Norway can thrive as a low emissions society in 2050,
including by establishing national emissions reduction strategies for key sectors to2030 and 2050 that include specific targets and define supporting policy measures.
 Consider various scenarios for future global oil and gas demand as it pursues a longerterm strategy for the transformation from oil and gas revenue dependency, including
diversification into low-carbon energy carriers.
 Facilitate expansion and development of low-carbon electricity generation, storage,
and transmission and distribution grids to maintain Norway’s position as a key player
in the Nordic electricity market.

ENERGY INSIGHTS

2. GENERAL ENERGY POLICY Prioritise energy efficiency as a policy area, including through sectoral targets, actionplans and supporting measures, especially in the buildings and industry sectors.

33

IEA. All rights reserved.

 Increase its ambition to jump-start clean technologies where Norway may havecompetitive advantages and means, such as hydrogen, green shipping, carbon
capture and storage, and offshore wind.

2. GENERAL ENERGY POLICY

References
Energy Facts Norway (2018), Key EU energy legislation (web page),https://energifaktanorge.no/en/eu-lovgivning/sentrale-direktiver-pa-energiomradet
Norway, Ministry of Petroleum and Energy (2022), An energy policy for employment,
transition and security in times of uncertainty (web page),https://www.regjeringen.no/no/aktuelt/pm-tilleggsmelding/id2908251/
Norway, Ministry of Climate and Environment (2021a), Norway’s comprehensive climate
action plan (web page), https://www.regjeringen.no/en/historical-archive/solbergsgovernment/Ministries/kld/news/2021/heilskapeleg-plan-for-a-naklimamalet/id2827600/?expand=factbox2827687
Norway, Ministry of Petroleum and Energy (2021b), Energy for work - long-term value
creation from Norwegian energy resources (web page),https://www.regjeringen.no/no/dokumenter/meld.-st.-36-20202021/id2860081/
IEA (International Energy Agency) (2022), World Energy Balances (database),https://iea.org/data-and-statistics/data-product/world-energy-balances (accessed on
18 February 2022)
NBIM (Norges Bank Investment Management) (2021), About the fund (web page),https://nbim.no
Norwegian Petroleum (2022), The government’s revenues (web page),https://norskpetroleum.no/en/economy/governments-revenues
OECD (2021), Emplyment rate (database), https://data.oecd.org/emp/employment-rate.htm(accessed on 31 May 2022)
Statistics Norway (2022), Electricity Prices (database), https://ssb.no/en/energi-ogindustri/energi/statistikk/elektrisitetspriser (accessed on 11 May 2022)
Statistics Norway (2021), Over 150,000 jobs in the oil industry (web page),https://ssb.no/arbeid-og-lonn/sysselsetting/artikler/over-150-000-jobber-i-oljebransjen
Statistics Norway (2021b), Long-term Perspectives on the Norwegian Economy 2021,
https://www.regjeringen.no/contentassets/91bdfca9231d45408e8107a703fee790/engb/pdfs/stm202020210014000engpdfs.pdf

34

IEA. All rights reserved.

World Bank, (2021), Population Density (database),https://data.worldbank.org/indicator/EN.POP.DNST?locations=NO&most_recent_value_desc=false (accessed on 11 May 2022)

Key data
GHG emissions without LULUCF (2019):* 50.3 Mt CO2-eq, -8.9% since 2005, -2.2% since1990
GHG emissions with LULUCF (2019):* 31.7 Mt CO2-eq, -7.4% since 2005, -19.8% since
1990
Energy-related CO2 emissions (2020):
CO₂ emissions from fuel combustion: 35 Mt CO₂, +2% since 2005, -6% from 2010 to 2019,-4% from 2019 to 2020
CO₂ emissions by fuel: oil 55.2%, natural gas 32.8%, coal 8.5%, other 3.4%
CO₂ emissions by sector: industry 58.5%, transport 34.1%, electricity and heatgeneration 4.6%, buildings 2.8%
CO₂ intensity per GDP: 0.08 kg CO₂/USD (IEA weighted average 0.197 kg CO₂/USD)* GHG emissions data are from UNFCCC, https://di.unfccc.int/detailed_data_by_party

Overview

ENERGY SYSTEM TRANSFORMATION

3. Energy and climate change

Through its enhanced under the Paris Agreement, Norway has committed to reduce GHG
emissions by at least 50% and towards 55% by 2030 compared to 1990 levels. Norway’s
NDC is economy-wide, covering all sectors and GHGs.
In June 2017, the Norwegian parliament adopted the Climate Change Act. In addition toestablishing the 2030 target, the act establishes by law Norway’s target of becoming a low
emissions society by 2050, which is equivalent to reducing emissions by around 90-95%
from 1990 levels.

In 2019, GHG emissions from the energy sector were 36 Mt CO2-eq and accounted for
71% of total GHG emissions. Energy sector emissions include oil and gas extraction (25%of total GHG emissions), transport (24%), fuel combustion in industry (7%), buildings (6%),
fugitive emissions (4%), and electricity and heat generation (3%). Emissions from industrial
processes accounted for 18%, followed by the agriculture sector (9%) and waste (2%).

35

IEA. All rights reserved.

GHG emissions in the base year (1990) were 52 million tonnes of CO2 equivalent(Mt CO2-eq), excluding LULUCF. In 2019, Norway’s total GHG emissions stood at
50.35 Mt CO2-eq, a 2% reduction since 1990.

3. ENERGY AND CLIMATE CHANGE

Mt CO2-eq

Figure 3.1 Greenhouse gas emissions by sector in Norway, 2000-2019 and targets
60

Targets

50

Waste

40

Fugitive emissions

30-50/55%

20

Electricity and heat generation
Agriculture

10-90/95%0

Buildings
Industry

- 10

2050

2030

- 30

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Transport
Oil and gas extraction

1990

- 20

LULUCF

IEA. All rights reserved.

Norway’s GHG emissions fell by 9% from 2000 to 2019, with a sharp decline in 2019. The
country’s targets are to reduce emissions by 50-55% by 2030 and 90-95% by 2050.
Notes: LULUCF = land use, land-use change and forestry. 2030 GHG emissions target data excluding LULUCF are estimatedaccording to the emissions target in the Norway’s nationally determined contribution, and can be partly achieved with trading ofemissions allowances within the European Union or other flexible mechanisms.
Source: UNFCCC (2022).

Energy-related CO2 emissions
In 2020, Norway’s energy-related CO2 emissions were 35 Mt CO2, 10% higher thanin 2000 (Figure 3.2). There was a sharp decrease between 2018 and 2020, as emissions
fell in the transport sector, also driven down by the Covid-19 pandemic in 2020. Between
2010 and 2020, energy-related CO2 emissions dropped by 9%, with significant reductions
in all sectors, with the exception of industry, whose emissions increased by 2%.
Figure 3.2 Energy-related CO2 emissions by sector and fuel in Norway, 2000-2020
40

Mt CO₂
Buildings

35
30

Electricity andheat generation

25
20

Transport

15
10

Industry

50

IEA. All rights reserved.

Source: IEA (2022a).

36

IEA. All rights reserved.

After peaking in 2010, Norway’s energy-related CO2 emissions were stable until 2015.
Emissions steadily fell in all sectors from 2015 to 2020, except in industry.

Domestic consumption of oil was responsible for the largest share of energy-related CO2
emissions in Norway, accounting for 55% of the total in 2020, followed by natural gas at
33%, coal at 8.5% and non-renewable waste at 3.4% (Figure 3.3). Oil emissions
experienced a marked decline between 2018 and 2020, in line with a notable reductionin emissions from the transport sector. Natural gas emissions slightly dropped between
2019 and 2020, as its use in industry decreased, whereas coal and other energy sources
have remained stable over the last decade.
Figure 3.3 Energy-related CO2 emissions by energy source in Norway, 2000-2020
25

Mt CO₂

20

Oil

15

Natural gas

10
Coal

5

Non-renewable
waste

0

IEA. All rights reserved.

Oil makes up the largest part of energy-related CO2 emissions in Norway, followed by natural
gas and coal. Oil emissions dropped by 8% in 2020 compared to 2018.
Source: IEA (2022a).

CO2 emissions drivers and carbon intensity

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

Over the period 2000-2020, Norway’s total energy-related CO2 emissions fluctuated,peaking in 2015 and decreasing since then. Norway has started to decouple its
emissions and economic growth, as energy-related emissions increased by 10%
between 2000 and 2020 while the country’s GDP increased by 35%. The decoupling ismore evident since 2015, when energy-related CO2 emissions started to decline while
GDP kept growing. The carbon intensity of Norway’s energy supply (CO2/TES)
fluctuates, but has been on average stable since 2014.

37

IEA. All rights reserved.

In 2020, CO2 emissions per unit of GDP in Norway were 0.107 kilogrammes of carbon
dioxide (kg CO2) per USD, which is the sixth-lowest among IEA member countries.
Norway’s CO2 intensity has been historically low and has shown a gradual declining
trend, which has steepened since 2015. CO2 emissions from electricity and heatgeneration were 10 g CO2/kWh in 2020, the lowest among IEA member countries.

3. ENERGY AND CLIMATE CHANGE

Index 1 = 2000

Figure 3.4 Energy-related CO2 emissions and main drivers in Norway, 2000-2020
1.4
GDP

1.3

Population

1.2
1.1

CO2
CO2 emissions

1.0
CO
CO2/TES
2
0.9
0.8
2000

CO
CO2/GDP
2
2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

IEA. All rights reserved.

Norway’s energy-related CO2 emissions are mostly decoupled from economic growth,
especially since 2015.
Notes: GDP = gross domestic production; TES = total energy supply.
Source: IEA (2022a).

Climate change targets
Through its enhanced NDC under the Paris Agreement, Norway has committed to reduce
emissions by at least 50% and towards 55% by 2030 compared to 1990 levels (UNFCCC,
2020). The updated target increased ambitions compared to the original NDC target of atleast 40% emissions reductions by 2030 from 1990 levels (UNFCCC, 2015). Norway’s
NDC is economy-wide, covering all sectors and GHGs. It intends to fulfil this commitment
jointly with the EU, though the target will stand regardless of agreements with the EU.
Provisions in the NDC also allow for international flexibility mechanisms to be used to fulfil
this target, both through the climate co-operation with the EU and market-based
mechanisms under the UNFCCC.
GHG emissions in the base year (1990) were 51.5 Mt CO2-eq, excluding LULUCF. In 2019,
Norway’s total GHG emissions stood at 50 Mt CO2-eq, a 2% reduction since 1990, making
2019 the fourth year of decline in a row.

In June 2017, the Norwegian parliament adopted the Climate Change Act, which
establishes by law Norway’s target of becoming a low emissions society by 2050. The
target is equivalent to reducing GHG emissions by around 90-95% from 1990 levels. The
climate target for 2050 is economy-wide, including LULUCF. When assessing
achievement of the target, the impact of Norwegian participation in the EU ETS will betaken into account. It has not been decided how the detailed accounting of the LULUCF
sector will be counted when assessing progress towards the target. Norway is committed
38

IEA. All rights reserved.

The Norwegian parliament decided in June 2016 that Norway will be carbon-neutral by
1 January 2030. The parliament further decided that this climate neutrality could beachieved through domestic reductions, the EU ETS, international co-operation onemissions reductions, other forms of emissions trading and project-based co-operation.
The government is currently reviewing policy alternatives.

to not applying the full LULUCF sink, as its inclusion would require a negative emissions
target to ensure the same level of ambition as the current target.
Norway’s 2020 target was to cut GHG emissions by 30% from 1990 levels, underpinnedby participation in the EU ETS and international offset mechanisms. Domestically, Norway
missed its 2020 target by a large margin, relying heavily on international offsets. From2000 to 2019, Norway’s GHG emissions fell by 9%, with a sharp decline in 2019 thanks tolower emissions in the transport, industry and electricity generation sectors. Additionally,
carbon removals from the LULUCF sector accounted for 19 Mt CO2-eq in 2019.

Climate change policies
EU emissions reduction policies
Norway has an agreement with the EU to participate in EU climate legislation for the period2021-2030, covering the EU ETS, the ESR for non-ETS emissions and the LULUCF
regulation.
As part of its participation in the EEA, Norway has been a part of the EU ETS since 2008
on the same terms as EU member states. The EU ETS regulates emissions from industrial
plants, power plants, the petroleum industry and commercial aviation within the EEA.
Around half of Norway’s emissions fall under the EU ETS, making it a central componentof national climate policy.
Under the current climate agreement with the EU, Norway has a legally binding 2030 target
to reduce emissions in non-ETS sectors by 40% below 2005 levels and has stated an
ambition to reduce its emissions by 45% through domestic measures. Non-ETS sectors
include agriculture, transport, waste and buildings. Norway will apply the same rules andhave the same obligations and flexibilities as EU member states, to allow for a fair andcost-efficient achievement of targets (EC, 2021).

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

Under the LULUCF regulation, Norway will ensure that GHG emissions from LULUCF arebalanced by at least an equivalent removal of CO2 from the atmosphere in the 2021-2030
period, the so-called “no-debit” rule (EC, 2019).
The EU’s Fit for 55 package will update all three regulations (the ETS, the ESR and the
LULUCF regulation). The government has stated on its political platform that it intends tocontinue the climate co-operation with the EU as EU policies are updated.

Climate Change Act

The purpose of the act is to promote the long-term transformation of Norway in a
climate-friendly direction. The act describes a low emissions society as one where GHG
emissions – on the basis of the best available scientific knowledge, global emissions trends

39

IEA. All rights reserved.

In June 2017, the Norwegian parliament adopted a Climate Change Act, which establishes
by law Norway’s emissions reduction targets for 2030 and 2050. Based on the latest
update, it states that by 2030 Norway will reduce emissions by at least 50% and up to 55%
from 1990 levels by 2030, and by 2050 Norway will become a low emissions society(defined as an emissions reduction of 90-95% from 1990 levels).

3. ENERGY AND CLIMATE CHANGE

and national circumstances – have been reduced to avert the adverse impacts of global
warming, as described in the Paris Agreement.
The Climate Change Act, which took effect on 1 January 2018, introduced a system of
five-year reviews of Norway’s climate targets, based on the same principle as the Paris
Agreement. In addition, the act introduced an annual reporting mechanism. Each year, thegovernment must submit to the parliament updated information on status and progress
toward achieving climate targets under the law, as well as on how Norway is preparing for
and adapting to climate change.

Climate Action Plan 2021-2030
In January 2021 the former government presented a white paper describing a Climate
Action Plan for the period 2021-2030 (Meld. St. 13 [2020-2021]). The plan outlines how
Norway will achieve its climate target of reducing emissions by at least 50% and towards
55% from 1990 levels by 2030, while at the same time creating green growth.
On carbon pricing, the white paper announced a gradual increase in the taxes on non-ETS
emissions to 2 000 NOK/t CO2-eq (200 EUR/t CO2-eq, 2020 value) in 2030 (see below oncarbon pricing). For mainland industry covered by the EU ETS, the carbon price from the
ETS will continue to be the main policy driver for emissions reductions. However, for the
petroleum and domestic aviation industries, the action plan stated that the total carbon
price (EU ETS allowance price plus CO2 tax) was to be increased to approximately
2 000 NOK/t CO2-eq (200 EUR/t CO2-eq) in 2030.
In non-ETS sectors, the action plan pays particular attention to transport, where the former
government stated an intention to halve emissions from the sector by 2030. Measures toachieve this include the carbon tax, as well as incentives for purchasing ZEVs, with theaim that all new passenger car sales be zero emissions by 2025 and that progress extend
to non-road transport and shipping. Enova supports technology development and earlymarket introduction of zero emissions solutions in the transport sector. The government
also uses public procurement to advance the development of zero emissions transport
options (especially in the segments of vans, heavy trucks and buses). The white paper
also notes the importance of co-ordinated transport planning through a planned National
Transport Plan 2022-2023 that will provide guidance toward 2030 emissions targets in the
sector (Norway, Ministry of Transport, 2021).
For other non-ETS sectors, the plan highlights the gradual phase-out of fossil fuels forenergy purposes in industry by 2030 and natural gas for heating of buildings by 2025.
Moreover, the increased carbon tax is expected to have a particular impact in driving
decarbonisation in the industry, buildings, oil and gas, and waste incineration sectors.

The Climate Action Plan also outlines a strategy to enhance Norway’s carbon sinks
through measures to increase CO2 removals by forests, including tree planting, fertilisationand other forest management methods. LULUCF measures to reduce emissions also
40

IEA. All rights reserved.

The action plan also addresses emissions from the agriculture sector. The government
signed a letter of intent with agricultural organisations with a target to reduce GHG
emissions from the sector by 5 Mt CO2-eq over the period 2021-2030. The government
will help support farmers to switch from fossil fuels to electricity, sustainable liquid biofuelsand biogas for their machinery, as well as make better use of livestock manure and local
fodder resources.

include plans for reducing peatland degradation, for peatland restoration, as well as
consideration of a ban on peat extraction and a land tax.
In April 2022, the government presented a supplementary white paper (Meld. St. 11[2021-2022]) to the previous government’s white paper on energy policy and long-termvalue creation from Norwegian energy resources (Meld. St. 36 [2020-2021]). The
supplementary white paper presents an updated energy policy that aims to provide
abundant and affordable access to power, to continue stable oil and gas production on the
NCS, and to contribute to lower GHG emissions. The white paper also presents policies
to facilitate new green industries, such as offshore wind, hydrogen and CCS.

Carbon pricing
The polluter-pays principle is a cornerstone of the Norwegian policy framework on climatechange. Norway was one of the first countries in the world to put in place a carbon tax,
already in 1991, covering the combustion of fossil fuels and the petroleum sector. Today,
approximately 85% of domestic GHG emissions are either covered by the EU ETS or
subject to a CO2 tax (or other GHG taxes), or both. And nearly 70% of non-ETS emissions
are covered by taxes on GHG emissions. Emissions of nitrous oxide and methane fromagriculture constitute two-thirds of non-priced emissions. Methane from landfills is anotherimportant source of non-priced emissions. The practice of dumping biological waste on
landfills has been banned, and these emissions will phase out.
Since the IEA’s last in-depth review, the national CO2 tax has increased and is currently
around 766 NOK/t CO2-eq (76 EUR/t CO2-eq) for emissions outside the EU ETS.
Emissions from the petroleum sector are mostly covered by the EU ETS and the current
CO2 tax is about 620 NOK/t CO2-eq (62 EUR/t CO2-eq for natural gas) and
705 NOK/t CO2-eq (70 EUR/t CO2-eq) for mineral oil. Almost all emissions in the
petroleum sector come from the combustion of natural gas.

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

The former government announced in its 2021 white paper that the CO2 tax will gradually
triple the level of taxation to 2 000 NOK/t CO2-eq (200 EUR/t CO2-eq) in 2030. The current
government has stated its support for this measure. According to the Climate Action Plan,emissions from the oil and gas industry and domestic aviation covered by the EU ETS was
to have a total carbon price (EU ETS price + national CO2 tax) of around
2 000 NOK/t CO2-eq (200 EUR/t CO2-eq) in 2030. The announcement of the CO2 tax
increase was presented to parliament as part of the white paper in January 2021. The
white paper was debated and decided on in April, including the CO2 tax increase. In its
first budget, the current government has started to increase the CO2 tax.

Norway has the highest share of electricity produced from renewable sources in Europe
and the lowest carbon emissions intensity from the power sector. Hydropower accounted
for 89% (33.5 gigawatts [GW]) of total installed electricity generation capacity in 2020.
Norway also had 2.9 GW of installed wind capacity, and about 500 MW of natural gas at
a plant that is not used on a regular basis. Hydropower capacity has increased by 4 GW
since 2009, while wind capacity has increased almost sixfold from 423 MW in 2009.
Looking ahead, the increased electrification of end uses, notably industry and transport, tomeet climate targets means that electricity demand will grow, requiring an additionalbuild-out of zero emissions generation capacity. New industries such as green hydrogen,
41

IEA. All rights reserved.

The role of low-carbon electricity in decarbonisation

3. ENERGY AND CLIMATE CHANGE

data centres or battery gigafactories, and the decarbonisation of existing processindustries are also expected to contribute to increased electricity demand. In its long-term
analysis from 2016, the Norwegian Water Resources and Energy Directorate (NVE)
estimated an increase in electricity demand in Norway from 130 TWh in 2015 to 143 TWhin 2030. In the NVE’s recent long-term analysis from 2021, it estimated demand growth to
159 TWh in 2030.
Given that nearly all electricity production comes from hydropower and wind power, andthat Norway is highly electrified, renewables are not subject to special treatment or
policies, but constitute a central component of the country’s domestic energy system. The
NVE predicts that the bulk of new generation growth from 2021 to 2030 will come fromnew hydro capacity, with some growth from solar PV, though there are some uncertainties
with respect to the extent of solar capacity additions given the costs associated withground-mounted solar and grid connections.
In 2019, the former government put on hold approvals for new wind projects. Norway has
faced local opposition to onshore wind power projects, based on the impact on landscapesand ecology.
In June 2020, the former government released a white paper on land-based wind power,
proposing changes to the licencing requirements. Some of the main measures focused onincreasing local and regional involvement, ensuring that environmental matters were more
effectively taken into consideration, and introducing new deadlines to shorten the timeline
for planning and building wind farms. The overall aim was to provide a reliable framework
for long-term development of onshore wind power in Norway.
In April 2022, the government announced that the licencing of new onshore wind power
projects, in cases where the local municipality agrees, will resume. The new framework forlicencing, presented by the previous government’s white paper on onshore wind, will beapplied.
Most unused wind licences either expired in 2021 or will expire in 2022. Due to the recent
pause in granting new licences, it is expected that only onshore wind currently underconstruction will be realised by 2030.

Norway will also need to expand grid capacity to accommodate the growth in renewables
generation capacity, including introducing more flexibility mechanisms to handle additional
generation from variable renewables. Toward this end, and based on the need forreinvestment and growing electricity demand, Norway’s TSO Statnett released a Grid
Development Plan 2021 that includes plans for several major new projects, for aninvestment of NOK 60-100 billion.

42

IEA. All rights reserved.

Norway also has longer term plans for the development of offshore wind, and is currently
in the process of developing a licencing framework for the technology. These include aplan to build the world’s largest floating offshore wind farm (Hywind Tampen), consistingof 11 wind turbines based on Equinor’s floating wind technology, with a total installedcapacity of 88 MW. Beyond this project, two areas have been opened for offshore wind
power development, one in deep waters with high-cost floating technology and one with abottom-fixed solution. The NVE does not expect any offshore wind projects to be online
before 2030, and its projections include 7 TWh of offshore wind power produced in 2040.

In February 2022, the government appointed an Energy Commission to map out futureenergy demand and propose increased energy production, with the aim that Norway willcontinue to have surplus electricity production and that Norwegian industry and electricity
consumers will continue to have abundant access to renewable power. The commission
will also assess the challenges facing Norwegian energy policy towards 2030 and 2050,
and how different policy choices will affect the long-term development of Norway’s power
supply. The Energy Commission’s mandate is linked to five overarching themes: 1) how
Norway is affected by rapidly changing energy markets; 2) perspectives on the evolutionof power consumption; 3) the potential for socio-economically profitable power production;4) perspectives for security of supply; and 5) key conflicts of interest within the energy
policy field. The Energy Commission is expected to submit its report by 15 December
2022.

Critical minerals
Increased electrification as well as a number of clean energy applications will increase
Norway’s demand for critical minerals such as lithium, cobalt, nickel, manganese andcertain rare earth minerals. The NCS has sulphides and manganese crusts, containing
metals and minerals that are crucial for such technologies, including batteries and windturbines.
The government initiated an opening process for mineral activities on the NCS. The
Norwegian Petroleum Directorate has been tasked by the MPE to map the mostcommercially interesting mineral deposits on the NCS. The Norwegian Petroleum
Directorate’s assessments of sulphides so far show high contents of copper, zinc andcobalt. In addition, rare earth elements have been found in samples from manganesecrusts. The content of some of these metals is high compared with deposits from otherplaces around the world (Norwegian Petroleum Directorate, 2022).
The act relating to mineral activities on the NCS – the Seabed Minerals Act – also enteredinto force on 1 July 2019.

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

Oil and gas sector decarbonisation
GHG emissions from petroleum activities originate from the combustion of natural gas anddiesel in turbines, engines and boilers; flaring of natural gas for safety reasons; venting
and diffuse emissions of gas; and storage and loading of crude oil. The industry’s own
organisation, the Norwegian Oil and Gas Association, has a national database for reporting
all releases from the industry, called the EPIM Environment Hub. All operators on the NCS
report data on emissions to air and discharges to the sea directly in the EPIM Environment
Hub (Norwegian Petroleum, 2021).

Norway has regulated methane emissions and controlled flaring since the 1970s. A permit
under the Pollution Control Act is required for the offshore and onshore petroleum sector,
issued by the Norwegian Environmental Agency. Direct emissions of methane (venting
and fugitive emissions) are regulated through emissions limits set in facility-specific43

IEA. All rights reserved.

Norway has a number of policies in place to ensure that oil and gas companies consider
environmental and climate issues during all phases of their activities, from exploration todevelopment, operations and field cessation (Norwegian Petroleum, 2021). Emissions
from oil and gas activities in Norway are regulated through the Petroleum Act, the CO2 Tax
Act and the Pollution Control Act.

3. ENERGY AND CLIMATE CHANGE

permits. As a general requirement, the emissions limits are based on best available
technology as defined nationally or in the EU, assessed individually for each facility. Flaringof natural gas is only permitted when necessary for safety reasons, based on permits
issued by the MPE. Norway is also part of the Global Methane Pledge of over 100 countries
announced at COP26 to reduce global methane emissions by at least 30% from 2020
levels by 2030.
The CO2 tax on petroleum sector activity on the continental shelf was introduced in 1991.
It is levied on all combustion of gas, oil and diesel in petroleum operations on thecontinental shelf and on releases of methane directly into the atmosphere. For 2022, thetax rate is NOK 1.65 (EUR 0.16) per standard cubic metre of gas or per litre of oil orcondensate. For combustion of natural gas, this is equivalent to 705 NOK/t CO2(70 EUR/t CO2). For emissions of natural gas directly into the atmosphere, the tax rate is
NOK 10.66 (EUR 1.1) per standard cubic metre, or 766 NOK/t CO2-eq (76 EUR/t CO2-eq).
The combination of the carbon tax and the EU ETS means that companies on the NCS
pay approximately 1 600 NOK/t CO2 (160 EUR/t CO2) emissions in 2022, which issignificantly higher than for most other businesses in Norway. It is also higher than theCO2 price paid by producers in other countries with petroleum activities (NorwegianPetroleum, 2021). As a result, Norway has among the lowest emissions intensity of oil
production in the world, estimated by the government at around 8 kg CO2-eq per barrel ofoil.
The government has a target for the sector to halve 2005 emissions by 2030, and to reachnet zero emissions by 2050. An assessment by the MPE along with the industry found thatthose reductions could only be achieved by around 2035, driven by the increasing carbon
price.
Electrification of oil and gas platforms is considered a key tool to achieving emissions
reduction targets. All new upstream projects are required to consider electrification in theirplanning process, though application still depends on costs and access to gridconnections. Beyond electrification, the advancement of new technologies, such as CCS,is also expected to play a role in upstream decarbonisation (see below).

Transport sector decarbonisation

Vehicle taxation is the main policy instrument for decreasing emissions in the transport
sector. Fossil fuel cars are taxed through the registration tax, which contains a component
that increases with estimated CO2 emissions, the CO2 tax, and the road use tax on
gasoline and diesel. ZEVs, on the other hand, enjoy zero VAT; exemption from the oneoff registration tax; as well as reduced toll road charges, ferry and parking fees. Electricity
to EVs is not covered by the road usage tax, which is levied on liquid fuels and gas. In
addition, PHEVs have for several years benefited from a reduced one-off registration
tax. EVs also have special e-number plates, allowing authorities to choose local
incentives such as free parking, use of bus lanes or payment of lower regional road tolls.
The tax expenditure of the EV incentives were NOK 18.7 billion (EUR 1.9 billion) in 2021,

44

IEA. All rights reserved.

Norway is a large and mountainous country spanning a distance of 1 770 km from northto south. Road transport is the dominant means of transport both for short trips in cities
and longer journeys. Freight relies heavily on road (52%) and sea (42%), with only 6% byrail.

while the energy industry associatgion Drivkraft Norge estimates that EVs reduced
emissions of CO2-eq by around 5% in 2020.
As a result, Norway had the highest share of EVs (including both pure battery and PHEVs)
in both car stock (25%) and car sales (85%) among IEA countries in 2021. In 2021, about
151 900 EVs were sold in Norway, of which 113 700 were fully battery electric and 38 200
plug-in hybrids; the total EV stock reached 585 650.
Norway also had 9 726 electric vans, 453 electric buses, 25 electric trucks and 159 fuelcell cars on the road in 2020. In the same year, almost 17 000 public electric chargers
were available in the country, of which 5 300 were fast chargers. The country has 0.35
public charging points for every ten EVs. The first electric ferry was introduced in 2015 andthe government aims to have 70 hybrid and electric ferries on the Norwegian coast by2022, as well as the first offshore vessel fuelled by ammonia by 2024.
The Climate Action Plan 2021-2030 also announces a target to halve emissions from theshipping industry from 2005 to 2030, including through the establishment of low- and zero
emissions criteria in public procurement of maritime transport services, commencing
in 2023. The increase in the taxes on non-ETS emissions is the main policy instrument forreaching this goal. The government also plans to support county municipalities thatprioritise zero-emission solutions on ferries and speedboats. Following a parliamentarydecision, the government is working on a plan to establish criteria for deploying zero- andlow emissions solutions for offshore vessels in petroleum production by 2023.
In addition to EVs, the government plans to build on successful decarbonisation to date inroad transport driven by biofuels by expanding its quota policy to extend progress beyondroad transport to include off-road diesel and shipping. Currently for road transport, fuelsuppliers must fulfil a biofuels quota of 24.5% of the volume of fuels supplied, of which aminimum of 9% must be advanced biofuels. Advanced biofuels are counted at twice theirvolume, creating an effective blend rate of 12.25-15.5%.

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

The government is also exploring options for creating low emissions zones that promotesustainable transport and cleaner cities. The government set a target of zero growth inpassenger transport by car in large urban areas. Long-term urban growth agreements
include improving public transport, bicycle and walking alternatives, and restrictive
measures for car traffic such as road tolls and parking restrictions. Under agreements
between the government and local communities, funds are granted to finance public
transport projects.

Technology and innovation
Energy innovation also has an important role to play in meeting Norway’s climate targets,notably in decarbonising hard-to-abate sectors, such as transport (especiallynon-passenger and non-road transport), industry, and oil and gas production. To this end,
Norway has several programmes in place to promote technology development, including
for CCS and hydrogen.

CCS is a priority area for Norway's climate action, and is identified as an essential measurein Norway's NDC. Without CCS, it will be nearly impossible for Norway to meet its targets
for domestic emissions reductions. Langskip (“Longship”) which is under construction, is
45

IEA. All rights reserved.

Carbon capture and storage3. ENERGY AND CLIMATE CHANGE

a central part of the government’s policy for CCS. The project comprises state aid, on
certain conditions, for two full-scale capture facilities and one storage facility in the
North Sea. Langskip aims to facilitate learning related to regulation and simulation of CCS
for subsequent projects in Europe and the rest of the world. CCS has broad public
acceptance in Norway.
The carbon tax introduced in 1991 is one of the key drivers of CCS. In 2005, Gassnova
was established by the Norwegian government as a state-owned enterprise with themandate to drive investment in CCS technologies. The government also adopted a CCS
strategy in 2014-2015.
In addition to several pilot projects, there are currently two large-scale CCS projects
operating in Norway and one under development. Since 1996, CO2 has been captured
from natural gas production at the Sleipner West reservoir (and since 2014 from theGudrun field) and stored at the Utsira geological formation. Since 1996, up to 1 Mt CO2
per year has been separated and stored under this project. The second active, large-scale
CCS project started operations in 2008, where CO2 is captured from the natural gas
produced at the Snøhvit field before it is converted into liquefied natural gas (LNG) for
export, and stored back in the same field. At full production, about 0.7 Mt CO2 per year isseparated and stored at the Snøhvit field.
The CCS strategy adopted in 2015 initiated pre-feasibility studies for the Longship project(Longship, 2021). By spring 2020, front-end engineering design studies were completed
for CO2 capture, transport and storage, and the government took a final investment
decision that year to proceed with the project. The project will transport CO2 from emissions
points by truck, then ship to an onshore gathering station. CO2 is then piped around 100 km
offshore to the storage site where it is injected. Given that one of the challenges with CCS
is the integration of complete value chains, the state is playing the role of a market maker,
serving as an intermediary between capture and storage operators.
Longship initially includes CO2 capture from the Norcem’s Brevik cement factory and, incertain conditions, Fortum Oslo Varme’s waste incinerator facility, for a total of 0.8 Mt CO2
per year. Northern Lights, a joint venture company owned by Equinor, Shell and Total, isdeveloping the CO2 transport and storage solution, and proved in February 2020 that theTroll oil and gas field was suitable for approximately 1.5 Mt CO2 storage per year. In May
2021, the Northern Lights Joint Venture announced its intention to drill a second injection
well in 2022 as the first step toward increasing the capacity of Longship to 5 Mt/year.
With the approval of the national budget for 2021, the parliament agreed to the funding
model and the conditions for further project development. State funding for the Longshipproject is estimated to be NOK 16.8 billion (EUR 1.65 billion), or about two-thirds of thetotal cost of the first phase. Longship is currently in the construction phase, planning tostart operations in 2024.

46

IEA. All rights reserved.

In 2021, Norway declared two additional offshore areas as available for CO2 storage
development, with a deadline to submit applications for those areas in December 2021.
Two licences were awarded by the MPE on the NCS (one in the North Sea and one in the
Barents Sea) in April 2022 (Norway, Ministry of Petroleum and Energy, 2022).

Norway is home to a number of companies with carbon capture, utilisation and storage(CCUS)-specific or related expertise: Equinor owns the Sleipner and Snøhvit CCUS projects. It is also involved in numerous
CCUS projects in development globally. While Equinor is a publically traded company, theNorwegian state is the majority shareholder.

 Northern Lights JV, a joint venture between Equinor, Shell and Total, is the promoter of theNorthern Lights project.

 Aker Carbon Capture, a spin-off of Aker Solutions, owns proprietary capture technology andis working to develop a business model where CO2 capture is offered as a service to small
emitters. It also designs and constructs capture facilities for large emitters.

 DNV is a classification society that has produced best practice guidelines for CCUS
activities. It has been involved with certifying the design of numerous projects globally, andhas worked with many governments on CCUS-related activities.

 Horisont Energi is a Euronext listed cleantech start-up that is developing blue ammonia, bluehydrogen and CO2 storage services. It is a promoter of the Barents Blue ammonia/Polaris
CCS storage project.

In addition, Gassnova jointly runs the CLIMIT programme with the RCN, which is focusedon research, development and demonstration (RD&D) of CCUS technologies in Norway.
Norway also places a strong emphasis on international co-operation on CCUS, and has
identified Europe as a priority area. The Norwegian government estimates that every
doubling of CCUS capacity globally can bring down costs by at least 10%. Longship has
been designed with significant excess transport and storage capacity. Both the commercial
project promoters and the Norwegian government have suggested that this excess
capacity could be used by non-Norwegian emitters. Since 2017, the Northern Lights
project has been included in the (EU’s) List of Projects of Common Interest.

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

HydrogenAlmost all hydrogen being used today in Norway is as feedstock in chemical industries andin refineries of petroleum-based products. In these applications, hydrogen is used as partof the end-product. Currently, the most relevant direct applications for hydrogen in Norway
appear to be the maritime sector, heavy goods transport and industrial processes.

In June 2020, the former government published the Norwegian government’s Hydrogen
Strategy. The strategy highlights parts of the heavy manufacturing and transport sectors,
including shipping and heavy goods transport, as the sectors most suitable for hydrogen.
These are sectors in which there are currently few emissions reduction alternatives, andin which replacing fossil energy sources with renewables, batteries or bioenergy solutions
will be challenging (Norway, Ministry of Petroleum and Energy and Ministry of Climate andEnvironment, 2020).
The government offers several R&D-related support measures for green and bluehydrogen development. The RCN, Innovation Norway and Enova contribute to developing
47

IEA. All rights reserved.

The main drivers for hydrogen development are emissions reductions and value creation,with an eye to leveraging Norway’s existing competitive advantages. On the current
coalition government’s political platform, an important point for hydrogen is to develop a
coherent value chain where production, distribution and use are developed in parallel as
there is still a need for technology development across the entire value chain.

3. ENERGY AND CLIMATE CHANGE

and demonstrating energy-efficient and cost-efficient methods and value chains for the
production, transport, storage and use of clean hydrogen, including through joint calls for
proposals in the PILOT-E scheme (see Chapter 6; Norway, Ministry of Petroleum andEnergy and Ministry of Climate and Environment, 2020).
In transport, hydrogen vehicles get the same tax breaks and user benefits as battery
electric vehicles. Moreover, the Zero Emissions Fund was introduced to accelerate theintroduction and growth of zero emissions solutions in the commercial vehicle and vessel
market. Through Enova, the government also supports the build-out of early-phase fuelling
infrastructure for shipping (Norway, Ministry of Petroleum and Energy and Ministry of
Climate and Environment, 2020).
The government also plans to continue work on developing regulations and standards forthe use of hydrogen-based systems in new applications.
Following up on the Hydrogen Strategy, in June 2021, under the white paper Putting
Energy to Work, the former government also launched a hydrogen road map. The
road map outlines a plan for the establishment of a robust domestic market for the
production and consumption of hydrogen in Norway by 2050. By 2050, the road map
expects that hydrogen will be used as a chemical feedstock in industry where economicallyfeasible, as fuel in shipping both in coastal waters and for longer distances, in heavy-dutyroad transport, and exported to create economic value domestically.
In the short term, by 2025, the hydrogen roadmap outlines plans for the establishment offive hydrogen hubs for maritime transport, one or two industrial projects with associatedhydrogen production units, and five to ten pilot projects for the development anddemonstration of new and cost-efficient hydrogen technologies.
In the medium term, by 2030, the road map plans for the creation of hydrogen clusters thatare geographically spread and demand-driven to align with access to vessels and vehicles;
projects in the industry that can be tied to a market for hydrogen in Europe and the rest of
the world; hydrogen solutions as a competitive alternative to fossil fuels; and companies
that are tied to the development of a market for hydrogen in Europe through exports.

Norway participates in a number of international organisations seeking to speed up thecommercial breakthrough of hydrogen through the harmonisation of standards andregulations, as well as information-sharing on value chains, research partnerships andsafety. These include: the Clean Energy Ministerial, Mission Innovation, the IEA Hydrogen
Technology Collaboration Programme, the Carbon Leadership Forum, the European
Clean Hydrogen Alliance, the European Strategic Energy Technology Plan and Horizon
Europe, among others.
In April 2022, the government presented a supplementary white paper to the previous
government’s white paper on energy policy and long-term value creation from Norwegian48

IEA. All rights reserved.

Policy instruments to achieve growth in hydrogen include support for R&D efforts, including
pilot and demonstration projects (notably in maritime and industry), taxes and regulations(including the increasing CO2 tax), requirements in public procurement, as well as
supporting investments in infrastructure. The government will support hydrogen R&D
through the RCN, Enova, Gassnova and Innovasjon Norge. Two new research centres
dedicated to hydrogen and ammonia have also been established, led by SINTEF andNORCE (RCN, 2022).

energy resources. The supplementary white paper presents an updated policy on thedevelopment of hydrogen. In this supplementary paper, the government states that it willcontribute to emissions reductions in Norway with an ambition to produce hydrogen withzero or low emissions in line with national demand. The government also states that it willcontribute to the development of a market for hydrogen in Europe. This includes
participation in relevant international fora and initiatives, international research cooperation and bilateral co-operation with relevant countries, the development of regulation
for hydrogen in Europe and in EEA countries, as well as the creation of a national market
for hydrogen.
The government will also enable economically viable production of blue hydrogen. The
contribution will include Gassco’s architecture function and the provision of areas for CO2
storage to stakeholders with storage needs.

Climate adaptation and resilience
The Norwegian Centre for Climate Services published the Climate in Norway 2100 reportin 2015. It provides a scientific basis for climate change adaptation in Norway. Several
climate-related changes will affect the Norwegian energy system. Increased rainfall during
spring combined with early snowmelt caused by temperature rise will increase seasonalriver flow changes and widen the gap between winter and summer runoff. Overall runoffof Norway’s mainland is expected to increase by the end of the century, which is likely tohave a positive effect on the country’s hydropower generation, but investments in reservoir
capacity and power infrastructure may be required to fully capture the anticipated benefits.
Temperature increases, leading to milder winters, will likely reduce energy demand forheating, especially in the southern part of the country. However, temperature increases
and reduced runoff in summer might also lead to more intensive droughts in this period of
the year. Further, strong winds combined with the sea level rise may increase the height
and frequency of storm surges in Norway in the future. Storms and snowfalls have been
the most common reason for electricity supply interruption in recent years.

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

In 2013, Norway adopted its first white paper Climate change adaptation in Norway thatcovered the energy sector’s adaptation and resilience, including sections that described
existing and potential measures to enhance climate resilience of power supply (IEA,
2022b). Building on this, the NVE adopted the Strategy for Climate Change Adaptation
2015-2019, which emphasises that climate change adaptation must be integrated into the
NVE’s different areas of work, such as licencing for hydropower installation and operation,and further encourages the acquisition of the best possible knowledge on climate change’s
impacts on energy supply and demand (IEA, 2022b).

Norway’s municipalities, which have overall responsibility for social development, planningand provision of services, have a major role to play with respect to climate adaptation. To
this end, there are central government planning guidelines in place for climate and energy
planning and climate change adaptation to ensure that municipalities use a wide range of49

IEA. All rights reserved.

Although Norway’s energy policies recognise climate impacts on the energy sector, they
focus on energy security and mitigation. Though some of the proposed measures (suchas enhancing power system flexibility) could raise the energy sector’s climate resilience,
most actions only target energy supply security, efficiency and renewable energy
production.

3. ENERGY AND CLIMATE CHANGE

their roles and instruments in adaptation work. The Norwegian Environment Agency has
developed practical guidelines to implement the guidelines.

Assessment
Norway’s total greenhouse gas emissions have been relatively stable over the past two
decades and have exceeded emissions in the base year (1990) of 51.5 Mt CO2-eq for
most of this period. In 2019, Norway’s total GHG emissions stood at 50.3 Mt CO2-eq, a
2% decrease since 1990. Carbon removals from the LULUCF sector accounted for18.6 Mt CO2-eq in 2019.
Norway’s 2020 target was to cut GHG emissions by 30% from 1990 levels, underpinned
by domestic emissions reductions, participation in the EU Emissions Trading System aswell as international offset mechanisms. Despite emissions reductions evoked by the
pandemic, Norway missed its ambition to realise at least half of its emissions reductions
domestically, relying to a large extent on the EU ETS and international offsets to achieve
the target.
Norway is in the enviable position of having an almost fully decarbonised power sector.
Having benefited from historically low electricity prices, Norway has also achieved
substantial electrification of the buildings sector and almost half of industry, thereby also
lowering emissions in these sectors. As a result, many of the easy wins for reducing
emissions have already been achieved and the remaining emissions reductions are more
complex, challenging and costly. In this regard, Norway can be well-positioned to lead theworld on new technologies for decarbonising hard-to-abate sectors, such as EVs, carbon
capture and storage, and hydrogen, if the right policies and incentives are put in place.
Norway must further reconcile its twin identities of being a major oil and gas producer anda leader on climate change mitigation. The country is committed to maximising the value
from its petroleum reserves, but should place a greater emphasis on plans for how thismight change as the world decarbonises over the next 30 years.
With its excellent starting point and considerable wealth, Norway has the potential to leadthe way in how to reach net zero-equivalent emissions. The government should take theopportunity as the country recovers from the pandemic to advance a vision for Norway’s
low-carbon future that seizes the economic opportunities, manages risks anddemonstrates global leadership.
Through its enhanced nationally determined contribution under the Paris Agreement,
Norway has committed to reduce GHG emissions by at least 50% and towards 55%
by 2030 compared to 1990 levels. Its NDC is economy-wide, covering all sectors and
GHGs.

In June 2017, the Norwegian parliament adopted the Climate Change Act, which
establishes by law Norway’s target of becoming a low emissions society by 2050. The
target is equivalent to reducing economy-wide emissions by 90-95% from 1990. It remains
to be decided how the detailed accounting of the LULUCF sector will be taken into accountwhen assessing progress toward the target. However, the full LULUCF sink will not be
50

IEA. All rights reserved.

Norway intends to fulfil its 2030 NDC commitment in co-operation with the EU. Provisions
in the NDC also allow for international flexibility mechanisms to be used to fulfil this target.

counted in full, as inclusion would lead to a negative emissions target, to ensure the samelevel of ambition as the current target.
In 2021, Norway published its Climate Action Plan, which sets out the former government’s
strategy for achieving 2030 emissions targets, notably for non-ETS sectors, which include
transport (excluding domestic air), agriculture, buildings, waste and parts of industry.
Specific sectoral targets have been set for the transport and agriculture sectors, but
dedicated plans for how these targets will be achieved and how they will in detail add up
to the overall 2030 target is not clear.
The polluter-pays principle is a cornerstone of the Norwegian policy framework on climatechange. Approximately 85% of domestic GHG emissions are either covered by the ETS
or subject to a CO2 tax (or other GHG taxes), or both. In 2022, the CO2 price is around
766 NOK/t CO2-eq (76 EUR/t CO2-eq) for emissions outside the EU ETS. The former
government announced in a 2021 white paper that the CO2 tax will gradually increase to
2 000 NOK/t CO2-eq (200 EUR/t CO2-eq) in 2030.
The CO2 pricing levels are robust from an international perspective and can drive
meaningful emissions reductions in relevant sectors. Moreover, the recently proposedchanges allow for a more even pricing level across economic sectors. However, even a
carbon price of NOK 2 000 is unlikely to lower domestic emissions to the level needed tomeet Norway’s climate targets. Making use of flexibility mechanisms would be one option
to consider, notably if carbon prices in other countries lag behind this level. To reduce
emissions as much as possible domestically, the government would benefit from moredetailed projections of the levels of carbon prices needed to motivate technological shifts
to cut emissions, and consider supplementary incentives and support for sectors that may
need them.
Moreover, bottom-up modelling of emissions reduction pathways for various sectors,
including the role that carbon prices and technology will play in achieving them, would help
clarify how each sector can decarbonise and what investments are needed to get there.

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

The electricity sector in Norway is almost completely decarbonised, relying extensively onhydropower and a small share of onshore wind. However, going forward, electricity
demand is expected to increase as more of industry and transport turn to electrification to
reduce reliance on fossil fuels and meet Norway’s climate targets. New industries such as
green hydrogen, data centres or battery gigafactories, as well as the decarbonisation ofexisting process industry, could further increase electricity demand. Therefore, given aheavy dependence on electrification as a decarbonisation strategy across sectors, Norway
should holistically assess projected future demand for electricity to ensure sufficient andaffordable generation and transmission capacity, along the lines of the mandate of therecently established Energy Commission.

Emissions from oil and gas production in Norway were 12.6 Mt CO2-eq in 2019, amounting
to 25% of total GHG emissions. As the largest contributor to energy sector emissions,
Norway’s oil and gas sector will have a crucial role to play in meeting the country’s climate
51

IEA. All rights reserved.

While Norway has enjoyed a great pace of electrification in many sectors of the economy
and is looking to expand this further, it should be mindful of the increased demand for
critical minerals it entails. In this regard, Norway is exploring possibilities to start
indigenous production of critical minerals, including from the seabed, to alleviate expectedsupply pressures globally.

3. ENERGY AND CLIMATE CHANGE

targets. The government has regulations in place to address emissions in the sector. Directemissions of methane (venting and fugitive emissions) have long been regulated andflaring is only permitted when necessary for safety reasons. Norway is also part of the
Global Methane Pledge of over 100 countries announced at COP26 to reduce global
methane emissions by at least 30% from 2020 levels by 2030.
The CO2 tax on the petroleum sector on the continental shelf was introduced in 1991. Mostof these emissions are also covered by the EU ETS, so oil companies face a total carbon
price close to 1 600 NOK/t CO2 (160 EUR/t CO2) in 2022.
As a result of these policies, emissions from the sector have been steadily declining since2015. Overall, Norway has among the lowest emissions intensity of oil production in theworld, estimated by the government at around 8 kg CO2-eq per barrel of oil.
The government has a target for the sector to halve emissions by 2030 relative to 2005
levels and to reach net zero emissions by 2050. An assessment by the MPE and theindustry expects to achieve those reductions only by around 2035. This is mainly expected
to be driven by the rising carbon price. Electrification of oil and gas platforms will play a
key role in achieving this target. New upstream projects are required to consider
electrification in their planning process. But retrofitting existing platforms will depend on
costs, remaining project lifetime and onshore infrastructure. The government should
consider options beyond carbon pricing to incentivise electrification of new and existing
platforms to speed up the decarbonisation of this sector.
Emissions from the transport sector in Norway account for 34% of total GHG emissions,the largest contributor to emissions that fall outside of the EU ETS and hence crucial toachieving Norway’s domestic climate goals. Norway has an ambition to halve emissions
from transport by 2030 relative to 2005 levels. Achieving this goal will require targeted
efforts that focus on policies that deliver measurable emissions reductions.
ZEVs are heavily subsidised in Norway. Support includes zero VAT; exemption from a
one-off registration tax; as well as reduced toll road charges, ferry and parking fees. The
tax expenditure of the EV incentives were NOK 18.7 billion (EUR 1.9 billion) in 2021. As aresult, over 85% of new car sales were fully battery or plug-in hybrid electric vehicles in
2021, and they make up around 25% of the total car fleet. However, the overall impact onemissions reductions is uncertain, as it is unclear to what extent EVs are substituting
conventional internal combustion engine vehicles. Drivkraft Norge estimates that EVs
reduced emissions of CO2-eq by around 5% in 2020.

Though EVs receive more popular attention, Norway has partly achieved its notableemissions reductions in transport (15% reduction in CO2 emissions over 2009-2019) bysubstituting fossil fuels with biofuels, through an ambitious biofuels policy. An expansionof biofuels policy and support for advanced biofuels can notably complement electrificationin non-road transport in particular.

52

IEA. All rights reserved.

Government support for EVs must be coupled with investment in charging infrastructureand grid design. In particular, a more substantial network of fast-charging facilities will benecessary to achieve a shift away from internal combustion engine vehicles for longer
passenger journeys and freight. Norway also has ambitious plans to expand the role ofelectricity in other transport segments, including maritime, rail and short-haul aviation.

Carbon capture and storage is a priority for Norway’s climate action, and is identified as
an important measure in Norway's NDC. The government’s ambition is to develop a robust
value chain for CCS, and has a goal to realise at least two full-scale capture facilities andone storage facility in the North Sea. The carbon tax introduced in 1991 is one of the key
drivers of CCS.
Norway is undoubtedly a leading country for CCS deployment, with projects in place sincethe 1990s and continuous technology development since then. Norway is now making a
big step forward with the Longship project that encompasses capture; collection fromdifferent sources; transport by truck, ship and pipeline; and storage in a depleted field.
Although it comes with a large subsidy from the government (EUR 1.65 billion out of a total
project cost for Phase 1 of EUR 2.5 billion), the project will be important for proof-ofconcept for CCS technology in Europe as well as the development of a full CCS chain.
The novel approach, where the state has taken a role as intermediary and market maker
between capture and storage operators, can bear results. The project can also achieve
sizeable economies of scale if it can be successfully expanded on a commercial basis in
the longer run. CCS technology will have an important role to play in Norway for industrial
sectors like cement production, waste incineration, and oil and gas production, as well as
for bringing new business opportunities to the county. It can also provide invaluable
technological expertise to help bring down costs and facilitate wider deployment globally.
The former government published its Hydrogen Strategy in June 2020, followed by a white
paper in 2021 that assessed the entire energy sector and included a road map forhydrogen. The current government plans to further update the white paper, which is again
expected to include a focus on hydrogen. An important point in the government’s vision isto develop a coherent value chain where production, distribution and use are developedin parallel. Toward this end, in addition to Enova funding for demonstration projects andcarbon pricing, the government offers several R&D-related support measures for green
and blue hydrogen development. Norway also participates in a number of internationalorganisations seeking to speed up commercial breakthrough of hydrogen through theharmonisation of standards and regulations, as well as information-sharing on value
chains, research partnerships and safety.

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

On adaptation and resilience, the climate impacts on the energy sector are well recognised
in several assessments and climate policies at the national level. Nonetheless, measures
to enhance the energy sector’s climate resilience proposed in the “White paper on climatechange adaptation” or the Strategy for Climate Change Adaptation are not consistently
integrated into energy policies, which are more focused on mitigation. The monitoring,
reporting and evaluation mechanism should also be strengthened by introducing indicators
to measure the adaptation target.
53

IEA. All rights reserved.

Overall, Norway is well-positioned for the development of a hydrogen industry, with
suppliers covering the full value chain and significant potential for offshore wind to power
the electrolysers needed. The road map for hydrogen appears clear and well-considered,with benchmarks for progress in 2025, 2030 and 2050. The focus of the plan is to createhydrogen development hubs based on existing industry and infrastructure. Building on thiswork, the government should also consider establishing specific production goals forhydrogen that can provide stronger investment signals. The government should also
promptly clarify the role that green hydrogen will play in the economy and the level ofrenewables generation (including offshore wind) that will be needed for its production toprovide clarity for the development of both sectors in a complementary way.

3. ENERGY AND CLIMATE CHANGE

Recommendations
The government of Norway should: Clarify certain elements of its 2050 target, including how land use, land-use change
and forestry is included and whether quantified limits and/or environmental stringency
criteria will be applied to the use of international flexibility mechanisms.
 Set out detailed pathways for how sectors will decarbonise, both to 2030 and to 2050,
based on bottom-up technology modelling to understand deployment pathways, cost
trajectories and infrastructure needed under different scenarios.
 Building off successful projects, develop an ambitious road map for carbon captureand storage that clarifies its role across sectors in meeting Norway’s climate changetargets.

54

IEA. All rights reserved.

 Study possibilities for indigenous production of critical minerals needed for clean
energy technologies to alleviate expected global supply-side pressures and add totechnology breakthroughs.

References
EC (European Commission) (2021), Effort sharing 2021-2030: Targets and flexibilities(web page), https://ec.europa.eu/clima/eu-action/effort-sharing-member-states-emissiontargets/effort-sharing-2021-2030-targets-and-flexibilities_en
EC (2019), The European Union, Iceland and Norway agree to deepen their cooperation inclimate action (web page), https://ec.europa.eu/clima/news-your-voice/news/europeanunion-iceland-and-norway-agree-deepen-their-cooperation-climate-action-2019-10-25_en
Norway, Ministry of Petroleum and Energy, (2022), Two licenses under the carbon storage
regulations awarded on the NCS (press release),https://www.regjeringen.no/en/aktuelt/two-licenses-under-the-carbon-storage-regulationsawarded-on-thencs/id2907318/#:~:text=Two%20licenses%20under%20the%20carbon%20storage%20regu
lations%20awarded%20on%20the%20NCS,Press%20release%20%7C%20Date&text=Today%2C%20the%20Norwegian%20Ministry%
20of,one%20in%20the%20Barents%20Sea.
Norway, Ministry of Transport (2021), National Transport Plan 2022-2023,
https://www.regjeringen.no/contentassets/117831ad96524b9b9eaadf72d88d3704/engb/pdfs/stm202020210020000engpdfs.pdf
Norway, Ministry of Petroleum and Energy and Ministry of Climate and Environment (2020),
The Norwegian Government’s Hydrogen Strategy,
https://www.regjeringen.no/contentassets/8ffd54808d7e42e8bce81340b13b6b7d/hydrogenstrategien-engelsk.pdf
IEA (International Energy Agency) (2022a), Greenhouse Gas Emissions from Energy(database), https://www.iea.org/data-and-statistics/data-product/greenhouse-gasemissions-from-energy (accessed on 15 February 2022)
IEA (2022b), Norway climate resilience policy indicator (web page),https://iea.org/articles/norway-climate-resilience-policy-indicator

ENERGY SYSTEM TRANSFORMATION

3. ENERGY AND CLIMATE CHANGE

Longship (2021), Longship – Norway’s largest climate project (web page),https://langskip.regjeringen.no/longship
Norwegian Petroleum (2021), Emissions to air (web page),https://norskpetroleum.no/en/environment-and-technology/emissions-to-air
Norwegian Petroleum Directorate (2022), Seabed minerals (web page),https://npd.no/en/facts/seabed-minerals
RCN (Research Council of Norway) (2022), Creates two new research centers on hydrogen(web page), https://forskningsradet.no/omforskningsradet/pressekontakt/pressemeldinger/2022/oppretter-to-nye-forskningssentre-pahydrogen
UNFCCC (United Nations Framework Convention on Climate Change) (2022), Greenhouse
Gas Inventory Data (database), https://di.unfccc.int/detailed_data_by_party (accessed on
23 February 2022)

UNFCCC (2015), Norway’s Intended Nationally Determined Contribution,
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Norway%20First/NorwayIND
C%20(Archived).pdf

55

IEA. All rights reserved.

UNFCCC (2020), Update of Norway’s Nationally Determined Contribution,
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Norway%20First/Norway_up
datedNDC_2020%20(Updated%20submission).pdf

Key data (2020)
TFC: 1 20.5 Mtoe (electricity 47.5%, oil 36.1%, bioenergy and waste 6.8%, natural gas 4.3%,
coal 2.1%, heat 2.3%), -0.5% from 2000 to 2019, -3.2% from 2019 to 2020
TFC by sector: industry 45.7%, buildings 32.5%, transport 21.8%
TFC per capita: 3.82 toe/capita (IEA average* 2.9 toe/capita), -12.5% since 2010
TFC per GDP** 62.6 toe/USD million (IEA average* 65 toe/USD million), -15.5% since 2010
* Weighted average among the 30 IEA member countries in 2019.
** GDP in USD 2015 prices and PPPs (purchasing power parities).

Overview
In Norway, economic growth has been decoupling from energy consumption. Between
2010 and 2019, Norwegian GDP grew by 15%, while TFC fell by 0.5% (Figure 4.1). The
decoupling is also evident in a reduction of energy intensity, both in terms of TFC per
GDP (-16% from 2010 to 2020 and -5% from 2015 to 2020) and TFC per capita (-12%from 2010 to 2020). Electricity consumption per capita was stable between 2009 and2019, as increased efficiency was offset by higher demand, especially in the residential
sector. Between 2019 and 2020, the Covid-19 pandemic contributed to a 3% drop in
TFC.

ENERGY SYSTEM TRANSFORMATION

4. Energy efficiency

Norway’s main target for energy efficiency is to improve the overall energy intensity ofthe economy by 30% in 2030 compared to 2015.

1

Total final consumption (TFC) is the final consumption of energy (electricity, heat and fuels, such as natural gas andoil products) by end users, not including the transformation sector (e.g. power generation and refining). TFC also
includes non-energy use. Non-energy use refers to fuels used as raw materials, and not used as fuel or transformed
into another fuel. This typically comprises raw materials used in the chemical and petrochemical sector.

57

IEA. All rights reserved.

TFC in Norway was 20.5 Mtoe in 2020, and has been relatively stable over the last
decade, with a low in 2009 following the financial crisis and a peak in 2010 due to therecovery and exceptionally cold weather. Industry was the largest energy-consuming
sector in 2020, followed by buildings and transport.

4. ENERGY EFFICIENCY

Index 1 = 2000

Figure 4.1 Energy demand and drivers in Norway, 2000-2020
1.35

GDP

1.25

Population

1.15
TFC
1.05
Electricity/capita

0.95

TFC/capita

0.85
0.75
2000

TFC/GDP
2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

IEA. All rights reserved.

While Norwegian GDP increased by 15% between 2010 and 2019, total final consumption
was stable, showing a decoupling of economic growth and energy demand.
* GDP data are in billion USD 2015 prices and PPPs (purchasing power parities).
Notes: GDP = gross domestic product; TFC = total final consumption.
Source: IEA (2022).

Figure 4.2 Total final consumption by sector in Norway, 2000-2020
25

Mtoe
Transport

20
15

Buildings

10
5

Industry*
0
IEA. All rights reserved.

Industry was the largest energy-consuming sector in 2020, followed by buildings andtransport.
* Industry includes non-energy use.
Source: IEA, (2022).

Energy efficiency targets and strategies

The state-owned Enova, which supports the development of energy and climate
technology, has been Norway’s main provider of financial support for projects resulting inenergy savings across various sectors as well as projects targeted toward households andconsumers. These include projects for innovative district heating, increased use of waste
58

IEA. All rights reserved.

Based on a 2016 white paper, Norway’s main target for energy efficiency is to improve theoverall energy intensity of the economy by 30% in 2030 compared to 2015. As of 2020,
the government estimates a reduction in energy intensity of 6% since 2015. Norway also
set a target to reduce the energy use in existing buildings by 10 TWh by 2030, compared
to 2015.

heat in industry and more effective production processes in industry. Enova is also
responsible for projects that reduce GHG emissions from transport, which can help lower
energy consumption. For the period 2021-2024, the scope of Enova’s mandate pivoted
from energy-saving projects to an increased focus on projects resulting in reduced GHG
emissions, though a number of projects receiving support under the new scope will also
result in energy savings.
Several EU directives related to energy efficiency have been incorporated into the EEA
Agreement, so Norway has adopted them into national legislation and regulations,
including the Energy Performance of Buildings Directive, the CHP Directive, the Ecodesign
Directive and the Energy Labelling Regulation.
Energy consumption data are mainly collected by Statistics Norway. Statistics Norway
collects information on all energy carriers and fuels. In all sectors, Statistics Norway also
performs calibrations and calculations and publishes these data on an annual basis. In
addition, some data are collected by other parties, when official statistics are not sufficientor when more information is needed.
Several municipalities in Norway have local energy efficiency targets and related activities,
though these are not mandated or overseen by the central government.

Industry
Through Enova, Norway had measures directed toward energy efficiency in the
manufacturing sector from 2003 to 2018, providing support to a total of 705 projects.
In 2018, Enova changed its focus to concentrate on measures more specifically targeting
emissions reductions. Therefore, since 2019, Enova’s mandate no longer directly targets
energy efficiency in industry.
Between 2012 and 2018, Enova provided support for industry and transportationcompanies to implement energy management systems, financing the implementation ofenergy audits needed to get started with the management systems. Norway is also
preparing the implementation of the 2012 EU Energy Efficiency Directive, requiring
mandatory energy audits for companies using more than 5 GWh per year, which will
significantly help companies identify energy savings options and motivate theimplementation of energy management systems. Norway should also consider
implementing the 2018 EED as well as examine developments from the EED revision
under the Fit for 55 package to determine measures that can accelerate efficiency
improvements.

ENERGY SYSTEM TRANSFORMATION

4. ENERGY EFFICIENCY

Despite growing electrification, the industry sector still strongly depends on fossil fuels.
Technologies needed to electrify some processes are not yet available or economical, so
there is still substantial potential for improving energy efficiency to reduce emissions. The
mandatory implementation of measures with short payback periods identified in energy
audits can help realise untapped energy savings, as can financial support for specificenergy efficiency measures in certain cases. Moreover, given the expected role that
59

IEA. All rights reserved.

Given that the largest industrial companies fall under the EU ETS, the government relies
mainly on the incentive given by the carbon price to drive energy savings. Still, the sector
could benefit from an assessment of the costs and benefits of energy efficiency
improvements, and the degree to which various levels of carbon pricing would motivate
these changes or not.

4. ENERGY EFFICIENCY

electricity will play in improving energy intensity and lowering emissions in the industry
sector, a faster expansion and upgrading of the electricity grid would help support better
outcomes.

Industry
Industry is the sector with the highest TFC: in 2020, its share of energy consumption was
46%. Energy demand in industry in 2020 (9.4 Mtoe, including non-energy use) was only
2% higher than in 2010. In the same year, the main source of energy in the sector was
electricity, accounting for almost half (45%) of consumption (Figure 4.3). However, thesector still strongly depends on fossil fuels, as oil, natural gas and coal satisfy 48% ofenergy demand.
The largest energy-consuming sector among Norwegian industries is the chemical andpetrochemical sector (39%), as the country’s economy is strongly tied to oil and natural
gas production and refining. Other sectors responsible for TFC are non-ferrous metals(20%), non-metallic minerals (9%), iron and steel (8%), construction (8%), paper (6%),
food and tobacco (4%), and wood (3%).
The energy intensity of the industry sector fell between 1990 and 2014, partly due to a shift
from energy-intensive industries to less intensive and more efficient ones. However, more
recent data show an increase in energy intensity between 2014 and 2020, mainly due toincreased production in energy-intensive industries and reduced production from lessenergy-intensive oil service industries.
Figure 4.3 Total final consumption in industry by source in Norway, 2000-2020
10

Mtoe

9

Heat

8

Electricity

7
6

Bioenergy and waste

54Natural gas

3
2

Oil

1

Coal

0

IEA. All rights reserved.

After a steady decline in industry energy intensity between 2004 and 2016, a growth trend
took hold from 2016 onwards, mainly attributable to the metal and chemical sectors.
Note: Includes non-energy use in the chemical and petrochemical sector.
Source: IEA (2022).

Due to its low energy costs from renewable energy sources, Norway has built up a strong
base of energy-intensive industries, including the metals and chemicals industries.
Looking ahead, the government expects continued growth in energy-intensive industries,
60

IEA. All rights reserved.

Policies and measures in the industry sector

including additional metals facilities, battery factories, data storage and hydrogenproduction. The government anticipates increased demand for renewables-based
electricity and reduced use of fossil fuels to support industrial sector growth, which, alongwith improved energy efficiency, will reduce GHG emissions. For example, the new Hydro
Aluminium Karmøy plant that started operations in 2018 is 15% more energy efficientcompared to the world average and has the world’s lowest CO2 footprint, drawing its
energy needs from hydropower. The government further expects decarbonisation ofexisting industry processes through electrification, as well as CCUS sites.
Norway’s largest energy-intensive industries fall under the EU ETS, where carbon pricesignals are expected to provide a strong motivation for achieving energy savings, giventhat an estimated 20-30% of input costs come from energy.
Through Enova, Norway had an ongoing energy efficiency support scheme targeting
industry from 2003 to 2018, providing support to a total of 705 projects for energy efficiency
and for replacing fossil fuels with renewable energy. The programme provided total
financing of NOK 2.97 billion (EUR 291 million) and delivered 7.8 TWh (0.67 Mtoe) of
cumulative energy saved or converted from fossil fuels to renewables. In 2018, Enova
changed its focus to concentrate on innovative measures more specifically targeting
emissions reductions and the shift to a low emissions society, so since 2019, Enova’s
mandate no longer directly targets energy efficiency in industry. However, Enova still
supports the use of waste energy through programmes targeting emissions reductions,and a number of the projects supported under the current scheme result in sizeable energy
savings.
Between 2012 and 2018, Enova also provided support for industry and transportationenterprises to implement energy management systems, financing the implementation ofenergy audits needed to get started with the management systems. A total of 764 projects
were supported with a total of NOK 360 million (EUR 35 million).

ENERGY SYSTEM TRANSFORMATION

4. ENERGY EFFICIENCY

A total of 42 Norwegian enterprises covering 82 sites were certified with ISO 50001 as of2020.
Funding for Enova comes from the Climate and Energy Fund (Norway, Ministry of Climate
and Environment, 2015), which is part of the national budget; over a four-year period, theorganisation has a clear picture of what its funding will be. Moreover, Enova has flexibility
to apply funding from one year to another, and appears sufficiently well-funded to enact its
mandate.

The Forskningssenter for Miljøvennlig Energi (FME) HighEFF – the Centre for an Energy
Efficient and Competitive Industry for the Future – is a collaboration project between
national and international universities, research institutes, and industry partners, withpublic funding for the period 2017-2025. The industry partners represent Norway’s largest
industry sectors including metals, oil and gas, chemicals, and food. Knowledge,
technology and solutions developed within the FME HighEFF can be applied in realindustrial applications to increase efficiency and reduce emissions. Some have alreadybeen advanced as spin-off projects in the industry, with co-funding from Enova.
61

IEA. All rights reserved.

Enova also remains an important source of information on energy efficiency across all
sectors. One example is the information platform promoting energy management targetingsmall and medium-sized enterprises that was introduced in 2020, Enova Kunnskap(https://www.enova.no/kunnskap).

4. ENERGY EFFICIENCY

Norway is also preparing to implement the 2012 EU Energy Efficiency Directive (EED),
requiring mandatory energy audits for companies using more than 5 GWh per year. The
EU updated the EED in 2018 to include several new elements, including a headline energy
efficiency target of 32.5% for 2030 (IEA, 2021). The EU is also preparing another updateof the EED in line with the EU Fit for 55 package, though Norway has not yet committed
to implementing these updates.

Buildings and district heating
In 2020, the buildings sector accounted for 32.5% of TFC. This sector includes residentialbuildings (57% of buildings TFC in 2019) and service sector buildings (43%). Energy
consumption in the sector has fluctuated over the last decade, depending on wintertemperatures, as most energy demand from buildings is used for space heating(Figure 4.4).
The largest part of energy consumption in buildings is covered by electricity (81% in 2020),
which plays an important role in both residential buildings (84% of residential buildings’
TFC) and in service sector buildings (76%) (Figure 4.4). The second-largest source ofenergy for buildings is bioenergy (8.6% in 2020), which is used mainly in the residential
sector, where it covers 13% of TFC. While oil has been almost completely phased out fromthe residential sector, its use in service sector buildings has been slightly increasing inrecent years and covered 10% of service sector TFC in 2020 (mostly in the defence
sector). District heat supplied 6.2% of buildings’ TFC, mainly in the service sector. Energy
demand in buildings increased by 7.3% between 2014 and 2019.
Figure 4.4 Total final consumption in the building sector by source in Norway,
2000-2020
8

Mtoe

7

District heat6
5

Electricity

4

Natural gas

32

Bioenergy and waste

1
Oil

0

IEA. All rights reserved.

Energy demand in buildings increased by 10% between 2014 and 2019. Buildings are highly
electrified as electricity covers most energy consumption in the sector.
Source: IEA, (2022).

Norway has a target to reduce the energy use in existing buildings by 10 TWh (0.86 Mtoe)by 2030, compared to 2015. The MPE is working on a plan to meet the target and toincrease local electricity production in buildings. The plan will be presented in the statebudget for 2023.
62

IEA. All rights reserved.

Policies and measures in the buildings sector

In 2021, Norway’s building stock consisted of 4.2 million buildings, of which 66% were built
before 1990. The number of residential buildings was 1.6 million (2.6 million dwellings) inaddition to 0.5 million cabins and other dwellings for part-time use. The total number of
non-residential buildings is around 1.5 million, which includes buildings without heating.
The main energy efficiency measure in the buildings sector is the adoption of building
codes. Norway’s building codes were last updated in 2017, to the passive house level,
which are 20-25% stricter than previous energy efficiency requirements. The regulation
requires that new buildings or buildings undergoing major renovation have either a total
net energy need lower than specified in the regulation or meet a set of energy requirements
for individual building components (windows, doors, roof, walls, etc.). The latter option
applies only to residential buildings. Regardless of which option is chosen, all newbuildings must meet minimum requirements for windows, roofs, floors, exterior walls andair tightness. The new energy requirements specify that larger buildings (more than
1 000 m2 of heated usable floor space) must have flexible heating solutions. The
government is currently re-evaluating building codes; a public consultation on updated
building codes was completed in September 2021, with a focus on circular principles for
new buildings.
A ban on the installation of fossil fuel heating systems in new buildings came into force
in 2017. As of 1 January 2020, a new regulation bans the use of mineral oil for heatingbuildings. The two measures are designed to promote a shift from fossil fuel heating toother heating technologies such as heat pumps, biofuels and direct electrical heating.
Natural gas is still allowed in existing buildings, but is used only in a few places in Norway.
New installations for natural gas heating are not permitted.
Since 2010, energy performance certificates are required when buildings and dwellings
are built, leased or sold. The objective of the scheme is to provide basic information about
the energy performance of buildings and possibilities for improvements. About 1.3 million
certificates have been issued since 2010, covering about half of total buildings or dwellings
with an obligation to be certified. The energy certification scheme is part of the follow-up
to the EU Directive on Energy Performance in Buildings (Directive 2002/91/EC). Since
2016, responsibility for the energy performance certificate scheme has been transferred
to Enova, to create synergies between certification and support schemes. A new versionof the energy performance certificate scheme is under preparation.

ENERGY SYSTEM TRANSFORMATION

4. ENERGY EFFICIENCY

Enova also runs a number of information and advisory activities targeting businesses,
municipalities and households, including a free advisory service that provides guidance bytelephone, chat or e-mail (Enova svarer). In addition, the National Office of Building
Technology and Administration offers guidance on smart renovation of buildings. On its
website, it offers in-depth advice on a number of measures, including the installation ofheat pumps, retrofitting building envelopes, and changing to more energy-efficient doors
and windows, among others.
63

IEA. All rights reserved.

Enova has managed several programmes on energy efficiency in buildings with a goal ofmarket transformation. Enova has run a scheme targeting energy-saving projects for
consumers and in households, with an annual budget of NOK 250 million(EUR 24.5 million) per year until 2020. For the period 2021-2024, the scope of the scheme
has been changed to projects resulting in reduced emissions and the transition to a low
emissions society. The annual budget was also increased to NOK 300 million(EUR 30 million).

4. ENERGY EFFICIENCYIn response to the recent high energy prices, the government has provided NOK 100 million(EUR 10 million) to fund energy efficiency measures in “Municipal Social Homes” (public
housing). The scheme, administered by Enova, will improve the energy performance ofmunicipal homes, thereby lowering the electricity bills of low-income families, as well as
contributing to the overall target to reduce energy use in the existing building stock.

Appliances, equipment, lighting
The Ecodesign Directive 2009/125/EC was transposed into Norwegian legislation in 2011.
Related regulations for different product groups are also implemented in Norway, with the
exemption of ten product regulations, which are not yet incorporated into the EEA
Agreement.
The Energy Labelling Regulation (EU) 2017/1369, replacing the former Energy Labelling
Directive 2010/30/EU, was implemented into Norwegian legislation in 2020. It lays out aframework for mandatory energy labelling and introduces a common scale for all products,
which only includes classes A-G. New delegated acts adopted under
Regulation 2017/1396 are also implemented in Norwegian legislation (2021). In 2021, theNVE carried out an information campaign when the rescaled energy label for six productgroups was introduced.
The NVE estimated annual energy savings of household appliances, equipment andlighting covered by ecodesign or energy labelling regulations to be 4.11 TWh (0.4 Mtoe)
in 2020 and 10.18 TWh (0.9 Mtoe) in 2030.
The NVE is responsible for the market surveillance of ecodesign and energy labelling
requirements. The non-compliant rate for energy labelling of products in stores was
42-45% for the period 2018-2019, while the non-compliant rate was lower for online
retailers and advertisements. There are few available data on the non-compliant rate for
products covered by the ecodesign regulations.
Norway participates in international co-operation, such as Nordsyn, which is a co-operationof national energy agencies in Nordic countries responsible for policy development andmarket surveillance of ecodesign and energy labelling.

Smart meters

The smart meters register electricity consumption every hour, and automatically send
information about the consumption to the distribution system operation (DSO). The meters
have two-way communication between the metering point and the DSO, through which theconsumer can receive time-of-use information about consumption and prices. This
information can be made available through a smartphone or an in-home display. DSOs
are not obligated to provide time-of-use information services, but must enable other service
providers to offer information services or demand-side response solutions to the customer.

64

IEA. All rights reserved.

Smart metering, or the Advanced Metering and Management System, has been
implemented in 98% of Norway’s metering points. This includes approximately 2.9 million
customers, which covers up to 99.5% of national demand. There was no support scheme
to deploy smart meters, but the NVE decided in 2011 that all customers must have smart
meters by 2019.

District heating
In 2019, 5.9 TWh (0.5 Mtoe) of district heating (DH) was delivered to customers,
accounting for around 8% of energy use for heating in buildings. The sector has seen
notable growth of 22% since the last IEA review in 2016. About half of DH was produced
from waste and around 30% came from biofuels, while only 4.3% came from fossil gas
and diesel. The majority (two-thirds) of DH production is used in service sector buildings.
The government expects modest growth in DH in coming years.
There are currently 106 licence areas for DH in Norway. Many DH companies have several
licences, so there are currently about 60 concessionaires. The NVE has given DH
concessions for total installed capacity of 5 070 MW. Most Norwegian DH companies are
owned by larger energy companies, which have both public and private ownership. Often,
the same company owns both the heating plant and the main pipeline network.
Municipalities have the authority to announce mandatory connection to DH infrastructure
for customers in cases where the NVE has already granted a licence to a DH plant.
The government is studying how to improve the interaction between DH and electricity
generation to maximise the use of existing infrastructure. In doing so, the government aims
to improve interaction between the power system, the DH system and opportunities for
consumer flexibility.
In addition, Enova provides support to companies that want to develop new DH
infrastructure and contribute to increased innovation in the DH sector, through the District
Heating Programme. A precondition for support is that projects use renewables-based fuelsources such as biofuels, waste and heat pumps. Support is also granted to co-generation
projects that do not receive electricity certificates (see Chapter 5).

Transport

ENERGY SYSTEM TRANSFORMATION

4. ENERGY EFFICIENCYIn 2020, energy demand in the transport sector represented 22% of TFC (4.5 Mtoe). From2010 to 2019, energy consumption in the sector slightly declined (-1%), despite a peak at
5 Mtoe in 2014 (Figure 4.5). Between 2019 and 2020, energy demand in transport dropped
by 7%, due to the Covid-19 pandemic. Oil products cover 86% of transport energy
demand, the second-lowest share among IEA member countries after Sweden. In 2020,
diesel and gasoline accounted respectively for 65% and 15% of TFC in transport. Diesel
is predominantly employed in road transport (which represents 71% of TFC for transport)
and domestic navigation. The use of diesel peaked at 3.3 Mtoe in 2014 and is now falling(3.0 Mtoe in 2019 and 2.9 Mtoe in 2020).

Norway has the highest share of EVs (including pure battery and plug-in hybrid) in bothcar fleet (22% in 2021) and car sales (85%) in the world. In 2021, about 151 900 EVs weresold in Norway, of which 113 700 were battery electric vehicles and 38 200 PHEVs; thetotal EV stock reached 585 654. Norway also had 9 726 electric vans, 453 electric buses,
25 electric trucks and 159 fuel cell cars on the road in 2020. Close to 4% of light
65

IEA. All rights reserved.

Electricity, traditionally used mainly in rail transport, provides an increasing share oftransport demand, as EVs are being used widely. In 2020, electricity provided 2.9% of roadtransport demand, the highest share among IEA member countries, and 3.2% of totaltransport demand. The share of biofuels in transport demand (9%) is the second-highest
among IEA member countries after Sweden, and has almost trebled since 2010.

4. ENERGY EFFICIENCY

commercial vehicles are now fully electric, while 6.7% of buses are electric. In 2021,
18 086 public electric chargers were available in the country, of which 5 225 were fast
chargers. In addition, Tesla had 1 182 electric charging points for Tesla cars in 2021. The
country has 0.35 public charging points for every ten EVs (not counting in-home charging).
The first electric ferry was introduced in 2015. The government aims to have 70 hybrid andelectric ferries on the Norwegian coast by 2022, a hydrogen ferry in operation in western
Norway in 2023, and the first offshore vessel fuelled by ammonia by 2024.
Figure 4.5 Total final consumption in transport by fuel in Norway, 2000-2020
5.0

Mtoe

4.5

Electricity

4.0

Biofuels

3.5
3.0

Natural gas

2.5
2.0

Other oil

1.5

Gasoline

1.0
0.5

Diesel0.0

IEA. All rights reserved.

In 2019, Norway’s oil products had the second-lowest share in transport among IEA member
countries. Biofuel consumption grew by 413% between 2009 and 2019.
Note: Transport sector demand excludes international aviation and navigation.
Source: IEA (2022).

700 000

25 000600 000

20 000500 000
400 000

15 000300 000

10 000200 000

Charging points

EV fleet

Figure 4.6 Registered electric vehicles and public charging points in Norway,
2012-2021

5 000

100 000
0

0

90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Share of new registrations

BEV

PHEV

Charging points (right axis)

Share of total fleet

IEA. All rights reserved.

Notes: BEV = battery electric vehicle; PHEV = plug-in hybrid electric vehicle.
Source: Norway, Norwegian Public Roads Administration, Road Users and Vehicles, 2022

66

IEA. All rights reserved.

Between 2010 and 2021, there has been a sharp increase both in registered electric vehicles
and public charging points. In 2021, there was more than one electric car per ten habitants.

Policies and measures in the transport sector
Norwegian measures promoting a shift toward alternative fuels in transport are primarily
implemented to reduce CO2 emissions. Nonetheless, a shift from fossil fuels to electricity
in the transport sector also results in a considerable energy efficiency improvement, due
to the high efficiency of electric motors compared to conventional combustion motors.
In 2012, the Norwegian parliament set a target for new passenger cars’ CO2 emissions to
be lower than 85 g CO2/km in 2020. Norway reached the target in 2017, and in 2019 theaverage CO2 emissions for new passenger cars was 60 g CO2/km.
Norway’s well-known success with EVs is a result of incentives in place for ZEVs since the1990s.
The Norwegian parliament has an ambition to achieve 100% zero-emission car sales
in 2025. A precondition for these goals is that technological development makes zero
emissions technology in transport competitive with fossil technology based on upfront
costs. Based on the effect of the incentives currently in place, Norway expects to achieve
its EV target through promoting a shift in consumer preferences toward EVs, without
imposing an official ban on the sale of fossil fuel vehicles.
Additional government targets for road transport, contingent on cost competitiveness withinternal combustion engines, include (Norway, Ministry of Transport, 2021):

 All new city buses should be zero-emission or use biogas by 2025.
 All new heavy vans, 75% of new long-distance buses and 50% of new trucks sold should bezero-emission by 2030.

 The distribution of most goods in major city areas should be emissions-free by 2030.

ENERGY SYSTEM TRANSFORMATION

4. ENERGY EFFICIENCY

Vehicle taxation is the main policy instrument for lowering emissions (and thus increasing
efficiency) in the transport sector. Fossil fuel cars are subject to a registration tax and VAT
on purchase. Furthermore, fossil fuel cars are subject to a CO2 tax and road use tax on
gasoline and diesel. ZEVs benefit from exemptions from VAT (25%) and the registrationtax (around EUR 10 000 on average). PHEVs benefit from a reduced registration tax,
though this reduction is subject to stricter conditions since January 2022. The incentives
amounted to NOK 18.7 billion (EUR 1.9 billion) in 2021. Exemption from the purchase tax
and VAT, in particular, provide a large financial incentive for buying an EV; as a result of
these incentives, the government estimates that a new Tesla has an equivalent purchaseprice as a new non-electric Audi or Mercedes (Norway, Ministry of Transport, 2021).
ZEVs also have special e-number plates. Moreover, the government introduced a rule that
ZEVs should pay no more than half of what conventional vehicles pay for parking, boarding
ferries and driving on toll roads. The rate up to the 50% level is decided by local authorities.

Electric buses are also expected to see notable growth in Norway, as more cities adopt
them. Oslo, the country’s largest municipality, aims at zero emissions public transport
by 2028.
67

IEA. All rights reserved.

Enova also supports the uptake of EVs through investment support for fast-charging
infrastructure and for zero emissions vehicles for commercial trials (i.e. vans, trucks).
In 2020, Enova investment support to climate-friendly land and sea transport projects
amounted to NOK 2 billion (EUR 0.2 billion).

4. ENERGY EFFICIENCYElectromobility is also being promoted for other transport modes, including maritime(ferries, fishing boats, supply vessels), railways (around 80% of rail kilometres travelledannually are fuelled by overhead electricity lines) and aviation (where Enova can support
the development of electric planes for short-haul flights).
Norway’s policy also focuses on avoiding the need for transport, and shifting it from private
cars to more efficient public alternatives. To prevent car-based transport growth that
contributes to GHG emissions as well as traffic and air and noise pollution, Norway has agoal of zero growth in passenger transport by car in large urban areas. The zero-growthtarget is underpinned by comprehensive, long-term urban planning agreements that
include road, public transport, cycling, walking and land-use measures as well as
restrictive measures for car traffic such as road tolls and parking restrictions. The purpose
is to improve co-ordination between the state and local authorities responsible for various
measures and instruments in urban areas. The solutions chosen are intended to reduce
the need for car-based transport and facilitate more walking, bicycling and use of public
transport. Through the agreements, state contributions include funds to finance large
public transport projects.
Furthermore, Norway is taking steps to mitigate the environmental impact of public
transport outside cities. For instance, new state-owned ferries are required to use
low-carbon emissions technologies through procurement processes. In addition, Norway
prioritises investments in the Norwegian rail network, which is a more energy-efficient
alternative to road and air travel.

Assessment
To date, Norway has made notable progress on decoupling economic growth from energy
consumption. The energy intensity of the Norwegian economy (TFC per GDP) decreased
by 13% between 2010 and 2019. While national GDP grew by 15% between 2010
and 2019, total final consumption was stable. Notably, Norway’s high degree ofelectrification of end uses, such as transport, has helped improve the overall energy
intensity of the economy. Between 2019 and 2020, the Covid-19 pandemic contributed toa 3% drop of TFC, while GDP decreased by 0.8%.
Norway’s main target for efficient use of energy is to improve the overall energy intensityof the economy by 30% in 2030 compared to 2015. However, through 2020, theimprovement from 2015 was only 5%, suggesting that additional measures are needed tomeet the 2030 target.

Norway has an overall energy policy focused on reducing emissions, but should moreconcertedly consider the role that energy efficiency improvements can play in several
sectors: the “energy efficiency first” principle. Moreover, energy efficiency can also free up
electricity for other uses or for export. In particular, Norway would benefit from a nationalenergy efficiency strategy that prioritises policies and measures based on
68

IEA. All rights reserved.

Over the years Enova has provided financial support for energy efficiency projects acrossvarious sectors, as well as projects targeted toward households and consumers. Since
2021, Enova’s mandate now focuses on GHG reductions and technology development.
The entity is well-funded with multi-year clarity on available funds and flexibility to apply it
to projects.

cost-effectiveness. Such a strategy should also clearly define the contribution fromdifferent end-use sectors to reach the overall energy intensity target.
With many short-term options, energy efficiency can notably play an important role inreaching Norway’s 2030 emissions reduction target. Timely and complete implementationof the EU Energy Efficiency Directive into Norwegian law would help in this regard.
Collection of data on end-use energy consumption in the buildings, industry and transport
sectors is key to support policy making as well as to inform, monitor and achieve energy
efficiency improvements effectively. The government of Norway should increase efforts incollecting end-use energy data and developing efficiency indicators. It can use theinformation to understand the main drivers of energy consumption, identify sectors withpotential energy savings and tackle these with specific policy action.
Several municipalities have local energy efficiency targets and related activities,
administered independently of the central government. Improved co-ordination between
authorities on overall monitoring and results would help achieve more successful
outcomes.

Buildings and district heating
Norway has a target to reduce energy use in existing buildings by 10 TWh (0.86 Mtoe)by 2030 compared to 2015. Based on calculations by the Norwegian Water Resources
and Energy Directorate, the MPE’s assessment is that Norway is on track to reach thetarget with current policies.
The main energy efficiency measure in the buildings sector is the adoption of building
codes. The building codes were last updated in 2017 to the passive house level, which isaround 20-25% stricter than previous energy efficiency requirements. A public consultation
for the next update of the building codes was concluded in September 2021, with a focus
on sustainable building materials and circular principles.

ENERGY SYSTEM TRANSFORMATION

4. ENERGY EFFICIENCY

Since 2017, heating systems using fossil fuels can no longer be installed, and since 2020
the use of heating oil is banned. The use of natural gas is still allowed in existing boilers,
but it is not widespread, and most buildings have electrical heating systems.

Beyond this, there are still more energy savings that Norway could achieve in its buildings
sector through demand response. The 2019 move toward installing smart meters in all
households will help consumers shift behaviour and conserve energy based on pricing
data. Additional incentives can come from a regulatory framework for demand-side
management at the household level, including exploration of a tariff structure that allows
people to use their electric vehicles to support grid flexibility. Moreover, further researchon behavioural change to improve the energy efficiency of households can also help drive
more effective future policies and regulations.

69

IEA. All rights reserved.

Though Norway’s codes for new buildings will achieve beneficial energy efficiency
outcomes, a stronger push for buildings renovations could yield greater results in the
country, where two-thirds of the building stock consists of older structures (built before1990). An ambitious national target for buildings renovations along with supporting policy
measures, as well as the full implementation of the EU Energy Performance of Buildings
Directive, would help toward this end.

4. ENERGY EFFICIENCYIn previous years, Enova had programmes specifically targeting energy savings projects
for households. For 2021-2024, the scope has shifted from energy savings to projects
resulting in reduced GHG emissions. However, some energy efficiency measures should
also be considered in their own right if they can provide cost-effective ways to reduce
emissions.
The estimated energy savings in buildings in 2020 were 4.11 TWh, resulting from theimplementation of the EU ecodesign and energy labelling requirements adopted by
Norway under the EEA Agreement. Projected annual savings in 2030 are estimated to be
10.18 TWh. However, not all EU product regulations have been incorporated into the EEA
Agreement. Norway should consider updating its legislation to cover more products, as it
would contribute to further energy savings.
The government is studying how to improve the interaction between district heat andelectricity generation to maximise the use of existing infrastructure, a move the IEA
supports. In addition, Enova provides support to companies who want to develop new DH
infrastructure and contribute to increased innovation in the DH sector, through the District
Heating Programme. Support is granted for projects based on renewable energy sources
and for co-generation that does not receive electricity certificates.

Transport
In 2012, the Norwegian parliament set a target for new passenger cars’ CO2 emissions to
be lower than 85 g CO2/km in 2020. This target was reached in 2017, and the average
CO2 emissions for new passenger cars was 60 g CO2/km in 2019. The Norwegian
government has an ambition to achieve 100% zero emissions car sales in 2025. Based on
the effects of the incentives currently in place, Norway expects to achieve its EV target bypromoting a shift in consumer preferences toward EVs, without imposing an official ban on
the sale of fossil fuel vehicles.
Vehicle taxation is a key policy instrument for lowering emissions (and thus increasing
efficiency) in the transport sector. Fossil fuel cars are subject to a registration tax and VAT
on purchase. Fossil fuel cars are also subject to a CO2 tax and road use tax on gasoline
and diesel. ZEVs benefit from VAT (25%) and registration tax exemptions. ZEVs also havespecial e-number plates. The government introduced a rule that ZEVs should pay no morethan half of what conventional vehicles pay for parking, boarding ferries and driving on tollroads.

While Norway’s growth in EV sales is unquestionably impressive, the government should
ensure that the measures, which are costly for the public budget, are achieving true
displacement of internal combustion engines and driving sustainable, cost-effective
reductions in road transport energy consumption and emissions reductions. Moreover,generous incentives for EVs in Norway appear to be prompting people to shift from walking

70

IEA. All rights reserved.

Norway's policy also focuses on reducing transport demand and shifting it from private
cars to more efficient public alternatives. The government set a target of zero growth inpassenger transport by car in large urban areas. Long-term urban growth development
plans include improving public transport, bicycle and walking alternatives, and restrictive
measures for car traffic such as road tolls and parking restrictions. Under agreements
between the government and local communities, funds are granted to finance public
transport projects.

or bicycling to driving cars. The federal government should support local programmes toencourage modal shifts and ensure that EV policy does not undermine these efforts.
Increasing the benefits of electrification in transport will require expanding its penetration
to the heavy-duty and maritime segments. Norway is off to a good start with electric trucks,
buses and ferries already on the roads and in waters. Given the high number of EVs andthe continuous foreseen growth in all transport segments, particular attention should begiven to the availability of public chargers in the country, especially fast chargers,
considering the long travelling distances in Norway. Enova provides investment support
for public charging infrastructure.

Recommendations
The government of Norway should:
 Develop a national energy efficiency strategy that prioritises policies and measures
based on cost-effectiveness and defines the contribution from different end-use
sectors to reach the overall energy intensity target.
 Ensure that the focus of support schemes on emissions reductions does not limit
implementation of energy efficiency measures, where these measures present
cost-effective ways to reduce emissions in hard-to-electrify end uses.
 Impose a requirement for companies to implement measures with short payback
periods (five years or less) identified in energy audits.
 Speed up domestic implementation of the EU Energy Efficiency and Energy
Performance of Buildings Directives and regulations to provide clearer investment
signals that spur more rapid energy efficiency improvements.

ENERGY SYSTEM TRANSFORMATION

4. ENERGY EFFICIENCY71

IEA. All rights reserved.

 Ensure steady expansion of fast-charging infrastructure to support continued growthof all categories of electric vehicles throughout the country.

4. ENERGY EFFICIENCY

References
Norway, Ministry of Transport (2021), Norway is electric (web page),https://www.regjeringen.no/en/topics/transport-and-communications/veg/faktaartikler-veiog-ts/norway-is-electric/id2677481/
Norway, Ministry of Climate and Environment (2015), ENOVA (web page),https://www.regjeringen.no/en/dep/kld/organisation/Subordinateagencies/enova/id2599611/#:~:text=Enova's%20work%20is%20funded%20by,Renewable%20Energy%20and%20Energy%20Transition%E2%80%9D
IEA (International Energy Agency) (2022), World Energy Balances (database),https://iea.org/data-and-statistics/data-product/world-energy-balances (accessed on
18 February 2022)

72

IEA. All rights reserved.

IEA (2021), EU Directive 2018/2002 on Energy Efficiency (web page),https://iea.org/policies/13353-eu-directive-20182002-on-energy-efficiency

Key data (2020)
Renewables in TFEC: 11.1 Mtoe (hydro 8.9 Mtoe, bioenergy 1.5 Mtoe, wind 0.6 Mtoe), 61%
of TFEC (IEA average:* 13%)
Renewables in electricity generation: 151.4 TWh (hydro 140.9 TWh, wind 9.9 TWh, biofuels
and waste 0.4 TWh, bioenergy 0.2 TWh), 99% of electricity generation (IEA average:* 27%)
Renewables by sector: industry 73%, buildings 95%, transport 14%* Weighted average among IEA member countries in 2019.

Overview
Norway has the highest share of renewable energy in total final energy consumption(TFEC) among IEA member countries. In 2020, 61% of TFEC came from renewables,
while the IEA average was 13%. Most renewable energy in Norway is hydropower, which
covers the largest share (92%) of electricity generation among IEA member countries. In
recent years, solid biofuels have provided about 5% of TFEC, down from 6% in 2010.
Energy from liquid biofuels and electricity from wind have been increasing and covered
respectively 2% and 3% of TFEC in 2020.

ENERGY SYSTEM TRANSFORMATION

5. Renewable energy

Figure 5.1 Renewable energy in total final energy consumption in Norway, 2000-2020
12

Mtoe

70%
60%

10

50%

8

40%

6

30%

4

20%

2
0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Hydro
Geothermal
Solar
Wind
Bioenergy (heat)
Bioenergy (electricity)

10%

Liquid biofuels (direct use)0%

Solid biomass (direct use)
Share of renewables (right
IEA. All rights reserved.
axis)

Source: IEA (2022).

73

IEA. All rights reserved.

The considerable share of hydropower in total final energy consumption determines Norway’s
position as a leader in the IEA in renewable electricity generation.

5. RENEWABLE ENERGY

Thanks to the exceptionally high share of renewables in electricity and to the high level ofelectrification of the country, Norway has the highest shares of renewables by sector in
the IEA. Renewables in 2019 provided 90% of energy demand (TFEC) in buildings, 71%
in industry and 12% in transport. After renewable electricity, covering 79% of buildings
TFEC, 62% of industry and 3% of transport, solid biomass provided 8% of energy inbuildings and 4% in industry, and liquid biofuels had a high share (9%) of transport energy
demand.

Mtoe

Figure 5.2 Renewable energy by sector in Norway, 2020
9

90%

8

80%

7

70%

6

60%

Renewable waste

550%

Liquid biofuels

4

40%

3

30%

2

20%

1

10%

0

0%

Buildings

Industry

Transport

Renewable heat
Renewable electricity

BiogasSolid biomass
Share of renewables(right axis)
IEA. All rights reserved.

Renewable electricity is extensively used in Norway’s end-use sectors; no other IEA country
has a higher share of renewable electricity in buildings, industry or transport.
Note: Data are not available for Australia, Finland, Greece, Italy, Luxembourg, New Zealand, Spain or Turkey.
Source: IEA (2022).

Renewable electricity

74

IEA. All rights reserved.

Out of 154 TWh of total electricity generation in Norway in 2020, 151 TWh (98%) camefrom renewable energy sources, of which 141 TWh (92%) came from hydro (Figure 5.3).
Electricity generation from wind has increased tenfold since 2010 and amounted toalmost 10 TWh in 2020. Renewable waste contributed with a minimal contribution toelectricity generation, providing 210 MWh in 2020. Starting in 2018, some solar PV
panels were also installed, but they generated only 30 MWh in 2020.

Figure 5.3 Renewable energy in electricity generation in Norway, 2000-2020
TWh

All renewable electricity

TWh
160

100%

140

80%

120
100

60%

80

40%

60
40
20
0
Hydro

Renewables share (right axis)

Excluding hydro

12
10
8
6
4

20%

2

0%

0

Renewable waste

BiogasSolid biomass

Solar

Wind

IEA. All rights reserved.

As hydropower dominates renewable electricity generation, other renewable sources are
emerging in the mix, mainly wind.
Source: IEA (2022).

Renewable energy policies
Norway is subject to the targets for renewable energy set out in EU Directive 2009/28/EC.
Norway has met the overall target for a 67.5% share of renewables in 2020.
Given that nearly all electricity production comes from hydropower and wind power andthat Norway is highly electrified, renewables are not currently subject to special treatment
or policies, but constitute a central component of the country’s domestic energy system.

Renewable electricity

ENERGY SYSTEM TRANSFORMATION

5. RENEWABLE ENERGY

Expected additional electrification across the economy to meet climate targets as well as
the development of new industries is expected to drive up power demand significantly inthe coming years. New demand for electricity will come starting this decade from theindustry sector, petroleum sector, data centres, production of green hydrogen and thetransport sector. For example, by drawing renewables-based electricity from shore,
Equinor estimates that emissions from the Johan Sverdrup oil field can drop from anaverage of 10 kilogrammes (kg) per barrel on the NCS to just 0.67 kg/barrel (Equinor,
75

IEA. All rights reserved.

Norway is part of the joint Nordic power market with Denmark, Finland and Sweden, whichis in turn integrated into the wider European power market through interconnectors toGermany, the Netherlands, Poland, the Baltic states and Russia. Two new interconnectors
from Norway to Europe became operational in 2021: the Nord-Link cable to Germany and
the North Sea Link cable to the United Kingdom. As such, Norway’s interconnection
capacity stands at 8.85 GW. Norway has historically been a net exporter of electricity toneighbouring countries, reaching a record 20.5 TWh of net exports in 2020, making it oneof the largest exporters in Europe. Given Norway’s large volumes of renewable generation
capacity, it serves as a large exporter of renewable power to the Nordic region and therest of Europe. Cross-border trade of electricity can also play a role in the European energy
transition as it enables more efficient use of resources and better utilisation of energy
systems. In years when water flows are exceptionally low, such as in 2004, Norway has
been a net importer of electricity.

5. RENEWABLE ENERGY2022). The owners of the Kårsø gas processing plant are currently planning partial
electrification of the plant. Looking ahead to future projects, increased electrification will
require an additional build-out of new renewables generation capacity. Overall, thegovernment projects electricity demand to grow to 159 TWh in 2030 and 174 TWh in 2040,
while generation will grow to 166 TWh in 2030 and 184 TWh in 2040.
The NVE expects that part of the growth in generation will come from new hydro capacity,some of which is already under construction, as well as refurbishments and upgrades tothe country’s ageing fleet of existing hydro plants. While thermal capacity is expected toremain constant (at just 315 MW of installed capacity and 3.5 TWh of generation), solar
photovoltaics (PV) is expected to see strong growth (Table 5.1). Meanwhile, wind power
will see very modest growth through 2025 based on licences already issued. The NVE
expects offshore wind to only begin to make contributions after 2030, and produce 7 TWhof power in 2040.
Table 5.1 Electricity generation capacity growth projections in Norway (MW),2021-2030

Hydro
Wind
Solar PV
Thermal2021
33 269
4 929
300
315

2025
34 092
5 041
699
315

2030
34 701
5 019
1 796
315

Source: Norwegian Water Resources and Energy Direrctorate, based on the Norwegian government’s response to the IEA
questionnaire.

Norway and Sweden have had a joint renewable electricity certificate market since 2012,
and which is set to end in 2035. New plants and production increases at existing plants(technology-neutral) are eligible for electricity certificates for up to 15 years. It is left to themarket to determine where and by which technology this electricity is generated. The target
for the market was to increase renewable energy production by 28.4 TWh by 2020
compared to 2012, with Norway to finance 13.2 TWh and Sweden 15.2 TWh. The 2020
target was met in 2019. In 2017, Sweden set a new target of an additional 18 TWh to befinanced by 2030 under the joint certificate scheme. As of 30 June 2021, the countries had
increased their renewable electricity generation under the scheme by 47.6 TWh, of which
17.3 TWh was in Norway. Norway has no plans to extend this policy.

76

IEA. All rights reserved.

Hydropower is the cornerstone of Norway’s electricity system, accounting for 88% of thecountry’s generation capacity from 1 690 hydropower plants (Energy Facts Norway, 2021).
The country has 1 000 storage reservoirs, with a total capacity of over 87 TWh, equivalent
to 70% of annual Norwegian electricity consumption. As such, Norway has half of Europe’s
reservoir storage capacity, and more than 75% of Norwegian production capacity is flexible(Energy Facts Norway, 2021). The flexibility provided by Norwegian reservoirs plays animportant role in balancing out variable renewables technologies such as solar and wind,in addition to evening out generation from hydro throughout the year and from year to year
based on variable inflow rates. Currently, the average age of Norway’s hydropower
infrastructure is around 46 years, prompting a number of refurbishments and upgrades ofplants throughout the country that are currently underway or planned (IHA, 2022).

Norway has faced local opposition to onshore wind power projects, based on the perceived
impact on landscapes and ecology. In 2019, the government put on hold approvals for new
wind projects. There are few remaining unrealised licences, and the government assumes
that there will not be a substantial increase in onshore wind power until after 2030 due tothe pause on new licences.
Some revenues from onshore wind are already directed toward local municipalities. For
instance, the property tax on wind power plants is a source of revenue for hostmunicipalities. Furthermore, an excise duty on onshore wind power plants has been
adopted, but will not take effect until the European Free Trade Association Surveillance
Authority has assessed the measure. It is presumed in the budget proposal that revenue
from the excise duty will be distributed to host municipalities.
In June 2020, the previous government released a white paper on land-based wind power,
proposing changes to current practice and imposing new licencing requirements. Some of
the main measures focused on increasing local and regional involvement, better ensuringthat environmental matters were taken into consideration, and introducing new deadlines
to shorten the timeline for planning and building wind farms. The overall aim was to provide
a reliable framework for long-term development of onshore wind power in Norway.
In April 2022, the government announced it would resume licences in municipalities thatare supportive of new applications being processed. The new framework also includes: A plan for the involvement, and early notification, of neighbours and other interests.
 Ensuring that municipalities are involved at an early stage, including through early dialogue
between the municipalities, developers and the NVE, as well as a written statement from themunicipalities to approve processing the impact assessment that is needed to apply for alicense (for plants bigger than 10 MW).

 Co-ordination of grid and power production, and assessing available grid capacity at an early

ENERGY SYSTEM TRANSFORMATION

5. RENEWABLE ENERGY

stage.

 Clearer licencing conditions, including distances to existing buildings, maximum turbineheights and environmental values. More of the conditions that affect the project design shallbe determined at an earlier stage of the process, compared to previous practice.

 Involvement of Sami interests in all stages of the process.
 Assessment of the total impact on the reindeer industry.
 Processing and prioritisation of applications to include documentation of co-operation withthe reindeer industry and agreements on compensation and mitigating measures.

The Norwegian government also has ambitions to build-out offshore wind capacity.
In 2020, Norway opened two areas for offshore wind with a combined capacity of up to
4.5 GW. A maximum capacity of 3 GW is set at Sørlige Nordsjø II, which is expected toaccommodate bottom-fixed turbines at an average water depth of 60 metres. The second
area, Utsira Nord, has a maximum floating wind capacity of 1.5 GW. The government’s
goal is to facilitate offshore wind through an ambitious national strategy, including a supply
industry, a solid regulatory regime and the development of connecting infrastructure on
77

IEA. All rights reserved.

Small-scale renewable energy plants (solar, wind, hydro) with total installed capacity ofless than 1 MW do not require a licence. Prosumers and small-scale community projects
are thus not affected by the temporary pause in licencing. Rather, smaller projects arelicensed by the municipality and regulated by the Planning and Building Act.

5. RENEWABLE ENERGY

the NCS. The MPE has consulted on offshore wind guidelines relating to area allocation,
licencing and applications for development, and has identified further issues to be resolvedin advance of opening up the acreage. However, the government’s ambition is for the firstlarge-scale offshore wind projects to be finished by 2030. As such, the NVE forecasts that
offshore wind will not make much of a contribution to Norway’s power mix before then.
Before Utsira Nord, Norway plans to build the world’s largest floating offshore wind farm(Hywind Tampen), consisting of 11 wind turbines, based on Equinor’s floating windtechnology, with a total installed capacity of 88 MW. The project is intended to provide
renewable electricity for the Snorre and Gullfaks offshore field operations in the NorwegianNorth Sea.
On 11 May 2022, the government presented a large-scale plan for offshore wind, with atarget of allocating areas for 30 GW of offshore wind capacity by 2040. This corresponds
to almost as much power generation capacity as in Norway today. The government wants
to facilitate large-scale offshore wind development that allows for the use of various grid
solutions. Cables with two-way power flow, radials to Europe and to Norway, will beconsidered for each call. When choosing an offshore grid solution that involves aconnection to the Norwegian power system, the technical design of the plant must ensure
national interests, including security of supply and reasonable electricity prices forhouseholds, industry and businesses. Awarding licences for offshore wind in new areas
will be done step by step. The government aims to carry out the next round in 2025. The
overall goal is to open a total area about five to six times that of Sørlige Nordsjø II, which
is about 1% of the Norwegian Sea area.
Norway will also need to expand grid capacity to accommodate the growth in generation
capacity, including introducing more flexibility mechanisms to handle additional generationfrom variable renewables. Toward this end, Norway’s TSO Statnett has released a Grid
Development Plan 2021 that includes plans for several major new projects, amounting to
NOK 60-100 billion (EUR 6-10 billion) in investments. Given that regulatory approvals forgrid lines can be lengthy, extending project timelines up to ten years from planning tocompletion, the government nominated a public committee to recommend options tostreamline and improve the licencing regime.

Renewable heating and cooling
In Norway, households mainly use electricity for heating. A ban on the installation of fossil
fuel-based heating installations in new buildings came into force in 2016. And as of
1 January 2020, a new regulation banned the use of mineral oil for heating in new andexisting buildings. The measures have helped end the use of fuel oil in heating and cooling,
and motivate a switch to other heating technologies, such as heat pumps, biofuels anddirect electrical heating. Natural gas is still allowed in existing buildings, but it is notcommonly used. New installations for natural gas heating are not allowed.

Renewable transport
Norway has several measures promoting the use of biofuels and the increased use ofrenewables in transport.
78

IEA. All rights reserved.

The state-owned enterprise Enova has supported the installation of local heating plants
based on the following renewable sources: woodchips, pellets, briquettes, air-to-water andliquid-to-water heat pumps, and solar thermal collectors.

Biofuels
Biofuels feature in Norway’s Climate Action Plan 2021-2030 as a tool for reducing
emissions from the transport sector. The plan calls for maintaining current volumes of
biofuels in road transport by increasing the obligation, planning to introduce a non-road
diesel and a shipping fuel obligation from 2022, and increasing non-road blending
obligations to the same level as road transport (exploring the option to merge theobligations).
For road transport, fuel suppliers must fulfil a biofuels quota of 24.5% of the volume offuels supplied, of which a minimum of 9% must be advanced biofuels. Advanced biofuels
are counted at twice their volume, creating an effective blend rate of 15.5%. As part of themandate, 4% of petrol supplied must contain biofuels. Only liquid biofuels can be used tomeet the requirement (biogas does not count) (Norwegian Environment Agency, 2021).
The programme is administered by the Norwegian Environment Agency, which is housed
under the Ministry of Climate and Environment. Almost all biofuels consumed in Norway
are imported.
Previously, the biofuels mandate was exceeded due to generous tax breaks, but in 2020,
tax policy was changed to remove an advantage to all biofuels except for volumes used tofulfil the biofuels quota. As a result, now only mandated amounts are sold. In 2020, offal
that cannot be used for animal feed was the most widely used raw material, followed byrapeseed and used frying oil. Almost all liquid biofuels used in Norway are imported fromother countries, with the largest share (61%) coming from the United States (Norwegian
Environment Agency, 2021).
In aviation, Norway set a quota obligation on fuel suppliers since 2020, under which theymust source 0.5% of annual fuel sales from advanced biofuels. This amounted to
2.5 million litres in 2020. There is no double counting of advanced biofuels under theaviation mandate. The quota applies to both domestic and international flights, thoughmilitary flights are exempt.

ENERGY SYSTEM TRANSFORMATION

5. RENEWABLE ENERGY

Biofuels used to meet Norway’s mandate must meet sustainability criteria as establishedunder the EU Renewable Energy Directive. Advanced biofuels must be made from specificfeedstocks, corresponding to the feedstock list in Parts A and B of Annex IX in the EU RES
Directive. The Norwegian Environment Agency publishes a guide for obligated parties thatare required to report on sustainability criteria, which is updated annually (Norwegian
Environment Agency, 2021).

With respect to shipping, the government has an ambition to reduce GHG emissions fromdomestic shipping and fishing by 50% from 2005 levels by 2030. Its main approach is tostimulate public-private partnerships in zero- and low emissions solutions for all vessel
categories using a tailor-made approach for various categories. R&D focus areas include

79

IEA. All rights reserved.

Looking ahead, in the first half of 2022, the government has a public consultation underway
to increase the biofuels mandate. The government’s proposal is to increase the overallmandate for biofuels in road transport (effective blend rate) to 17% from 1 July 2022 andto 17% from 2023. For non-road machines (mainly transport), the proposal calls forincreasing the advanced biofuels quota to either 6% or 10% from 1 July 2022. Impact
assessments on a new biofuels mandate for shipping as well as 2023 and 2024 quotas foraviation are ongoing.

5. RENEWABLE ENERGY

hydrogen, green ammonia, and ship design and infrastructure. The government isplanning to propose a package for green shipping in the second half of 2022.
Norway also offers RD&D support to bioenergy. Enova provides investment subsidies forthe production of biogas and biofuels and for the purchase of biogas-powered vehicles
and machinery that runs on electricity or biogas. The aim of the programme is to increasesustainable production of biogas and biofuels. Innovation Norway supports small-scale
production of biogas and woodchips in the agricultural sector, with grants for investments,
studies or capabilities evaluations related to the production of biogas and bioenergy.
In addition to these biofuel aid schemes, a number of tax exemptions are designed topromote the use of renewable energy in the transport sector, including an exclusion forbiofuels from the CO2 tax (though biofuels are subject to the road use tax), as well as
substantial tax exemptions on the sale and use of EVs (see below).

Renewable electricity
Norway has more electric cars per capita than any country in the world. Around 86% of all
new passenger cars sold in 2021 were EVs (with 64.5% being fully battery electric),
drawing from a renewables-based electricity grid. In comparison, less than 14% of newpassenger cars sold in 2021 were regular internal combustion cars. Norway is a relatively
small car market with about 2.9 million passenger cars. By the beginning of November
2021, 436 807 cars (15.1%) were fully electric, while 176 were fuel cell electric vehicles.
In 2021, 18 086 public electric chargers were available in the country, of which 5 225 were
fast chargers. In addition, Tesla had 1 182 electric chargers for Tesla cars in 2021. The
country has 0.35 public charging points for every 10 EVs.
Moreover, close to 4% of light commercial vehicles are now fully electric and nearly 14%
of vans sold in 2021 were electric. Norway also has large orders for electric buses inseveral cities. Currently, 6.7% of city buses are electric, though 23% of new buses were
electric in 2020 and 12% in 2021. In addition, approximately 80% of the railway kilometrestravelled per year are powered by overhead electricity lines.
A combination of taxation rules and incentives is the main reason for the high penetrationof EVs in Norway (see Chapter 4). ZEVs benefit from VAT (25%) and registration tax(around EUR 10 000 on average) exemptions. PHEVs benefit from a reduced registration
tax, though this reduction is subject to stricter conditions since January 2022. Moreover,the government introduced a rule that ZEVs should pay no more than half of whatconventional vehicles pay for parking, boarding ferries and driving on toll roads. The rate
up to the 50% level is decided by local authorities. Estimated at almost NOK 18.7 billion
in 2021 (EUR 1.9 billion), the benefits come with substantial costs.

Norway also introduced the first fully electric ferry in 2015. In 2022, 70 electric and hybrid
ferries will operate on the Norwegian coast, and the operation of a hydrogen ferry will startin western Norway in 2023. In 2024, the first offshore vessel fuelled by ammonia will
become operational.

80

IEA. All rights reserved.

Enova also provides investment support for fast-charging infrastructure and investment
support for zero emissions vehicles for commercial use (such as vans and trucks)
amounting to NOK 1 billion (EUR 0.1 billion) in 2020.

Looking ahead, Norway has set political targets for the transport sector. By 2025, all new
passenger cars and light vans should be zero emissions, while all new city buses shouldbe zero emissions or use biogas. By 2030, all new heavy vans, 75% of new long-distancebuses and 50% of new trucks should be zero emissions. Moreover, by 2030, there should
also be near emissions-free distribution of goods in major city areas. The targets arecontingent on improvements in zero emissions vehicle technologies. Norway also has anambition to achieve zero growth in private transport by cars in cities.

Assessment
Norway has the highest share of renewable energy in total final energy consumption
among IEA member countries. In 2020, 61% of TFEC came from renewables, comparedto the IEA average of 13%. Most renewable energy in Norway is hydropower, which covers
the largest share (92%) of electricity generation among IEA member countries. Between
2015 and 2020, solid biofuels provided on average 4.2% of TFEC, down from 6.2%
in 2010. Energy from liquid biofuels and electricity from wind have been increasing andcovered respectively 2.2% and 3.5% of TFEC in 2020. The share of biofuels in transportdemand in 2020 (9%) was the third-highest among IEA member countries after Sweden
and Finland, and has increased fourfold since 2009.
Moreover, thanks to the exceptionally high share of renewables in electricity and to thehigh level of electrification in the country, Norway has the highest shares of renewables bysector (industry, transport, buildings) among IEA member countries.
Norway is subject to the targets for renewable energy set out in EU Directive 2009/28/EC,
and met the overall target for a 67.5% share of renewables in 2020. Given that nearly allelectricity production comes from hydro and wind power and that Norway is highly
electrified, new renewables are not subject to special treatment or policies, but constitutea central component of the country’s domestic energy system.

ENERGY SYSTEM TRANSFORMATION

5. RENEWABLE ENERGY

Hydropower, with its combination of stability, flexibility and low production costs, has madea huge contribution to the creation and sustainability of Norway’s low-carbon economy.
Norway’s power market is organised in a decentralised and flexible manner and can be
deployed to balance the wider production of variable renewables. Together with high andincreasing levels of interconnection and integration, Norway provides the Nordic region
with a significant source of low-cost, highly flexible, renewable power.

Norway’s progress in increasing renewables in the transport sector over the past decade
is notable. A mix of policies, measures and incentives in promoting the uptake of electricvehicles and the use of biofuels has delivered tangible results.
Despite Norway being a world leader in renewable energy, many of the existing strategies
and policies do not include detailed annual trajectories or specific action plans, particularly
beyond 2030. This approach risks creating investor uncertainty and a lack of clarity for81

IEA. All rights reserved.

Norway’s high share of renewable electricity and an almost fully renewable heating systemmean that the country’s future efforts to increase renewable energy will be focused on
more challenging, harder to abate sectors, in particular industry and transport. Additional
electrification in these sectors, including offshore oil and gas platforms, will provide asignificant opportunity to further increase Norway’s renewable energy share and reduce
emissions in line with climate obligations.

5. RENEWABLE ENERGY

achieving emissions reductions, and poses challenges for monitoring and assessing
progress. Norway should seek to adopt an integrated approach to developing renewables
policies and underpinning measures. A lack of stakeholder visibility across policies relating
to renewable energy risks missing opportunities to create synergies and could result inunintended challenges for deployment.

Renewables in electricity
Out of 154 TWh of total electricity generation in Norway in 2020, 151 TWh (89%) camefrom renewable energy sources, of which 141 TWh came from hydro. Electricity generationfrom wind has increased tenfold since 2010 and amounted to almost 10 TWh in 2020.
Renewable waste made a minimal contribution to electricity generation, providing
210 MWh in 2020. Starting in 2018, some solar PV panels were also installed, but theygenerated only 30 MWh in 2020.
Norway and Sweden have had a joint electricity certificate market since 2012, which is set
to end in 2035. The 2020 target to achieve an additional 28.4 TWh from 2012 levels was
met in 2019. Norway has no plans to extend this policy, as the government expects thatmarket conditions can support a build-out of wind generation without additional policy
support.
Norway has the highest share of electricity produced from renewable sources in Europe,
almost completely sourced from hydropower, making it the country’s largest primaryenergy source. The future renewable electricity generation mix is expected to be made up
primarily of hydro, wind and solar power. Even with the projected growth in electricity
demand (to 164 TWh in 2030 and 184 TWh in 2040) and assumed growth in additional
renewable sources (to 166 TWh in 2030 and 174 TWh in 2040), hydropower’s share of
Norwegian electricity supply is likely to remain high. However, precisely how the non-hydroshare of renewable power generation will be broken down and realised is not sufficiently
clear under existing policies and measures.
A concerted, co-ordinated approach to the future development of the transmission system
to accommodate increased renewable energy production is also recommended tocomplement increased renewables generation.
Norway’s rich energy history and abundant natural resources mean it is well placed tofurther develop and diversify its renewable energy portfolio through new industries suchas green hydrogen and offshore wind. Norway should seek to harness its strong renewableelectricity potential to reduce emissions and decarbonise the oil and gas sector.
Electrification of some parts of the Kårstø (gas) processing plant is under consideration by
the government and future electrification of offshore oil and gas production could be asignificant driver for offshore wind.

However, Norway has faced local opposition to onshore wind power projects on the basisof a perceived impact on landscapes and ecology. In 2019, the government put on holdapprovals for new wind projects, and it is assumed that there will not be a substantial
82

IEA. All rights reserved.

Favourable wind conditions mean that Norway has substantial wind energy potential.
Onshore wind power has grown considerably in recent years, with the share of wind inelectricity generation increasing tenfold over the past decade, replacing thermal power
production as the second-largest generation source. This is a significant and welcome
achievement, thanks in part to the joint electricity market.

increase in onshore wind power until after 2030. In June 2020, the previous government
released a white paper on land-based wind power, proposing changes to current practiceand imposing new licencing requirements. The overall aim was to provide a reliable
framework for long-term development of onshore wind power in Norway.
It will be vital to ensure that concerns over community involvement as well as delays andbottlenecks in the permitting process (including relating to grid availability andenvironmental aspects) are adequately addressed under the new framework. Onshore
wind can generate concrete value for local communities. Enabling citizens to participate
as members of a prosumer community in both the financial returns of the wind farm as wellas in the overall decision-making process will contribute to raising acceptance for thistechnology and should be considered as part of the reform of the regulatory regime.
As a result of the hiatus of the licencing process for new onshore wind, there is broad
uncertainty over the future of Norway’s onshore wind sector. Timely implementation of a
new regulatory framework for onshore wind, while ensuring appropriate benefits-sharing
with local communities, will help Norway expand its base of renewables generation
capacity.
Norway has strong ambitions for the development of its offshore wind energy potential,
despite the challenges of its relatively deep waters. As the technology matures andbecomes competitive, offshore wind is expected to be a key component in Norway’s future
renewable energy mix. It will be one of the primary, long-term solutions for meeting
increasing demand for renewable power and enabling the energy transition in Norway andbeyond. Large-scale deployment of offshore wind offers a significant advantage to Norway
given its existing offshore and marine industries expertise, but clarity is required aroundtargeted end users for this technology, including whether and how it will connect to theonshore grid.

ENERGY SYSTEM TRANSFORMATION

5. RENEWABLE ENERGY

Norway plans to build the world’s largest floating offshore wind farm (Hywind Tampen),based on Equinor’s floating wind technology. With a total installed capacity of 88 MW, it
will power offshore oil and gas operations. This innovative project will serve as a pilot for
further development of floating wind and future integration between gas and wind power
generation systems. The government is, however, still in the process of creating a licencing
framework for offshore wind. As the government’s ambition is for the first large-scale
offshore wind projects to be finished by 2030, offshore wind will not make much of acontribution to the country’s power mix before then.
IEA analysis indicates that floating offshore wind will experience notable cost reductionsin the coming years (IEA, 2019). However, NVE projections do not include offshore windas part of the electricity generation mix until 2030-2040. In 2040, it is assumed that 7 TWhof offshore wind power will be produced.

Solar PV has been increasing in Norway, but does not form a significant share of therenewable electricity generation mix yet. By the end of 2020, installed solar PV capacity
connected to the grid was 142 MW and around 18 MW was installed off grid. Total annual
83

IEA. All rights reserved.

Two areas have been assigned for offshore wind power development to date, one on deep
waters with high-cost floating technology and one with a bottom-fixed solution. Norway
should prioritise the finalisation of the offshore wind policy and regulatory framework,
including the role of the transmission system operator and whether hybrid connections in
the future will be permitted.

5. RENEWABLE ENERGY

production in 2020 was approximately 140 GWh, which is projected to increase by
1.5 TWh out to 2030, contributing, alongside hydro and onshore and offshore wind power,
to meeting future demand. A more detailed assessment of the competitiveness of solar
power without subsidies in the Norwegian context would help to clarify the role that solar
can play.
Norway’s commitment to ensuring a high share of RD&D budget for renewables iscommendable and will contribute to its energy transition towards net zero.

Renewables in heating and cooling
A ban on using fuel oil for heating in both new and existing buildings entered into force on
1 January 2020, helping to increase the use of renewables in heating. The 2016 buildingcode already included a ban on installing new heating installations using fossil fuels.
Moreover, Enova has supported the installation of local heating plants based on several
renewable sources. Norway has successfully introduced and implemented a series ofcomplementary measures to promote the use of renewables in heating, and the IEA
welcomes the progress made.

Renewables in transport
Norway has several measures promoting the use of renewables in transport. Measures
promoting a shift towards the use of alternative fuels are primarily implemented to reduce
CO2 emissions from the sector, and have resulted in an increased share of renewables intransport in recent years.
Norway has made considerable headway relative to other countries in increasing the useof renewables-based electricity in the transport sector, primarily based on incentives forEVs (see Chapter 4). No other country in the world has more electric cars per capita than
Norway. Around 86% of all new passenger cars sold in 2021 were EVs, drawing from arenewables-based electricity grid. In comparison, less than 14% of new passenger cars
sold in 2021 were regular internal combustion cars.
As Norway seeks to reduce some of the current incentives for EVs, efforts should be madeto ensure this does not result in a significant reduction in the uptake of EVs. Ensuring
adequate charging for both passenger and larger road transport vehicles will be importantin safeguarding this.

Norway has already made considerable headway in increasing the share of biofuels in its
transport fuel mix, driven by a biofuels quota policy. The share of biofuels in transportdemand (9%) is the third-highest among IEA member countries after Sweden and Finlandand has increased fourfold since 2009.
84

IEA. All rights reserved.

By 2025, Norway’s ambition is that all new passenger cars and light vans should be zero
emissions and all new city buses should be zero emissions or use biogas. By 2030, theambition is that all new heavy vans, 75% of new long-distance buses and 50% of new
trucks should be zero emissions. The targets are all ambitious and will go a long way
toward significantly increasing the share of renewables in the energy mix, especially if they
are accompanied by a commensurate displacement of fossil fuel vehicles. Norway should
also ensure that the new demand created by electrification of transport is accompanied bysufficient growth in power generation capacity, especially in a context of competing
demand from other sectors for renewable power.

For road transport, fuel suppliers must fulfil a biofuels quota of 24.5% of fuels supplied, of
which a minimum of 9% must be advanced biofuels (with an effective blend rate of 15.5%).
Advanced biofuels are counted at twice their volume. The current proposal to increase theeffective blending rate from 15.5% to 17% in 2023, if adopted, will further reduce emissions
in the transport sector. A new mandate of 6% or 10% for advanced biofuels in non-roadtransport is proposed to come into effect in July 2022.
For air traffic, fuel suppliers must meet a biofuels quota of 0.5% of fuels supplied and only
advanced biofuels can be used toward the quota, with 2023 and 2024 mandate levels foraviation currently under consideration.
Norway’s ambition is to reduce emissions from domestic shipping and fishing vessels by
50% by 2030 compared to 2005. An impact assessment on a new biofuels mandate forshipping is underway, with a number of measures and programmes already in place tosupport increased renewables and low-carbon ammonia in the maritime shipping sector.
The government is expected to propose a package for green shipping. Given the rising
biofuel mandates across the transport sector, Norway should ensure appropriate
production levels and/or import sources to meet growing demand.

Recommendations
The government of Norway should:
 Establish sectoral road maps with indicative targets, including interim targets, forrenewable energy that align with projected demand growth and climate targets for2030 and 2050; develop detailed implementation plans for achieving those targets.
 Promptly develop a robust regulatory framework that provides long-term investment
signals and supports strong deployment of onshore and offshore wind generation,
including by addressing social acceptance issues and involving communities.

ENERGY SYSTEM TRANSFORMATION

5. RENEWABLE ENERGY Ensure the transmission and distribution systems are equipped to cope with expanded
renewable generation and new electricity demand from electric vehicles and industrial
end uses.

85

IEA. All rights reserved.

 Improve conditions for prosumers/local communities to produce and consume
renewable electricity to increase public acceptance and ensure the proper functioningof the electricity market.

5. RENEWABLE ENERGY

References
Energy Facts Norway (2021), Electricity production (web page),https://energifaktanorge.no/en/norskenergiforsyning/kraftproduksjon/#:~:text=seasons%20and%20years.,Hydropower,of%20Norways%20total%20power%20production
Equinor (2022), Magazine (web page), https://equinor.com/magazine
IEA (International Energy Agency) (2022), World Energy Balances (database),https://iea.org/data-and-statistics/data-product/world-energy-balances (accessed on
18 February 2022)
IEA (2019), Offshore Wind Outlook 2019, https://iea.org/reports/offshore-wind-outlook-2019
IHA (International Hydropower Association) (2022), Norway country profile (web page),https://hydropower.org/country-profiles/norway

86

IEA. All rights reserved.

Norwegian Environment Agency (2021), Biofuels (web page),https://miljodirektoratet.no/ansvarsomrader/klima/transport/biodrivstoff

Key data (2020)
Total public energy RD&D expenditure: USD 400 million
Share of GDP: 0.11% of GDP (IEA average:* 0.041%)
Share of energy in total RD&D: 2.4% (IEA average: 3.7%)* Average of 21 IEA countries as data for Australia, Finland, Greece, Italy, Luxembourg, New Zealand, Spain and Turkey are notavailable for 2020.

Overview
Norway has traditionally placed a strong focus on energy-related RD&D, and its RD&D
ecosystem is characterised by a high level of government support. Funding levels haveremained strong since the IEA’s last review and most RD&D programmes have been inplace since then, albeit shifting focus to better direct spending toward technology
innovation outcomes.

ENERGY SYSTEM TRANSFORMATION

6. Energy research, development andinnovation

In 2020, Norway’s public budget on energy-related RD&D was USD 400 million. In the last
decade, it has fluctuated at around an average of USD 380 million, or around 0.1% of thecountry’s GDP, the highest share among IEA member countries.
Energy efficiency RD&D projects accounted for the largest share (40%) of the publicbudget on energy-related RD&D in 2020, followed by renewables (20%), oil and gas(15%), and CCS (12%).

The government does not set any specific targets for RD&D spending levels for sectors,
including energy. However, energy innovation is an important part of Norway’s Long-term
Plan for Research and Higher Education. The long-term plan sets out ten-year objectives
and priorities as well as more concrete goals over a four-year period. The plan is revised
every four years to accommodate changes in the political and societal landscape. The
current long-term plan was presented by the former government, and has a ten-year
perspective from 2019 to 2028, specifying goals and priority areas for the four-year period
2019-22. The government will present a revised long-term plan for the period 2023-2032
to parliament in October 2022.
87

IEA. All rights reserved.

The government has set specific goals for the overall national level of RD&D, whereby
public spending for RD&D must amount to 1% of GDP and private RD&D spending shouldmake up 2% of GDP. Since 2016, the government’s spending levels have exceeded 1%,
but the private sector’s spending has fallen short of 2%.

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

Key actors in Norway’s energy innovation landscape
The Ministry of Education and Research is responsible for basic research andco-ordination of the government’s general RD&D policies, while individual ministries are
responsible for funding RD&D within their sector. The MPE is in charge of Norway’s policy
for petroleum and energy RD&D, all of which is channelled through the RCN, whichadministers national petroleum and energy RD&D programmes.
The RCN is the government’s strategic and advisory body on RD&D. It has a key role infinancing and following up on RD&D projects and activities as well as giving policy advice
to the government. The RCN distributes close to 30% of public RD&D spending in Norway.
The remaining funds go to universities, research institutes and industry. Universities andother higher education entities are principally funded by the Ministry of Education andResearch, while other ministries are responsible for funding specific institutes andindustrial entities that undertake research. In addition to the ministries and the RCN,
industry and academia participate in designing and reviewing high-level strategic RD&D
plans, in developing programmes and in individual projects. Publicly funded demonstration
programmes and projects are administered by several public agencies, such as Enova
and Innovation Norway.
Enova SF is an entity owned by the Ministry of Climate and Environment. It supports
projects that contribute to reduced GHG emissions, energy and climate technology
development (Enova, 2018). As such, Enova supports new energy and climate technology
in industry and transport, new technology for buildings of the future, and the introductionof new technologies. Through its GHG reduction projects, Enova supports more efficientenergy consumption and increased production of “new” renewable energy. This is done
through targeted programmes and support schemes. Within the area “new technology”,
support from Enova is meant to contribute to risk relief for the first user, thereby
contributing to the introduction of a new technology into the market. Enova provides
funding for technology development for both small- and large-scale projects. Enova, theRCN and Innovation Norway co-operate closely on promoting investments along the“innovation chain”. Enova is also member of the Energi21 strategy board (see below).

The state enterprise Gassnova contributes to developing and finding solutions to ensurethat technology for the capture, transport and storage of CO2 can be implemented andbecome an effective climate measure. The RCN and Gassnova together administer the
CLIMIT programme, through which Gassnova grants projects financial support fordevelopment, demonstration and piloting of CCS technologies. Gassnova also manages
the state’s interest in the CO2 Technology Centre Mongstad, which was established tocreate an arena for long-term and targeted development, testing and qualification oftechnology for CO2 capture. Moreover, Gassnova has experience with planning full-scale
CCS from the now finalised projects at Kårstø and Mongstad, and it now plays an important
88

IEA. All rights reserved.

Innovation Norway is an important instrument for innovation and development of
Norwegian enterprises and industry. Innovation Norway stimulates profitable businessdevelopment throughout Norway and supports companies in developing their competitive
advantage and to enhance innovation. The programmes and services are intended tocreate more successful entrepreneurs, more enterprises with capacity for growth and moreinnovative business clusters. Innovation Norway covers all sectors, including energy. It
helps promote technology through international networking services, general businessadvice services and aid for third-party technology verification.

role in supporting the development of the Longship CCS project (see Chapter 3).
Gassnova also plays an important role in helping to ensure that the experience andknowledge from CCS projects in Norway benefit the entire world. Gassnova furthermore
advises authorities on issues relating to CCS.

Energy innovation priorities and guiding documents
Energy innovation is an important part of Norway’s Long-term Plan for Research andHigher Education (Norway, Ministry of Education and Research, 2018). Out of the fivepriority areas, two relate to energy innovation: 1) seas and oceans (oil and gas); and2) climate, the environment and clean energy (energy and CCS).
The long-term plan outlines three specific plans for escalating appropriations: 1) the
technology initiative; 2) RD&D on renewal and restructuring in the business sector; and
3) enhanced quality in higher education. Each category has focus areas of relevance, suchas:

 enabling and industrial technologies, especially basic information, communications andtechnology (ICT) research and ICT security

 increased admission capacity for students in technology subjects
 technologies that will contribute to the green shift in the economy
 measures for increased commercialisation, research-based innovation and industry-oriented
research.

Energy sector research policies and targets are developed by the MPE based on input
from the OG21 (Oil and Gas for the 21st Century) and Energi21 strategies, with a particular
view to ensure industry relevance. Input from these processes guide priorities for RD&D
grants and support measures administered by the RCN, Gassnova and Enova. To
supplement the advice and input from the OG21 and Energi21, the MPE also draws on
information and advice from other sources, such as the RCN, the IEA, consultancies andindividual RD&D players in the energy sector.

ENERGY SYSTEM TRANSFORMATION

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

Recently, innovation policy changes have been focused on four areas: 1) reducing thetime from idea to market introduction (PILOT-E scheme); 2) taking a broader value chain
approach (the hydrogen road map and Longship CCS project); 3) an increased focus oncross-sectoral climate measures; and 4) enhancing value creation and environmental
performance through digital technologies. The changes are expected to achieve a fasterand more effective energy transition towards net zero, as well as improve the country’s
competitive edge in the petroleum and energy industries.

The Energi21 strategic body is an independent advisory body established by the MPE
in 2008 to provide advice to authorities on the organisation of public allocations toresearch, both thematically and financially. The MPE uses the Energi21 strategy as a basis
for guiding its allocations to research, development, demonstration and commercialisationof new climate-friendly energy technologies (Energi21, 2021).
The 2018 Energi21 strategy identifies three objectives: 1) increased value creation on thebasis of national energy resources and utilisation of energy; 2) energy restructuring with
89

IEA. All rights reserved.

Energi21 strategy

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

the development of new technology to limit energy consumption and GHG emissions while
efficiently producing environmentally friendly energy; and 3) the development ofinternationally competitive industry and expertise in the energy sector (Energi21, 2018).
In its fourth national research strategy from 2018, the Energi21 board recommended a
substantial increase in energy technology investment and efforts targeting the following
key areas: digitalised and integrated energy systems
 climate-friendly energy technologies for maritime transport solar power for an international market
 offshore wind power for an international market
 hydropower as the backbone of Norwegian energy supply
 climate-friendly and energy-efficient industry, including CCS.
The Energi21 strategy is now under revision; a new strategy is expected in June 2022.

OG21 strategy
The OG21 was established in 2001 and is organised under a board appointed by the MPE
and a secretariat. The OG21 is meant to enhance value creation on the NCS and topromote the export of Norwegian oil and gas technology (Norway, Ministry of Petroleum
and Energy, 2021a).
The Norwegian Petroleum Directorate estimates that less than half of the resources on the
NCS have been exploited. A considerable part of the resources has yet to be discovered.
One of the biggest challenges facing the petroleum sector is to develop new, efficient
exploration technologies to discover new fields worth developing. Another challenge is
how to enhance recovery of existing fields. At the same time, the oil and gas industry
strives to reduce its environmental footprint and continuously improve safety performance.
Research and technology will be crucial for both developing resources on the NCS andmaintaining the international competitiveness of Norwegian companies within the industry(Norway, 2021a).
The OG21 brings together oil companies, universities, research institutes, suppliers,
regulators and public bodies to develop and maintain a national petroleum technology
strategy for Norway (OG21, 2021a).

90

IEA. All rights reserved.

In its latest report from 2021, the OG21 notes that research, technology development andinnovation within eight technology areas are especially important to ensure the cost andenvironmental competitiveness of Norway’s petroleum sector: 1) improved sub-surface
understanding; 2) cost-efficient drilling and plugging and abandonment of wells; 3) utilisingexisting infrastructure efficiently; 4) unmanned facilities and subsea tie-back solutions;5) energy efficiency and cost-efficient electrification; 6) CCS; 7) world-leading health,safety and environmental performance; and 8) digitalisation (OG21, 2021b).

RD&D spending
Public spending on energy RD&D
In 2020, Norway’s public budget on energy-related RD&D was USD 400 million, 35% lower
than in 2019, when it peaked at USD 615 million (Figure 6.1). Over the last decade, it has
fluctuated at around an average of USD 380 million, or around 0.1% of the country’s GDP,the highest share among IEA member countries (Figure 6.2).

USD million (2020 prices)

Figure 6.1 Energy-related public RD&D budget by sector in Norway, 2009-2020
Others600

Nuclear

500

Hydrogen

400

Cross-cutting
technologies
Other power and storage

300
200

Carbon capture andstorage
Oil and gas

100

Renewables

0

Energy efficiency
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

IEA. All rights reserved.

Norway’s RD&D budget peaked in 2019 at USD 615 million, driven by a 366% increase ininvestment in renewable energies compared to the previous year.
Source: IEA (2022a).

ENERGY SYSTEM TRANSFORMATION

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

Share of GDP

Figure 6.2 Energy-related public RD&D spending per GDP in IEA countries, 2020
0.12%
0.10%
0.08%
0.06%
0.04%
0.02%
0.00%

IEA. All rights reserved.

Note: Data are not available for Australia, Finland, Greece, Italy, Luxembourg, New Zealand, Spain or Turkey.
Source: IEA (2022a).

91

IEA. All rights reserved.

Norway allocates by far the largest share of GDP on energy-related public RD&D spending of
all IEA countries, at about 0.11%.

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

Energy efficiency accounted for the largest share (40%) of the public budget onenergy-related RD&D in 2020. Since 2014, spending on energy efficiency has beensignificantly higher than in previous years. The energy efficiency budget is split between
the industry (40%), transport (34%) and buildings (12%) sectors. In 2020, Norway had thehighest share of energy efficiency RD&D budget with respect to GDP among IEA member
countries (Figure 6.3).
The budget allocated to renewables accounted for 20% of the total in 2020. The
renewables’ budget peaked in 2019, at USD 290 million, almost five times historicalvalues, due to an investment of about USD 240 million in offshore wind technologies.
In 2020, the budget for renewables RD&D dropped back to USD 81 million, mainly forbiofuels (36%) and solar PV (12%). In 2020, Norway had the highest share of renewables
RD&D budget with respect to GDP among IEA member countries.
The third- and fourth-largest sectors for RD&D spending were oil and gas (15%) and CCS(12%). While the budget for oil and gas RD&D fluctuated between USD 49 million in 2011
and USD 82 million in 2016, the budget for CCS significantly decreased by 78% between
2010 and 2020. Still, in 2020, Norway had the highest share of CCS RD&D budget withrespect to GDP among IEA member countries.
Figure 6.3 Top 10 countries for selected technologies in RD&D budget per thousand
units of GDP, 2020
NorwaySwitzerland
Denmark
Korea
SwedenFinlandFranceJapan
Germany
CanadaNorwayFinland
Belgium
SwedenCanadaAustria
Netherlands
Lithuania
Japan
FranceRenewables

0

0.05

NorwayCanadaEstoniaJapan
Denmark
United Kingdom
FranceAustralia
United States
Switzerland

0.1
0.15
0.2
0.25
RDD budget per thousand units of GDP

0

0.02

0.1

Japan
Switzerland
Korea
FranceAustria
NorwayCanadaNetherlands
Czech Republic
United Kingdom

Carbon Capture& Storage
0

EnergyEfficiency

0.04 0.06 0.08
0.1
0.12 0.14
RDD budget per thousand units of GDP

0.2
0.3
0.4
0.5
RDD budget per thousand units of GDP

Hydrogenand fuel cells
00.01

0.02 0.03 0.04 0.05 0.06 0.07
RDD budget per thousand units of GDP

Renewables, carbon capture and storage, and energy efficiency are sectors in which Norway
is a leader among IEA countries in RD&D spending.

The government has set specific goals for the overall national level of RD&D: public
spending for RD&D must amount to 1% of GDP and RD&D spending in the private sector
should make up 2% of GDP. Since 2016, the government’s spending levels haveexceeded 1%, but the private sector’s spending has fallen short of 2%.

92

IEA. All rights reserved.

Source: IEA (2022a).

The government, as a rule, does not set any specific targets for RD&D spending levels for
specific sectors, including energy, though various ministries dedicate specific budgets for
RD&D programmes in their respective sectors.
All programmes administered by the RCN have industry relevance as a selection criterion.
The RD&D grants from the RCN are mainly used for projects in which private enterprises
are partners or lead, accounting for about 80% of grants for the energy and petroleum
sector. Projects run by and for academia represent 20% of grant volume.
To augment technology transfer, the RCN often organises joint calls across industries andsectors.
Research centres are all based on the principle of public-private partnerships. The status
and funding to set up a centre is granted to an academic institution or research institute,but they are obliged to bring industry partners and technology users on board to secure
additional funding and complementary expertise. The share of private funding for thecentres is commonly about 25% of the total budget.
In 2020, start-ups featured strongly under Innovation Norway’s funding, with 26% of its
primary lines of funding going to companies less than five years old. For start-ups inparticular, support focuses on high technology and cutting-edge science and engineering.
In recent years, the share of funding directed to environmental issues has grown, including
renewable energy and energy systems more broadly. Innovation Norway has three main
ways of supporting start-ups financially: 1) start-up grants and loans; 3) environmental
technology grants; and 3) innovation contracts (IEA, 2022b).
The EU’s ninth framework programme for research and innovation, Horizon Europe,
started on 1 January 2021 with a proposed total budget of EUR 94 billion. Norwegian
actors can apply for funding on an equal footing with companies, public enterprises andresearch institutions in EU member states. As of November 2019, Norway participated in
5.2% of all Horizon 2020 projects (RCN, 2019a). The EEA and Norway Grants scheme
issues calls for proposals for bilateral projects in which Norwegian partners can participate.
The main applicant must be from the country in question, but there is a requirement of atleast one Norwegian partner in each project. Norwegian companies, the public sector andresearch organisations are all relevant project partners (RCN, 2019b).

ENERGY SYSTEM TRANSFORMATION

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

Covid-19 spending impacts

Specifically, the research programme ENERGIX (see below) was granted an additional
NOK 120 million (EUR 12 million), prioritising hydrogen. In addition, the new research
centre FME was granted NOK 15 million (EUR 1.5 million) for eight years, bringing its total
allocation to NOK 120 million (EUR 12 million). One of the centre’s main focus areas isoffshore wind. For the petroleum sector, funding was increased by NOK 130 million(EUR 13 million): the research programme PETROMAKS2 was granted an additional
93

IEA. All rights reserved.

In 2020, due to the consequences of the Covid-19 pandemic, the budget for petroleum
and energy RD&D under the MPE was boosted to ensure that the activity level of theindustry and in research institutes could be maintained. This RD&D stimulus package wasadministered by the RCN. For the energy sector, hydrogen and wind power were given
priority. For the petroleum sector, a larger part was allocated for demonstration projects
as these projects involve to a greater extent the supply industry, which was hit particularly
hard both by the pandemic and the ensuing oil price decline.

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATIONNOK 50 million, while the research and demonstration programme DEMO 2000 was
granted an additional NOK 80 million. The government also provided grants to Norwegian
Energy Partners (Norwep) to compensate for loss of income in 2020 as well as toimplement new measures for the supply industry given the challenging situation of theCovid-19 pandemic and coinciding fall in oil prices. Norwep was granted an extra
NOK 20 million, bringing its total support to NOK 54 million. In addition, the Federation of
Norwegian Industries was granted NOK 10 million for a project on delivery models foroffshore wind.

ENERGIX programme
ENERGIX is the principal Norwegian research programme on clean energy. The
programme is managed by the RCN and is a key instrument in the implementation ofEnergi21, as well as for achieving other energy policy objectives. It provides grant-based
funding for research on renewable energy, the efficient use of energy, energy systems andenergy policy. The ENERGIX programme has advanced RD&D in the electrification of both
maritime and ground transport, especially with the innovative PILOT-E scheme launchedin 2016 (IEA, 2021).

CLIMIT programme
The MPE established CLIMIT in 2005 to support the development of CCS technology forgas power plants. The scheme was expanded to include power generation based on all
fossil fuels in 2008 and industrial emissions in 2010. From 2021, the scheme includes
support for all possible CO2 sources. CLIMIT also funds R&D in the production of hydrogenfrom natural gas combined with CCS (Norway, Ministry of Petroleum and Energy, andMinistry of Climate and Environment, 2020).
CLIMIT’s primary objective is to contribute to the development of technology and solutions
for CCS by providing financial support to projects that will: develop knowledge, expertise, technology and solutions that can contribute towards cost
reductions and international deployment of CCS

 leverage national advantages and develop new technology and service concepts withcommercial and international potential.

The programme consists of two support schemes: CLIMIT RD&D and CLIMIT Demo, runby the RCN and Gassnova, respectively. The programme is directed towards companies,
research institutes and academia.

PILOT-E scheme

The objective of the scheme is to promote more rapid development and deployment ofnew, environmentally friendly energy technology products and services to help reduce
emissions both in Norway and internationally. Calls for proposals under the PILOT-E
scheme are targeted toward specific societal challenges, and the scheme is a good fit forlarger consortia that address complex challenges ranging from research activity to94

IEA. All rights reserved.

Norway’s PILOT-E scheme is a funding scheme for the Norwegian business sector
launched as a collaboration between the RCN, Innovation Norway and Enova SF. It works
as a “fast-track” for technology development through the various stages of research, from
idea to market (PILOT-E, 2015).

commercial realisation. PILOT-E is designed to support participants throughout the entire
technology development pathway, from concept to market (PILOT-E, 2015).
The first call for proposals under the PILOT-E scheme was issued in 2016. Calls under thescheme have targeted the following thematic areas: zero emissions maritime transport;
zero emissions land-based goods transport; the energy system of the digital age; zero
emissions maritime transport 2.0; sustainable industrial processes for the future; a zero
emissions hydrogen value chain; and zero emissions construction and facilities (PILOT-E,
2015).
The RCN, Innovation Norway and Enova combine multiple policy instruments and areasof expertise to provide comprehensive support to selected project consortia all along theinnovation cycle. The RCN provides research grants for consortia’s projects; Innovation
Norway offers innovation subsidies, development grants, risk loans and equity forcompanies in the consortia; and Enova provides financial support for technology
development and market introduction of new climate and energy technology.

PETROMAKS 2
The PETROMAKS 2 programme is administered by the RCN, and includes both strategic
basic research and competence development as well as applied research and technology
development. The main goal of the programme is to contribute to increased value creation
by developing and utilising Norwegian petroleum resources within an environmentallysound framework. The programme is meant to contribute to achieving goals in theindustry’s own strategy for research and technology development, the OG21 (Norway,
Ministry of Petroleum and Energy, 2021b).

DEMO 2000
DEMO 2000 is a research programme run by the RCN that aims to help reduce costs andrisks for the industry and commercialise new technology through support for piloting anddemonstration. DEMO 2000 is aimed at projects where new technology can bedemonstrated through pilots and field trials, and is particularly related to the challenge ofbringing research-based innovations in the Norwegian petroleum industry closer to market(Norway, Ministry of Petroleum and Energy, 2021c).

ENERGY SYSTEM TRANSFORMATION

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

The pilot projects are usually characterised by close collaboration between suppliercompanies, research institutions and oil companies. Through qualification of technology
for petroleum activities on the NCS, the programme will also contribute to the export of
Norwegian technology (Norway, Ministry of Petroleum and Energy, 2021c).

Private spending on energy RD&D

Chapter 2.6 of the white paper “Energy for work” (Meld. St. 26 [2020-2021]) provides thefollowing as to private spending levels: oil company RD&D spending in the period of
2014-2019 varied in the range of NOK 3-4 billion (EUR 0.3-0.4 billion) annually. Related
95

IEA. All rights reserved.

The RCN, on behalf of the MPE, collects statistics and information on oil companies’(operators on the NCS) RD&D spending related to their upstream activities. Both theNordic Institute for Studies of Innovation, Research and Education and Statistics Norway
provide data on private RD&D spending within different energy industry categories. Thesesources are consulted to estimate private spending levels.

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

oil services industry spending is in the same range according to Statistics Norway. Industry
sector RD&D spending on energy, including CCS, is in the range of NOK 2-3 billion(EUR 0.2-0.3 billion) annually for the period 2015-2019, according to Statistics Norway.

Monitoring, evaluation and tracking of results
The RCN has the main responsibility for collecting data on energy innovation. In thisregard, it plays a role in collecting data for annual reporting to the IEA on public funding
levels and technology categories. In addition, the RCN provides an aggregated annual
report to the Ministry of Education and Research covering all sectors as well as asupplementary annual report that addresses the respective ministries that allocate RD&D
funding. The supplementary annual report is designed to meet more specific needs for
sectoral information and allows the MPE to see if policy goals are met. It also contains
project examples as well as statistics that allow progress to be tracked on key metrics,
such as patents and start-ups.
All research centres, both for environmentally friendly energies (FME) and petroleum(PETROCENTER), are subject to mid-term evaluations after five years (the maximum
running time is eight years). These evaluations are administered by the RCN but executedin collaboration with international expert teams. The reports contain information on key
metrics and objectives.
Similar studies are undertaken for all programmes in the energy and petroleum portfolio,
including CCS.
Lately, the government has given priority to data collection that highlights the effects andimpacts of RD&D activities. In the field of energy, the RCN commissioned two reports: theImpello Report on Clean Energy (2018) and the Rystad Report on Petroleum (2020). The
Rystad report found that projects supported by the RCN in the period 2008-18 triggered
an increase in reserves of around 890 million barrels of oil equivalent and additional
production of about 100 million barrels (University of Stavanger, 2020).
The MPE has worked with the RCN on the preparatory phase to identify key performanceindicators for actual RD&D impact.
The findings of monitoring and evaluation processes are used as input to adjust policies,
but also to support arguments for sustaining or increasing government RD&D funding
levels in the state budget.

Hywind Tampen: Hywind Tampen is an 88 MW floating wind power project intended toprovide electricity for the Snorre and Gullfaks offshore field operations in the NorwegianNorth Sea. Hywind Tampen will be the world’s largest floating offshore wind farm and theworld’s first to power offshore oil and gas platforms. The project represents a direct transfer
of technology from offshore oil and gas technologies to renewables. Hywind Tampen will
be a test bed for further development of floating wind, exploring the use of new and larger
turbines, installation methods, simplified moorings, concrete substructures and integration

96

IEA. All rights reserved.

Noteworthy RD&D projects

between gas and wind power generation systems. The floating wind farm will consist of
11 wind turbines based on one of Equinor’s floating offshore wind technologies, Hywind.
MF Hydra: In the summer of 2021, the world’s first passenger ferry with hydrogen as fuelstarted sailing the route Hjelmeland-Skipavik-Nesvik in Norway. The ferry is 82.4 metreslong with a capacity of up to 300 passengers and 80 cars. The company, Norled, has notedthat the fuel cell-powered ferry is expected to reduce its annual carbon emissions by up to
95%. Research and innovation within the maritime sector have been a long-term priority
and a number of calls have been launched in recent years, particularly within the PILOT-E
programme. The ENERGIX programme also finances an associated project where theoverall idea is to build a full-scale national hydrogen infrastructure to secure a reliablesupply chain of liquid hydrogen to maritime applications.
Aasgard Subsea: In September 2015, Aasgard became the world’s first subsea gas
compression facility to commence operation. In 2020, the technology from this project
became one of Equinor’s most important measures for delivering additional volumes fromexisting fields on the NCS. Subsea processing, and gas compression in particular, areimportant advances to develop fields in deep waters and harsh environments. Subsea
compression with its building blocks is one of the technology areas that has received
funding from both PETROMAKS and DEMO 2000.
Robotic Drilling Systems: The RCN’s petroleum programmes have supported thedevelopment of this game-changing drill-floor solution consisting of robotic technology forfully unmanned drill-floor operations. The solutions offer benefits in terms of energy
savings, cost reductions and safety improvements. The Stavanger-based company
Robotic Drilling Systems (RDS) started out as a company specialised in drilling
automation. From 2008, it received equity funding from commercial entities in Norway,
including Equinor. In 2017, the US company Nabors acquired 100% of the shares in RDS
and found an industrial player that can continue to develop and sell the technology, now
named Canrig, for both onshore and offshore rigs.

ENERGY SYSTEM TRANSFORMATION

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATIONInternational collaboration
Participation in international RD&D co-operation in the field of energy and petroleum is ahigh priority and is an important supplement to Norwegian national research. Norway
participates primarily in co-operation activities within the EU, through the IEA and at theNordic level. Norway also participates in bilateral co-operation with several countries aswell as in large multinational co-operation fora. Among these are the European Strategic
Energy Technology Plan (SET Plan), Horizon Europe, Nordic Energy Research, theCarbon Sequestration Leadership Forum, a bilateral memorandum of understanding
between Norway and the United States, and BN21 (Brazil-Norway in the 21st Century).

Norway was one of the first countries to join Mission Innovation back in 2015. The focus
in the first five-year period has mainly been on the ambition to double public investment inresearch and innovation of climate-friendly energy technologies, as well as information
97

IEA. All rights reserved.

Norway also regards the IEA’s technology collaboration programmes as a valuable add-on
to national efforts because they foster co-operation and information exchange between
scientists and RD&D policy makers within a global framework. Norway participates in 20
out of the IEA’s 38 technology collaboration programmes.

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

exchange and co-operation between member countries. Through substantial public
investment, especially in CCS technologies and offshore floating wind, the doubling target
was met before the end of the initial period. Furthermore, Norway participated in some of
the Innovation Challenges, though not in a leading capacity.
At the Mission Innovation Ministerial hosted by Saudi Arabia in 2020, Norway announced
its intention to join the more ambitious Mission Innovation 2.0. With the new
mission-oriented approach, Norway has chosen to participate in three of the missions
chosen by member countries. Together with Denmark and the United States, Norway willplay an active role as co-lead of the mission on zero emissions shipping with the goal forat least 5% of the global deep-sea fleet to run on zero emissions fuel by 2030. Furthermore,
Norway has also decided to support the clean hydrogen mission as one of the core
coalition members, and the carbon dioxide removal mission as a member.
Norway also actively participates in the Clean Energy Ministerial (CEM) as a member ofthe following initiatives and campaigns: International Smart Grid Action Network, Electric
Vehicle Initiative, EV 30@30 Campaign, Drive to Zero, Equal by 30 Campaign, the CEM
Hydrogen Initiative, and the CEM CCUS Initiative. Norway is a co-lead of the CEM CCUS
Initiative.

Assessment
In 2020, Norway’s public budget on energy-related research, development anddemonstration was USD 400 million. Over the last decade, it has fluctuated at around an
average of USD 380 million, or around 0.1% of the country’s GDP, the highest shareamong IEA member countries.
Energy efficiency RD&D projects accounted for the largest share (40%) of the publicbudget on energy-related RD&D in 2020, followed by renewables (20%), oil and gas(15%), and carbon capture and storage (12%). In 2020, Norway had the highest share ofenergy efficiency, renewables and CCS RD&D budget with respect to GDP among IEA
member countries.
The government has set specific goals for the overall national level of RD&D, whereby
public spending for RD&D must amount to 1% of GDP and private RD&D spending shouldmake up 2% of GDP. Since 2016, the government’s spending levels have exceeded 1%,
but the private sector’s spending has fallen short of 2%. The government does not set any
specific targets for RD&D spending levels for sectors, including energy.

Of the five grand challenges that the government wants to address with innovation as
outlined in Norway's Long-term Plan for Research and Higher Education, two are focusedon energy innovation. To meet these challenges in energy, Norway has sectoral RD&D
strategies that prioritise certain technology areas within the grand challenges, as reflectedin the OG21 and Energi21 strategies, as well as some cross-cutting plans for ensuring theright research infrastructure and skills.

98

IEA. All rights reserved.

Norway’s overall public spending on energy RD&D is strong. As Norway collects data on
and evaluates its RD&D projects, it should also assess whether it is getting good value formoney based on costs and outcomes.

When addressing different technology priorities, the policy toolbox has recently evolved toinclude programmes such as PILOT-E and DEMO 2000, which have a more targeted focus
on bringing specific technologies to market.
Participation in international RD&D co-operation in the field of energy and petroleum is ahigh priority and an important supplement to Norwegian national research. Norway
participates primarily in co-operation activities within the EU, through the IEA (Norway
participates in 20 of the IEA’s 38 technology collaboration programmes) and at the Nordic
level. Norway also participates in bilateral co-operation with several countries as well as
in large multinational co-operation fora.
Norway conducts its energy RD&D activities with a high degree of ambition. Government
funding for energy RD&D has been at an exceptionally high level for years, althoughvariability between years has increased. This makes Norway a leading country in public
spending on energy RD&D per unit of GDP. The IEA acknowledges the strong support
from the government and encourages it to maintain it at continuously high levels.
In contrast to public RD&D funding, private spending is stagnating at a lower level.
However, for future-oriented concepts and technologies to be successfully implemented in
the market, there needs to be a strong commitment on the part of private companies, which
also bear part of the risks. The government should therefore identify and implement
policies to motivate increased private investment in RD&D.
Most RD&D programmes are subject to strong competition among stakeholders and,overall, there are more submissions of high quality relative to funds available. However,there are also some important areas where more applications for funding would be
welcome (e.g. energy efficiency in buildings sector). The government should therefore
provide appropriate measures to encourage potential applicants to strengthen work inthese crucial technology areas.

ENERGY SYSTEM TRANSFORMATION

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

Given that the concept of RD&D support is based on the Energi21 and OG21 strategies,
it is closely tied to political goals. Both strategies have recently been updated andexpanded to include new topics. It was recognised that many technological issues cannot
be considered in isolation. Rather, societal, market, environmental and regulatory aspects
must also be considered in the future. The IEA emphasises their importance andencourages the government to reflect this integrated view in strategic RD&D planning andindividual calls. It is essential to ensure that all relevant stakeholders and authorities are
involved in the process to maximise the outcome of interdisciplinary research.

Over the past years, Norway has spent a large part of its RD&D funds on energy efficiency.
However, this topic is no longer a stand-alone objective for Enova, though it still contributes
to the development of technologies that make the electrical grid more flexible. The revised
Energi 21 strategy, on the other hand, has explicitly included this topic. In view of the still
very high energy efficiency potential in Norway, the government should ensure that the
topic continues to receive appropriate attention in the relevant RD&D programmes.

99

IEA. All rights reserved.

The OG21 strategy underlines that the export-oriented Norwegian energy sector will face
major challenges in the future due to global decarbonisation efforts. The IEA shares thisview. As such, interdisciplinary RD&D programmes should address the question of how
the transition from fossil fuels to sustainable value chains could look for society and theeconomy, considering different scenarios and time horizons.

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATION

Norwegian RD&D programmes cover the entire innovation chain from basic research,
applied research, pilot and demonstration to market launch. The PILOT-E scheme will
enable industry to substantially shorten the time from idea to product once again. The IEA
appreciates this approach. However, the government is encouraged to review the funding
programmes to determine whether sufficient funds are available for all stages of innovation
and whether the programmes offer the right form of support. In particular, too many goodconcepts are still likely to fall by the wayside in the transition from application-related
research to a market-ready solution.
The Norwegian research landscape in the field of energy-related RD&D is well-positioned
in terms of personnel and resources. The government supports the formation of thematic
research centres (FME, PETROCENTER) and various participating technical universities
and research institutions enjoy world renown in their field. At the same time, Norwegian
research institutes are facing increasing competition from foreign institutes working on thesame topics and attracting Norwegian researchers. To remain competitive in the long term
and also be able to train enough young scientists, Norway should exploit its uniquecompetence in certain research topics (e.g. floating offshore wind power, hydropower,
carbon capture and storage, green shipping) and position itself even more stronglyinternationally.
Norway is well-represented in the IEA’s technology collaboration programmes and is also
actively involved in the current EU Horizon Europe programme. To increase the quality
and thus the success rate of submitted applications, researchers have appropriate funding
instruments at their disposal. The IEA encourages the government to continue to support
public and private organisations by enabling them to participate in the EU’s upcoming
Clean Energy Transition Partnership and Driving Urban Transitions to a Sustainable
Future initiatives.

Recommendations
The government of Norway should: Include societal, market, environmental and regulatory aspects as an integral part ofits RD&D strategy, and launch dedicated calls for interdisciplinary projects.
 Ensure that the topic of energy efficiency continues to receive appropriate attention in
relevant RD&D programmes. Evaluation criteria should not only be based on reducing
greenhouse gas emissions, but also on energy saved.
 Provide consistent and appropriate support for all stages of innovation, notably forcommercialisation and market opportunities abroad.

100

IEA. All rights reserved.

 Build on the unique competencies of its RD&D institutions in specific innovation topics(e.g. floating offshore wind, hydropower, carbon capture and storage, green shipping),
and aim for international leadership.

References
Energi21 (2021), About Energi21 (web page), https://energi21.no/en
Energi21 (2018), Energi21 Strategy 2018,https://energi21.no/contentassets/c975aa7108c144fb9564fca312624639/energi21-strategy2018.pdf
Enova (2018), About Enova (web page), https://enova.no/about-enova
Norway, Ministry of Petroleum and Energy (2021a), OG21 – Oil and gas in the 21st century(web page), https://www.regjeringen.no/en/topics/energy/energy-and-petroleumresearch/og21--oil-and-gas-in-the-21stcentury/id439227/#:~:text=OG21%20is%20to%20enhance%20value,strategy%20for%20oil%20and%20gas
Norway, Ministry of Petroleum and Energy, (2021b), PETROMAKS2 – large program forpetroleum research (web page), https://www.regjeringen.no/en/topics/energy/energy-andpetroleum-research/petromaks2-stort-program-for-petroleumsforskning/id439228
Norway, Ministry of Petroleum and Energy, (2021c), DEMO 2000 (web page),https://www.regjeringen.no/en/topics/energy/energy-and-petroleum-research/demo2000/id439220
Norway, Ministry of Petroleum and Energy, and Ministry of Climate and Environment(2020), The Norwegian Government’s Hydrogen Strategy,
https://www.regjeringen.no/contentassets/8ffd54808d7e42e8bce81340b13b6b7d/hydrogenstrategien-engelsk.pdf
Norway, Ministry of Education and Research (2018), Long-Term Plan for Research andHigher Education 2019-2028, https://www.regjeringen.no/en/dokumenter/meld.-st.-420182019/id2614131/?ch=1
IEA (International Energy Agency) (2022a), Energy technology RD&D budgets (web page),https://www.iea.org/data-and-statistics/data-product/energy-technology-rd-and-d-budgetdatabase-2

ENERGY SYSTEM TRANSFORMATION

6. ENERGY RESEARCH, DEVELOPMENT AND INNOVATIONIEA (2022b), Innovation Norway (web page), https://iea.org/articles/innovation-norway
IEA (2021), ENERGIX Programme (web page), https://iea.org/policies/2311-energixprogramme
OG21 (Oil and Gas for the 21st Century) (2021a), The OG21 Strategy – A new chapter(web page), https://og21.no/strategi-og-analyser/ny-og21-strategi-2021
OG21 (2021b), OG21: A New Chapter, https://og21.no/siteassets/figurer-og21-strategi2021/og21-strategi_eng.pdf
PILOT-E (2015), Information in English (web page), https://enova.no/pilot-e/information-inenglish
RCN (Research Council of Norway) (2019a), Research in Norway: Facts and Figures 2019,https://forskningsradet.no/siteassets/internasjonalt-innhold/research_in_norway_2019.pdf
RCN (2019b), International funding (web page), https://forskningsradet.no/en/apply-forfunding/international-funding

101

IEA. All rights reserved.

University of Stavanger (2020), Rystad: Increased value creation (web page),https://uis.no/en/rystad-increased-value-creation

Key data (2020)
Electricity generation: 154.2 TWh (+25% since 2010), hydro 92%, wind power 6%,
natural gas 1%, oil and bioenergy and waste combined 1%
Electricity net exports: 20.5 TWh

ENERGY SECURITY

7. Electricity

Electricity consumption: 133.7 TWh (+2% since 2010), buildings 51% (residentialbuildings 31%, service sector buildings 20%), industry 48%, transport 1%
Installed capacity: 38.9 GW (hydro 92%, wind 6.4%)

Overview
Hydropower is a mainstay of the Norwegian electricity sector, accounting for 92% ofproduction in 2020. A large increase in wind generation over the last decade led to an
overall share of 98% zero emissions electricity generation in 2020.
Norway is also characterised by a high degree of electrification of the economy. Electricity
demand in Norway has been on the rise since 2010, and is set to grow significantly in the
coming decade, while Norway already has the highest per capita consumption of electricity
globally. To achieve its long-term goal of climate neutrality, the government of Norway has
been pursuing additional electrification of several sectors, including transport, industry andoffshore hydrocarbons production. This will result in an almost 20% increase of
consumption over the next decade, which is challenging as offshore wind development
awaits a final regulatory framework and onshore wind generation faces permitting issues.
Norway’s electricity market is fully liberalised, but publicly owned companies are dominant
players in electricity generation, wholesale supply, retail, and transmission and distribution.

Due to its high level of interconnection, Norway has been exposed to the jump in electricity
prices seen across Europe in the second half 2021. The government introduced amulti-billion euro mechanism to reduce consumers’ bills in December 2021, but it isquestionable whether the government can sustain this over a longer period. As Norway is
divided into five pricing zones due to congestion on its transmission grid, high European
prices are mostly felt in the southern, interconnected regions of the country, with prices at
103

IEA. All rights reserved.

Norway has historically been a net exporter of electricity, thanks to abundantinterconnectivity with its neighbours and further afield. During winter peaks, the country
relies on significant imports, which raises adequacy concerns for future market balancing.

7. ELECTRICITY

times ten times higher than in the far northern regions. Planned investments in new grid
extensions may in the future reduce these discrepancies.

Electricity supply and demand
Electricity generation
Norway has the highest share of electricity produced from renewable sources in Europe(98%), and the lowest emissions from the power sector. At the end of 2020, the total
installed capacity of the Norwegian power supply system stood at 38.9 GW, and annual
production was 154.2 TWh. Hydro has historically been the main source of electricity
generation in the country. With installed capacity of 33.7 GW, hydro accounted for 91.8%
of production in 2020 (141.6 TWh). Wind generation ranks second in Norwegian
generation, with an installed capacity of 4 GW. The share of wind has increased more thantenfold in the last decade, from 0.9 TWh in 2010 to 9.9 TWh in 2020 (6.4% of total
generation), a 40% increase compared to 2019. In 2020 alone, 1.4 GW of wind power
capacity was commissioned in the country. Norway also had 1.1 GW of installed thermal(natural gas) capacity that delivered 2.7 TWh in 2020; and 160 MW of installed solar PV
capacity. Around 40 MW of new solar power was installed in 2020, which corresponds tothe installation of 350 solar panels per day. The average, volume-adjusted capacity factor
among all generating technologies was 42% in 2020: 44% for hydro, 22% for wind and
14% for gas power plants.
Figure 7.1 Electricity generation by source in Norway, 2000-2020
180
160
140
120
100
80
60
40
20
0

TWh

All electricity generation

14

Excluding hydro

TWh

12
10
8
6
4
2
0

Hydro

Wind

Bioenergy and waste

Oil

Solar

Natural gas

Heat

IEA. All rights reserved.

Electricity generation in Norway is dominated by hydro. However, electricity generation fromwind has increased significantly in recent years.
Source: IEA (2022a).

In 2020, Norway consumed 133.7 TWh of electricity, and had one of the highest per capita
consumption rates for electricity in the world. Historically, electricity has been the mainenergy source in the country for industry and households. A large share of heating is also
based on electricity, and Norway has the highest share of heat pumps per household in
the world, with over 1 million heat pumps installed in 2020.

104

IEA. All rights reserved.

Electricity demand

The industry sector accounted for the largest share of electricity consumption, at 48%
in 2020, followed by residential buildings at 31%, services buildings at 20% and thetransport sector at 1% (Figure 7.2). The shares of electricity consumption per sector haveremained relatively stable over the years.
In its long-term analysis published in 2016, the Norwegian Energy Regulatory Authority(NVE-RME) estimated an increase in electricity demand in Norway from 130 TWh in 2015
to 143 TWh in 2030. However, in the NVE’s recent long-term analysis from 2021 (NVE,
2021a), it estimated much higher demand growth to 159 TWh in 2030 and 175 TWhin 2040, more than 30% over current levels.
Expected demand growth in Norway represents the largest incremental growth inelectricity consumption among Nordic countries, and is mainly driven by increased
electricity consumption in end-use sectors (transport, power-intensive industries,
electrification of the oil and gas sector). Planned new industries such as data centres andgigafactories will also contribute to future demand growth, albeit from relatively low levels
at present. The Norwegian government has been looking into possibilities for data centres
and other large electricity users to offer waste heat from cooling servers to district heating
systems whenever possible.

ENERGY SECURITY

7. ELECTRICITY

Figure 7.2 Electricity demand by sector in Norway, 2000-2020
140

TWh

120

Transport*

100
Industry8060Service sector
buildings

40
20

Residentialbuildings

0

IEA. All rights reserved.

Electricity is the main source of energy for both the industry and buildings sectors.
* Transport demand for electricity has increased from 0.6 TWh to 1.7 TWh and is barely visible at this scale.
Source: IEA (2022b).

Norway is the largest electricity exporter in Europe with two historic years of exports:
24.97 TWh of exports in 2020 (20.5 TWh net) and 25.82 TWh of exports in 2021, up froma 10.1 TWh trade surplus in 2018. With that, already in 2020, Norway outpaced France,
which has historically been the dominant electricity exporter on the continent. In 2019,
exceptionally, imports were marginally greater than exports (12.353 TWh versus
12.309 TWh), as electricity generation from hydro was the lowest since 2011 due to lower
water flows (Statistics Norway, 2022a). Between 2014 and 2018, net exports of electricity
from Norway were stable and varied between 14.6 TWh and 16.4 TWh per year. There
are wide variations in the market balance from year to year, generally due to fluctuating
105

IEA. All rights reserved.

Electricity trade7. ELECTRICITY

temperatures, water inflow and wind factors (Figure 7.3). Norway trades electricity with all
the countries it is interconnected with: Denmark, the Netherlands, Sweden and, from 2020,
Germany and the United Kingdom.

Net imports

Figure 7.3 Norway’s electricity net trade with neighbouring countries, 2000-2020
15

TWh

Denmark

10
5

RussianFederation*0

Sweden-5

Net exports

- 10
Other

- 15
- 20

Total net
trade

- 25
- 30

IEA. All rights reserved.

Norway is the largest electricity exporter in Europe, thanks to its availability of low-cost hydrogeneration.
* Net imports to Russia account for less than 0.3 TWh over the period, and are not visible on this scale.
Source: IEA (2022b).

Electricity generation outlook
Hydropower is the mainstay of the Norwegian electricity system. At the beginning of 2021,
Norway counted 1 690 hydropower plants. On average, Norwegian hydropower plants
produce around 136-138 TWh per year, which is around 90% of Norway’s total power
generation. Hydropower generation is determined by water inflow and installed capacity.
In the period 1990-2020, annual inflow to Norwegian hydropower plants varied by over
65 TWh.

Since 2015, Norway has increased production from renewable energy sources as a resultof its common market for electricity certificates with Sweden that took effect in January
2012. It is based on the Swedish electricity certificate scheme, which has been in place
106

IEA. All rights reserved.

The uncertainty over water inflows is, however, largely offset by the very high storage
capacity in Norway, amounting to half of Europe’s total reservoir capacity. Norway has
more than 1 000 hydropower storage reservoirs with a total capacity of more than 87 TWh,corresponding to 70% of annual Norwegian electricity consumption. Over 70% ofhydropower plants have storage reservoirs. The country’s major reservoir, Blåsjø, near
Stavanger, has a capacity of 7.8 TWh alone, and can hold up to three years’ normal inflow.
The larger share of Norway’s storage capacity is concentrated in the mountains in thesouthern part of the country (in the regions of Vestland, Rogaland, Agder and Telemark).
At the beginning of 2021, an additional 2.3 TWh of hydropower was under construction
and the NVE assumes that hydropower production will increase by 7 TWh from 2021 to2030, to reach 145 TWh, as a result of new projects, upgrades at existing plants and higher
inflows from increased precipitation due to climate change.

since 2003. The goal of the common scheme was to increase annual renewable electricity
production in both countries by 28.4 TWh by the end of 2020. Through 2020, the scheme
has contributed 45.1 TWh of new renewable production, exceeding its goal. Norway’s
share was 16.6 TWh, with the largest share coming from wind power. The remaining
28.5 TWh was delivered by Sweden. While Sweden has set an additional goal of 18 TWhof renewable generation between 2020 and 2030, Norway has not set any new targets
after 2020.
In recent years, onshore wind power development has increased, but the NVE assumes
that there will not be an increase in onshore wind power until after 2030 as the licencing
process for new wind power was suspended in April 2019 due to local opposition toprojects. More recently, in April 2022, the government announced it would resume onshore
wind licencing in municipalities that were supportive of installations (see Chapter 5).
Two areas in the Norwegian Sea have also been assigned for offshore wind power
development, but the NVE assumes that they will not be realised before 2030. However,in February 2022, the government announced a major initiative to promote offshore wind
power and to implement the first phase of wind power production in the areas of Sørlige
Nordsjø II (seabed moored) and Utsira Nord (more complex floating wind turbines), with acapacity of up to 4.5 GW. The NVE was obliged to prepare a new study on the viability oflarge-scale offshore wind development in the area. In April 2022, the government decided
to give Statnett responsibility for the overall planning of the offshore grid. The main model
for awarding offshore areas is through a standard auction model for the seabed moored
Sørlige Nordsjø II area, while qualitative criteria will be used in the allocation round of
Utsira Nord to facilitate innovation and technological development of floating technology.

ENERGY SECURITY

7. ELECTRICITY

Solar PV has been primarily used as an electricity source for isolated houses, such as
cabins. The NVE has estimated solar PV to further increase to 0.6 TWh in 2025 and to
1.5 TWh in 2030.
According to the NVE’s forecasts, thermal power generation will remain at low levels,
mainly from smaller plants based on different types of fuels.

Transmission and distribution

Norway has a sizeable transmission network of more than 11 000 kilometres (km) due toits geographic length and the location of its hydropower stations. The country’s
transmission grid is divided into four subsystems. Since 2015, Norway added 1 065 km of
high-voltage lines and has several other projects ongoing to add additional high-voltage
lines by 2026.
Surplus production in the north of the country that is constrained due to limited
transmission capacity southwards and ample interconnections with Europe in the south
107

IEA. All rights reserved.

Statnett, owned by the MPE, is the only TSO in Norway and owns 98% of the transmission
grid. The remainder is owned by 13 regional grid companies, from whom Statnett rents
these parts of the grid. Statnett has been legally unbundled since 1992 and ownership has
been unbundled since 2002. Statnett is a TSO in line with EU regulations. Statnett’s
revenues are regulated by the NVE-RME. The NVE-RME also issues direct regulations,like the regulation on system responsibility, rules on quality of delivery, connection duties
and tariffs.

7. ELECTRICITY

drive prices in southern Norway. Norway is divided into five bidding zones, and the lack oftransmission capacity from north to south results at times in large price differences
between the north and south of the country. Due to good interconnections, the prices inthe south are linked to prices in continental Europe.
The previous government established a Grid Development Committee tasked withassessing options to reduce the amount of time spent on developing, case handling andbuilding of grid infrastructure projects. The committee is also tasked with looking into
economic principles for grid development when demand is very uncertain, as well as
considering improvements in the grid connection process.
The Norwegian distribution network (230 volts [V] – 132 kilovolts [kV]) is classified asregional distribution (33-132 kV) and local distribution (230 V – 22 kV) for regulatory
purposes. There are 86 DSOs that own and operate local distribution networks, while 68of these also own and operate regional networks to varying extents. Municipalities andcounty authorities own most of the regional and distribution grids.
Legal and functional unbundling was introduced for DSOs with more than 100 000
customers in 2007. An amendment to the Energy Act in 2016 imposed legal and functional
unbundling on all DSOs, irrespective of size. In 2020, it was decided to exempt DSOs withless than 10 000 customers from functional unbundling, which entered into force in March
2021. Today, all DSOs are legally unbundled and DSOs with more than 10 000 customers
are also functionally unbundled. In 2020, around 8% of final customers were connected to
DSOs exempt from functional unbundling.

Cross-border interconnections
Norway is part of a common synchronous area sharing the same frequency with Finland,
Sweden and eastern Denmark. Additionally, it has direct interconnections to theNetherlands and Russia.

108

IEA. All rights reserved.

Since 2015, Norway’s total cross-border capacity increased from around 6 200 MW to
8 950 MW (export) and 9 245 MW (import). The increase was due to two new additions:
NordLink to Germany and the North Sea Link to England. NordLink was operational from
December 2020, with a capacity of 1 400 MW, and the North Sea Link started operations
from October 2021, with a similar capacity of 1 400 MW. Apart from these, Norway has
cross-border interconnections with Denmark, Finland, the Netherlands, Russia andSweden.

Figure 7.4 Map of Norway’s cross-border electricity interconnections

ENERGY SECURITY

7. ELECTRICITY

By 2026, the oldest part of Norway’s connection to Denmark (Skagerrak 1 and 2) will haveto be decommissioned due to technical wear and tear. Statnett is conducting a feasibility
study to assess if and when it may be necessary to reinvest in this infrastructure that was
first built in 1977 (the oldest parts to be decommissioned have a capacity of 500 MW outof a total of 1 700 MW between Norway and Denmark).
109

IEA. All rights reserved.

In addition, NorthConnect has submitted a licence application for an interconnector
between Norway and the United Kingdom, though consideration of this application has
been put on hold. The Norwegian and Nordic power system is currently experiencing majorchanges. For this reason, Norway’s Ministry for Petroleum and Energy has concluded thatit needs to see the effects of the operation of the two latest interconnectors before it cantake a decision on the NorthConnect project.

7. ELECTRICITY

Statnett is also considering improving the use of the capacity to Finland. The existing
connection is a very long 220 kV AC line with limited capacity. Furthermore, the grid innorthern Norway consists of weak 132 kV connections. Consequently, controlling andlimiting the flow on the line between Finland and Norway is very difficult, and is a challenge
for operations. According to Statnett’s study, the best option to improve the capacity seems
to be a back-to-back high-voltage, direct current line. The capacity of such a solution could
be in the range of 100-150 MW and could be implemented around 2025 at the earliest.
Due to a significant increase in domestic consumption forecasted over the coming years,
Statnett’s short-term market analysis for 2021-2026 shows that the Norwegian powersurplus may be reduced to 3 TWh in 2026 and trigger the need for more generation
investments and more transmission capacity. At the same time, in the Nordic countries asa whole, power production capacity will continue to increase. New wind power, particularly
in Sweden, helps to keep the Nordic power balance stable, even with significant power
consumption growth of around 40 TWh. In Sweden, the power surplus will increasesignificantly from around 25 TWh today to around 40 TWh in 2026, and the surplus innorthern Sweden will be as much as 60 TWh (Statnett, 2021). Cross-border trade capacity
puts Norway in a position to benefit from market developments in the region, without risking
supply shortages.
Statnett applies the Net Transfer Capacity Principle when calculating cross-zonal
capacities, which is based on simplified, bilateral co-ordination among TSOs in the regions.
Based on regulatory changes of August 2021, a new method for congestion management,using flow-based capacity allocation, will be applied in 2023.

Market structure and regulation
The Norwegian Energy Act is based on the principle that electricity production and trading
should be market-based. While electricity transmission and distribution is a natural
monopoly, and not subject to competition, grid operations are strictly regulated by thestate.
The MPE has the overall responsibility for managing power supply in Norway, for which
operative responsibility is delegated to the NVE. The Energy Act and the Natural Gas Act
provide for the legal independence of the NVE-RME and the Energy Appeal Body.

The vast majority of generation in Norway is publicly owned by either the state ormunicipalities. Under the 1917 Industrial Concessions Act, the government has a “right ofreversion”, which allows it to resume ownership of privately owned hydropower assets
without compensation once the original 60‐year licence has expired. As a result, the act
has resulted in privately developed hydropower plants gradually passing into public
ownership over time.
In capacity terms, the three largest generation owners (Statkraft, Hafslund Eco Vannkraft
and Sira Kvina Kraftselskap) – all publicly owned – control just under 50% of Norway’s
110

IEA. All rights reserved.

Norway’s power market can be divided into wholesale and end-user markets. Largevolumes are bought and sold in the wholesale market by power producers, brokers, power
suppliers, energy companies and large industrial customers. Power suppliers trade on
behalf of small and medium-sized end users and small-scale businesses and industry.

installed hydro capacity and over 50% of production. Statkraft is dominant among these,
alone owning over 30% of generation capacity and producing close to 30% of net
generation.

Wholesale electricity market
The Norwegian physical electricity market and the European physical electricity markets
are integrated. The physical wholesale energy markets are divided into three sequential
markets where prices are determined: day-ahead, intraday and balancing markets.
There are two physical power exchanges in Norway, Nord Pool and EPEX SPOT, thoughmore than 90% of the physical power trade takes place on Nord Pool. The power exchange
operates two physical power markets: a day-ahead market (Elspot) and a continuous
intraday market (Elbas).
Elspot is the most important market and is used as a reference when planning theoperation of the grid by the TSO. Out of total electricity consumption in 2020 of 133.7 TWh,over 120 TWh (around 90%) was traded in the day-ahead market. The day-ahead market
closes at noon, 12-36 hours before the physical delivery takes place. The day-ahead
auction collects bids from both producers and consumers and is subject to physicalconstraints of cross-zonal capacity. By setting prices and volumes for each bidding zone,
the auction also determines the scheduled day-ahead flows between bidding zones.

ENERGY SECURITY

7. ELECTRICITY

In the intraday market (Elbas), contracts are continuously traded in the period between
clearance in the day-ahead market and up to one hour before the hour of operation. This
allows market participants to achieve a balance through trading. The intraday market
supplements the day-ahead market, for instance to correct potential imbalances accruing
after the closure of the day-ahead market. Market participants can only trade between
bidding zones if capacity is available.
The balancing markets are also operated by the TSO, which is responsible for balancing
the system. The balancing markets consist of primary reserves, secondary reserves andtertiary reserves.

Since 1 March 2018, the regulator has been enforcing market rules regarding prohibitionsof market manipulation and insider trading, as well as requirements on disclosure of insider
information. A special market surveillance team has been established at the NVE-RME.

111

IEA. All rights reserved.

The Energy Act states that any entity engaged in physical trading, generation and/or
distribution of electricity in Norway is required to hold a trading license. Through the Energy
Act, the NVE-RME has been given the authority to grant such licences and has delegatedpower to impose supplementing terms and conditions for the licenses whenevernecessary. The trading licence is a key basis for the NVE-RME’s supervision andregulation of market actors. A trading licence is required to become a balance responsible
party and to trade at a power exchange. At the beginning of 2021, 646 companies received
a trading licence lasting from 1 January 2021 to 31 December 2024. Electricity suppliers
supplying residential customers had 163 of these licences, while 100 of the licenses were
held by DSOs.

7. ELECTRICITY

Retail electricity market
Norway fully liberalised its electricity market in 1991. In a study commissioned by theEuropean Commission and published in February 2021, the Norwegian electricity retailmarket was found to have the lowest barriers to entry in Europe.
End users in Norway can freely choose their power supplier among approximately
140 suppliers. Although the suppliers in the retail market offer a variety of contracts, thecontracts can normally be divided into three groups: spot price, standard variable priceand fixed-price contracts. Spot price contracts are based on hourly spot prices plus amark-up. For a standard variable contract, the supplier may freely choose the price that
follows the spot price and its duration, given that any price change must be announced tothe customer at least 14 days in advance. Fixed-price contracts are based on anagreement to deliver electricity at a fixed price for the duration of the contract. Over 75%
of customers in Norway have contracts based on a spot price, close to 22% choose acontract based on standard variable price and only 2.5% have fixed-price contracts.
The combined market share of the three largest suppliers in the household sector bymetering points has been around 37% for several years. The Herfindahl-Hirschman Index
for household customers is 740. The low concentration can be explained by a high numberof suppliers, and indicates a competitive market structure.

Smart metering
Norway is the only country in the world where an advanced metering infrastructure forhourly meter readings has been installed in all households and other measurement points.
The rollout of advanced metering infrastructure devices was completed by the end of 2019.
Statnett was put in charge of establishing a data hub (Elhub) that collects and processes
information coming from advanced metering infrastructures (70-80 million meter readings
and 150 000 market messages daily).
Since 1991, the number of residential customers with a supplier different from theincumbent supplier has increased. The Norwegian Consumer Council has established a
website (www.strompris.no) where consumers can compare contracts offered by allelectricity suppliers. In 2020, there were 711 000 supplier switches resulting in a switchingrate of 21%. As soon as a supplier has signed a written contract with a consumer to switch
supplier, the supplier can send a digital message to Elhub. This digital message includes
information about the consumer’s metering point, date of supplier change, as well as othercustomer information needed for invoicing. If the data provided by the supplier are
validated, Elhub will proceed with the change of supplier and send a confirmation to the
new supplier and the previous supplier gets a notice about the terminated agreement.

Norway’s industry and household electricity prices have historically been the lowest among
IEA member countries (Figure 7.5). Norway’s industry price in 2020 was 16.1 USD/MWh,with a 20% tax rate, while household electricity prices reached 48.9 USD/MWh, with a tax
rate of 41%. Norway’s electricity prices have consistently been the lowest when compared
to its neighbouring countries in past years (Figure 7.6).

112

IEA. All rights reserved.

Electricity prices

Figure 7.5 Electricity prices for industry and households in IEA member countries,
2020
Industry
USD/MWh

200
180
160
140
120
100
80
60
40
20
0

Tax component

IEA. All rights reserved.

ENERGY SECURITY

7. ELECTRICITY

Notes: Tax Information is not available for the United States. Industry price data are not available for Australia,
Greece, Lithuania or Mexico.
Source: IEA (2022c).

Households

400
350
300
250
200
150
100
50
0

USD/MWhTax component

IEA. All rights reserved.

Notes: Tax Information is not available for the United States. Household price data are not available for Greece,
Lithuania or Mexico.
Source: IEA (2022c).

United Kingdom

Denmark

Finland

Households

450
400
350
300
250
200
150
100
50
0

SwedenNorwayElectricity prices in Norway are lower than in its neighbouring countries.

IEA. All rights reserved.
IEA. All rightsd* Data are not available for industry prices in 2020 nor for Sweden from 2000 to 2006 (industry and household).
Finland’s industry prices are for 2006.
Source: IEA (2022c).

113

IEA. All rights reserved.

Industry

180
160
140
120
100
80
60
40
20
0

USD/MWh

USD/MWh

Figure 7.6 Electricity prices in Norway and neighbouring IEA countries, 2000-2020

7. ELECTRICITY

Norway’s power grid is divided into five different pricing zones. Three southern areas(around Oslo, Stavanger and Bergen), where consumption is concentrated, may at times
have up to ten times higher electricity prices than in the northern part of the country. These
differences are a result of high production and low demand in the north, congestion on thetransmission network from north to south, and easy access of northern bidding areas tocheap wind generation from Sweden.
Typical electricity bills in Norway consist of charges for several different components: theelectricity price, grid tariff, electricity tax (0.32 NOK/kWh) and VAT. In addition, there is afee earmarked for the Energy Fund (Enova), which supports GHG emissions reductions
and improved security of supply.
In the second half of 2021, prices for electricity in Norway increased sharply following
similar surges across Europe. According to Statistics Norway (2022b), household net
electricity prices increased by 429%, reaching a final price (including 49% taxes andcharges) of 1 470 NOK/MWh (164 USD/MWh) in Q4 2021. Prices increased the most forcontracts tied to spot prices (by 551%). For non-energy intensive industry, prices jumped
more than sixfold, while the increase for energy-intensive sectors was 34%.
In December 2021, the government introduced a temporary support scheme forhouseholds with an initial allocation of NOK 8.7 billion (EUR 870 million) until the end of
March 2022. When the average spot price over a month exceeded 0.70 NOK/kWh, thegovernment covered 55% of the amount beyond this threshold up to a maximum of
5 000 kWh per month for households. In January, the government increased the coveragerate from 55% to 80%. In March 2022, the support scheme was extended to March 2023,
and the coverage rate was raised to 90% for October, November and December 2022.
This extension is estimated to cost NOK 7.4 billion (EUR 740 million). The support scheme
also applies to agriculture, greenhouses and voluntary organisations, which increases thescheme’s cost by about NOK 730 million (EUR 73 million). The share paid by the state isdeducted directly from the bill by the TSO or electricity provider. Additionally, thegovernment has initiated a dialogue with the TSO to enable a deferral of payments for themost exposed customers.

Electricity security and emergency response

The legislation for security of electricity supply and emergency preparedness is outlined in
Chapter 9 of the Energy Act and the Regulation on Security and Emergency Preparedness
in the Power Supply System. The Energy Act requires any grid company to keep its gridin good condition and sufficiently modernised, while the Regulation on Security andEmergency Preparedness in the Power Supply System describes requirements to ensure
electricity security and effective restoration in cases of outages. The NVE produces regularsector reports, analysing the current state of the electricity sector and related risks, andconducts oversight over whether grid owners comply with the regulations. In case of acrisis, the NVE would co-ordinate between government and market participants.

114

IEA. All rights reserved.

The MPE has the overall responsibility for managing the power sector in Norway, for which
certain parts are delegated to the NVE.

Statnett is responsible for system operation and operational security as well as fordeveloping measures to deal with highly strained supply situations. These are known as“SAKS measures”, and their purpose is to reduce the likelihood of rationing.
While the NVE is the national competent authority on cybersecurity, the regulator(NVE-RME) is responsible for cybersecurity in the metering value chain, which includes
smart metering systems and Elhub. The Metering Settlement and Billing Regulation
includes detailed security requirements for smart metering systems and Elhub. As withgeneral electricity security, grid owners and power producers are also responsible for theirown cybersecurity, including the security of their supply chains.

Electricity adequacy
In its analysis for 2021-2026, Statnett assumes that Norwegian power system adequacy,
although strained at times, poses no risk of power rationing in the next five years.

ENERGY SECURITY

7. ELECTRICITY

Through legislation, however, Statnett is given an extended responsibility to continuously
investigate and develop necessary measures to ensure that supply and demand arebalanced at all times, especially during the winter season. The TSO can require mandatory
participation in the balancing market, power production (even when not part of thebalancing market) and load shedding. System protection mechanisms in the transmission
network can only be installed and operated based on decisions taken by the TSO.
Permanent and operational costs of the different measures undertaken by the TSO for
ensuring security of supply are handled within Statnett’s revenue cap.
Statnett is preparing changes to its operational model (Nordic Balancing Model), also withthe aim to prepare for expected greater shares of variable renewables on the grid. The
main amendments are the switch from 60-minute to 15-minute market resolution, tochange the manual processes on the operator’s side to automated system response, anda change from control based in a synchronous area to control based within each of thefive bidding zones.
Statnett is expecting an increase in yearly generation from the current levels to 159 TWh
in 2030, with additions from hydropower (9 TWh), onshore wind (10 TWh), and offshore
wind and solar (4 TWh and 3 TWh, respectively). In response, it has developed a plan ofgrid investments across the country of up to NOK 100 billion (EUR 10 billion) by 2030 tohandle the increased capacity with a 420 kV grid nationwide.

The Norwegian electricity system does not have capacity available outside of the market(i.e. strategic reserves) ready to react when the market does not provide the necessary
production to meet demand. However, for a long time Norway had a reserve market,
connected to large industry consumers. Statnett is currently developing and testing a new
set of products to be offered to the market that will allow for some additional demand
flexibility in the system.

115

IEA. All rights reserved.

While flexibility in the national power system has historically been provided by abundantdispatchable hydro generation, increased consumption in some important areas (including
the Oslo area) reduces the availability of this flexibility source. In the future, flexibility will
have to come from the demand side to ensure system balancing.

7. ELECTRICITY

Risk preparedness
Norway, like almost all countries in the world, must deal with the impact of climate change
and related impacts on its electricity infrastructure.
Grid operators, producers and other entities that own or run power installations ofsignificant importance to the electricity supply system participate in the Power Supply
Preparedness Organisation, which is headed by the NVE. The Power Supply
Preparedness Organisation is divided into districts. Each district has a district manager
who is responsible for facilitating adequate co-operation for preventing and handlingemergencies. The Power Supply Preparedness Organisation is also responsible forrestoring power supplies in the aftermath of extraordinary occurrences.
Every second year, the DSOs and Statnett present updated regional and national network
development plans. The timeframe for the network development plan is 20 years at least,
and it must describe expected generation, transmission and consumption of electricity,and include conditions that are of importance for the development of the power system in
the area. Specifically, the responsibility to co-ordinate long-term power system planning isdelegated to the 17 biggest owners of the distribution network. Each of these is responsible
for planning the distribution network in a specific area, in co-operation with other network
owners and other relevant parties.

Reliability of electricity supplies
The large share of hydropower production makes the Norwegian power system vulnerable
to variations in water inflow and precipitation. The monitoring of security of supply istherefore closely linked to weekly monitoring of energy levels in hydropower reservoirs.
Every week, water level measurements of the 489 largest hydropower reservoirs arecollected – monitoring 96% of the total reservoir capacity.
The Norwegian Energy Act specifies that Statnett’s responsibilities include frequency
regulation, maintaining the instantaneous balance of the power supply system, developing
market-based solutions that promote efficient development and utilisation of the power
supply system, and making the maximum possible use of instruments based on market
principles.

Norway does not have electricity system reliability standards such as loss of load
expectation set by legislation. Nonetheless, the TSO complies with a set of internal
indicators; for instance, a 200 MW loss for 30 minutes standard is seen by the TSO as amanageable system failure. Norwegian continuity of supply is stable at close to 99.99% in
years without extreme weather events and it has never dropped below 99.96% in any year
since 1996. Consumers in Norway experience on average about two short interruptions
and two longer interruptions per year, where the average duration is less than two minutes
for short interruptions and approximately two hours for long ones. However, the securityof supply varies from region to region and is generally better at higher grid levels.

116

IEA. All rights reserved.

Norway’s peak demand is managed through market mechanisms, where price signals inthe day-ahead, intraday and balancing markets provide incentives for market participants
to adjust their consumption and production.

Electricity emergency response
In an emergency, Statnett is responsible for the continuous operation of the power system.
The NVE heads the preparedness and emergency planning of power supply and is also
the rationing authority. Regulation relating to power system operation regarding thehandling of extreme situations came into force on 1 January 2005. This regulation aims tosecure extreme situations and is not relevant for the normal operation of the system.
Through this regulation, Statnett is given an extended responsibility to continuously
investigate and develop necessary measures to ensure that there is momentary balanceat all times, the energy balance during the winter season and that adequacy can besustained during crisis situations.
According to Norwegian regulations, Statnett can develop different remedial actions within
the terms of the regulation on system operation, based on the following set of terms (NVE,
2021b):



ENERGY SECURITY

7. ELECTRICITY

to reduce the risk of electricity rationing as much as possible
to be effective for handling extreme situations, and at the same time not influence theelectricity market or investment decisions with respect to production or the network

to maintain TSO neutrality and its independent position in the power market

to take into consideration the ticexisting flexibility in production, transmission andconsumption.

to contribute to a socio-economic handling of extreme situations and maintain the efficiencyof the physical power market

In 2020, an amendment to the Grid and Energy Market Regulation made it possible forgrid companies to give customers a non-firm connection to the grid. This non-firmconnection enables the grid companies to curtail consumption on terms that are agreed
upon between the parties.

Assessment

One special feature of the Norwegian hydropower system is its high storage capacity(87.2 TWh). Norway has half of Europe’s reservoir storage capacity, which corresponds to
64% of Norwegian electricity production (in 2021). Energy storage from hydropower plants
with reservoirs are part of the market-based power system. Importantly, Norway’s vasthydro storage capacity can help balance production from growing variable renewables
generation in the Nordic and broader European power markets. Norway has no targets forenergy storage, nor any supporting measures.
With production at 154.2 TWh and consumption of 133.7 TWh in 2020, Norway has
confirmed its position as a net exporter of electricity over the last decade, with a record of
20.5 TWh of net exports in 2020. However, the country is also a significant importer at
117

IEA. All rights reserved.

Norway enjoys the largest share of zero emissions electricity in Europe at 98% of its
generation. Of that, 92% came from hydropower generated from almost 1 700 plants (at141.6 TWh in 2020). Most of the remainder was generated from onshore wind turbines,
for which generation increased more than tenfold over last decade to 9.9 TWh in 2020. As
such, Norway has significant potential to leverage its clean electricity system todecarbonise other sectors of the economy through electrification.

7. ELECTRICITY

times when hydro inflows are not sufficient, benefiting especially from abundant wind
generation in neighbouring countries. Norway is part of a joint Nordic power market with
Denmark, Finland and Sweden with abundant interconnectors to Germany, theNetherlands, Poland, Russia, the United Kingdom and the Baltic states. However, as
Nordic countries themselves experience a large deficit during winter peak demands, theneed for imports during cold spells might stress the Norwegian electricity system.
Additionally, according to the TSO’s forecasts, Norwegian demand for electricity will growquickly to 159 TWh in 2030, the largest increase among Nordic countries. The forecasted
growth is in part driven by electrification of other sectors as part of decarbonisation plans
as well as the emergence of new sectors such as data centres and gigafactories. As
Norway’s historical trade surplus narrows, the government should give due consideration
to additional generation capacity and energy efficiency, as well as expedited
implementation of demand-side flexibility options, which are still in pilot phases.
Norway has great potential for generating electricity from wind, but the sector now finds
itself at a standstill. Though costs for onshore wind have fallen to levels that are
cost-competitive despite the termination of a certificate support scheme in 2021, thecessation of permits due to a rethink of the regulatory framework is the main cause for thestagnation of onshore wind in Norway. As projected demand growth will likely surpass theavailability of hydro expansions, onshore wind should be reconsidered as a source of new
renewable electricity generation. The April 2022 decision to restart permitting for onshore
wind facilities will help toward this end.
Norway also has plans to develop an offshore wind industry. Although the Offshore Energy
Act entered into force in 2010, the Offshore Energy Regulation only came into effectin 2021. So far, Norway has identified two possible offshore project areas and at the
beginning of 2022 the government committed to accelerate offshore wind. However, lackof regulation and clarity for investors has so far delayed any final decisions, consequently
setting back Norway from gaining competitive advantage in an industry that has naturalsynergies with other existing offshore and maritime industries. As demand for upstream oil
and gas activities in Norway will decline, offshore wind may become a new business
opportunity for the country’s highly skilled workforce and infrastructure.

Like in other energy sectors, the state plays a major role in Norway’s electricity sector.
There is only one TSO, state-owned Statnett, which has been legally unbundled since
1992 and ownership unbundled since 2002. The majority of over 100 Norwegian DSOs
are also publicly owned. Public ownership is also prominent for large-scale hydroproduction, while wind power facilities have a larger share of commercial and foreign
ownership.
The internal wholesale market in Norway is divided into five bidding zones. Historically theprice differences between the bidding zones have been small. Occasionally, however,extraordinary bottlenecks between price zones in the last year has resulted in significant
118

IEA. All rights reserved.

While parts of the distribution grid in Norway have significant spare capacities (but should
consider the need for increased capacity based on expected growth, especially in EV
charging), the biggest strain is seen on the transmission grid, which will have to be
expanded to meet higher consumption levels. To this end, Statnett prepared a Grid
Development Plan 2021 with firm plans to invest up to NOK 100 billion in transmission griddevelopment by 2030. For this to happen in a timely fashion, strong regulatory incentives,social campaigns and support from local authorities will be crucial.

differences of up to 1 000% in day-ahead prices. In particular, a surplus of production in
the north of the country that is constrained due to limited transmission capacity, European
electricity prices and the weak hydrological balance in the south influence prices
throughout the country. This can have a significant impact on the social acceptance of thestructure and operation of the electricity market.
Norway’s industry and household electricity prices have been the lowest among its
neighbouring countries in past years. Nonetheless, the recent surge in electricity prices
experienced over winter 2021-2022, led by price spikes in Europe, have raised the issueof vulnerable consumers in the country.
In response, in December 2021, the government undertook a temporary support scheme
to reduce final electricity bills for consumers. Although this tool is very effective at
minimising the impact of high electricity prices on consumers, it is unsustainable even for
Norway for longer periods and can serve as a disincentive to respond to market prices andlower or spread consumption. As such, the government should start addressing the issueof vulnerable consumers in a more targeted way, including by providing increased support
for energy efficiency improvements to homes.

ENERGY SECURITY

7. ELECTRICITY

Norway enjoys a competitive retail market with over 100 suppliers. The government hasestablished a free electricity comparison tool covering all contracts, which supported theability for 620 000 out of 3.5 million customers to switch suppliers in 2020. Only 2.5% ofhouseholds are supplied on fixed-price contracts, even though the prices offered are often
favourable, underlining past public confidence in the electricity system with daily prices.
Norway has entirely digitalised the metering value chain in the electricity sector, with 99.5%
market coverage. Elhub, operational from 2019, is a centralised, neutral data exchange
tool, where all the data are readily accessible to market participants. The government andthe TSO should address potential cybersecurity threats to system functioning and securityof customers. Moreover, the data can be used to expand demand-side response
programmes at the household level, which is still in the pilot stage.

Recommendations
The government of Norway should: Ensure a conducive environment for the development of transmission and distribution
grid infrastructure to accommodate future demand and generation growth bystreamlining grid permitting while addressing the needs of local communities.

 Provide incentives for introducing sector-wide demand-side flexibility with network
tariffs and flexibility services aimed at changing electricity use patterns and to spreadout demand.
 During periods of high prices, consider applying policies that offer targeted support forvulnerable consumers, while retaining incentives for energy savings across the
economy.
119

IEA. All rights reserved.

 Promptly introduce regulation and incentives for offshore wind and update the licencing
regime for onshore wind capacities to supplement the role of hydropower inaccommodating expected demand growth.

7. ELECTRICITY

References
IEA (International Energy Agency) (2022a), World Energy Balances (database),https://iea.org/data-and-statistics/data-product/world-energy-balances (accessed on
18 February 2022)
IEA (2022b), Electricity Information, https://iea.org/data-and-statistics/dataproduct/electricity-information (accessed in March 2022)
IEA (2022c), OECD Energy Prices and Taxes Quarterly (database) https://iea.org/data-andstatistics/data-product/oecd-energy-prices-and-taxes-quarterly (accessed in March 2022)
NVE (Norwegian Energy Regulatory Authority – RME) (2021b), Long-term Power Market
Analysis 2021-2040, https://publikasjoner.nve.no/rapport/2021/rapport2021_29.pdf
NVE (2021b), National Report 2021,
https://publikasjoner.nve.no/rme_rapport/2021/rme_rapport2021_06.pdf
Statistics Norway (2022a), Electricity (web page) https://ssb.no/en/energi-ogindustri/energi/statistikk/elektrisitet
Statistics Norway (2022b), Electricity prices (web page) https://ssb.no/en/energi-ogindustri/energi/statistikk/elektrisitetspriser

120

IEA. All rights reserved.

Statnett (2021), Increased power consumption and plans for new industry generates needfor more power production (web page), https://statnett.no/en/about-statnett/news-andpress-releases/news-archive-2021/increased-power-consumption-and-plans-for-newindustry-generates-need-for-more-power-production

Key data (2020)
Oil
Net exports of crude oil:* 1 449 kb/d, -8% since 2010
Domestic production of oil products** 567 kb/d, -3% since 2010

ENERGY SECURITY

8. Oil and natural gas

Net exports of oil products: 303 kb/d, +32% since 2010
Share of oil: 32% total supply (TES and international bunker fuels)**, 36% TFC, 46% domesticenergy production
Oil consumption by sector: 211 kb/d (domestic transport, including international
bunkers 45%; industry, including non-energy consumption 42%; buildings [services andresidential] 3%; energy sector, including power generation 9%)* Exports of crude oil includes crude oil, natural gas liquids (NGLs) and feedstock.
** Domestic oil products production includes NGL that is consumed directly without being processed in refineries.

Natural gas
Net exports: 111 bcm, +8% since 2010
Domestic production: 118 bcm, +7% since 2010
Share of gas: 47% of domestic energy production, 16% of TES, 2 1% of electricity generation,
5% of TFC

Overview

As a reputable and reliable producer, Norway has played a stabilising role in the world’s
oil and gas supply, particularly in meeting European demand. 2021 marked the 50-year2

Total energy supply does not include oil used for international bunkering.

121

IEA. All rights reserved.

Oil and gas exploration has been a mainstay of the Norwegian economy sincehydrocarbons were first exploited on the NCS in 1971. The oil and gas sector is a major
source of revenues for the Norwegian state, accounting for close to 50% of the country’s
total export revenues in 2021. According to the latest statistics, the combination of highproduction, significant global demand and high commodity prices led to a historic peak inexport revenues from oil and gas in 2021, exceeding NOK 800 billion (EUR 80 billion). The
oil and gas industry employs approximately 200 000 workers in the country, in large partin the Stavanger area.

8. OIL AND NATURAL GAS

anniversary of hydrocarbon exploitation in Norway. Since then, the country has produced
50% of its recoverable resources on the NCS, while 24% of its total resources are believed
to not yet be discovered. However, before 2020, oil production had been on a downward
trend for some time as a result of declining output from Norway’s ageing offshore fields.
In 2020, production increased by 17% due to the commissioning of the Johan Sverdrup
field. However, looking beyond 2025, the level of future investment in Norway’s oil fields
remains uncertain. As the NCS is considered a mature petroleum basin, the government
anticipates that oil and gas production will naturally decline by 65% from current levels
by 2050.
Norway is the seventh-largest natural gas producer in the world and third-largest exporter,
supplying 3% of global gas consumption. Domestic production amounted to 113 bcm
in 2021, accounting for 47% of total energy production and 17% of total energy supply.
After an increasing trend since 2000, production peaked in 2017 at 129 bcm. Following aslight decline in 2018-2019, gas production started rising again in 2020-2021, and is
expected to continue increasing until 2024. According to forecasts from the NorwegianPetroleum Directorate, natural gas production in 2023 will reach 118 bcm.
In contrast to large upstream production, Norwegian consumption of natural gas is minimaland stood at 6.3 bcm in 2020 (1% of total final consumption of energy), most of which wasreinjected into oil and gas reservoirs to sustain output pressure.

Upstream policies and regulations
Policy principles and taxation
Exploration and production activities in Norway are governed by the Petroleum Act of
1996, with its subsequent amendments, and secondary legislation, notably the Petroleum
Regulations. The act stipulates that the Norwegian state has property rights to subsea
petroleum deposits and exclusive rights to resource management.

The petroleum taxation system is set out in the Petroleum Taxation Act of 1975. The
system ensures substantial revenues for Norwegian society. The tax system is based on
profits, i.e. only a company’s net profit is taxable. All losses, which are notably importantduring field development, may be carried forward with interest. Consolidation among fields
is allowed. This means that losses from one field, or exploration costs, can be written off
against the company’s income from operations elsewhere on the Norwegian shelf. For
companies that are not liable to pay tax, there is a system whereby companies can claim
reimbursement for exploration costs as an alternative to deducting them from the tax base.

122

IEA. All rights reserved.

The main objective of Norwegian petroleum policy is to ensure the greatest possible value
from oil and gas activities to Norwegian society, through efficient and responsible resource
management as well as by creating an enabling environment for safe investments on the
NCS. Consequently, Norway has established a division of roles and responsibilities
between the state and the business sector to provide a basis for achieving the goals of thecountry’s petroleum policy. While the authorities regulate the sector by setting a clear,enabling and predictable overall upstream business framework, petroleum companies andother actors in the industry are responsible for operational activities.

To ensure that value creation benefits Norwegian society, the tax rate for oil and gas
companies is set at 78%, one of the highest levels in the world. The petroleum taxation
system is based on ordinary company income tax (currently 22%) and an additional special
tax of 56%. As part of its neutral tax system, companies are entitled to deduct all relevantcosts of operations from this tax basis, including the CO2 tax on the petroleum industry.
When the basis for ordinary tax and special tax is calculated, investments are written off
using straight-line depreciation over six years from the year the expense was incurred. To
calculate the taxable income base for companies, the Norwegian Petroleum Price Board(PPB) has established a Norm Price System, based on the Petroleum Taxation Act andsecondary legislation (royal decrees). Under the Norm Price System, the government setsadministrative prices for crude oil for tax purposes. All oil production from the country’s
continental shelf is covered by the Norm Price System. The main principle for setting norm
prices is that they should reflect the price that could have been achieved between
independent parties and therefore can serve as a taxation base (each crude gets a specificnorm price). The PPB meets every quarter to set norm prices retroactively for the previous
quarter. It collects information from a variety of sources, including companies operating on
the NCS. The PPB also has meetings with companies before the final norm price is set
and companies may also appeal the PPB’s decisions to the MPE.

ENERGY SECURITY

8. OIL AND NATURAL GAS

The government has recently proposed a major change to the petroleum tax system,
where the special tax is transformed to a cash flow tax with immediate expensing of new
investment costs. The proposal was opened to public consultation in April 2022.

Key institutions
The Norwegian parliament (Storting) sets the framework for petroleum activities in Norway,
partly through its legislative powers. All major development projects must be debated by
the Storting.

Source: Norsk Petroleum (2022).

123

IEA. All rights reserved.

Figure 8.1 Division of responsibilities for the Norwegian upstream sector

8. OIL AND NATURAL GAS

The government has decision-making and supervisory roles, which it carries out boththrough the Council of Ministers and through individual ministries and subordinate
agencies (Figure 8.1).
The MPE, which holds a key role, is responsible for all upstream policy and regulations in
Norway. The Norwegian Petroleum Directorate, established in 1972, is a subordinate
agency of the MPE, located in Stavanger, the country’s upstream capital. It plays a keyrole in petroleum management and is an important advisory body for the MPE. The MPE
and Norwegian Petroleum Directorate exercise administrative authority over petroleum
exploration and production on the NCS and have powers to adopt regulations and takedecisions under petroleum legislation. The MPE also supervises Gassco, the country’s
gas infrastructure operator (see below).
The Ministry of Climate and Environment has general responsibility for environmental
policy and environment protection. The Norwegian Environment Agency, a subordinatebody of the ministry, has inspection and enforcement responsibilities under the Pollution
Control Act (mainly in relation to CO2 and methane emissions control for the upstream
sector).
The Ministry of Trade, Industry and Fisheries has a key role in managing the state’sownership interests in the petroleum sector, including Equinor (former Statoil), Petoro and
the SDFI (see below for details). It is also consulted as part of the procedures for awarding
offshore licences. Since 2017, the ministry has also had powers in managing oil
emergencies based on the 2006 Regulation relating to Petroleum Product Storing for
Emergency Purposes.
The Ministry of Labour and Social Inclusion has general responsibility for the working
environment and for health and safety in the upstream sector. Through its subordinate
Petroleum Safety Authority, it carries responsibilities for technical and operational safety,
emergency preparedness to deal with both accidents and wilful acts such as sabotage,
and the working environment throughout the petroleum industry.
The Ministry of Finance is responsible for the taxation system for the petroleum sector.
The Petroleum Tax Office is part of the Norwegian Tax Administration, which issubordinate to the Ministry of Finance. The main function of the Petroleum Tax Office is toensure the correct assessment and collection of taxes. The Ministry of Finance is also
responsible for managing the Government Pension Fund Global, also known as the Oil
Fund, which invests and secures Norwegian petroleum revenues for future generations.
The operational management over the fund has been delegated to Norges Bank (theNorwegian central bank).

The Norwegian government has a significant direct interest (the SDFI) in petroleum
production and infrastructure on the NCS. The state, though the SDFI, owns one-third of
the remaining resources, 21% of oil production, 30-40% of oil infrastructure and 47% of
gas infrastructure on the NCS. State ownership is typically around 20% of a licence,
although in some cases the state can retain a majority interest (especially in the mostpromising and profitable projects).

124

IEA. All rights reserved.

Government ownership

Although the government holds a key role in the upstream industry in Norway, its
ownership in the oil and gas sector is realised through a model in which the state partners
with other companies in pursuing upstream activities. Equinor (67% state-owned) operates
as a purely commercial company in completion with other companies. At the end of 2021,
a total of 37 exploration and production companies were active on the Norwegian shelf,
but Equinor is by far the most active in terms of licences and operatorships as an operator
of about 70% of all oil and gas production on the NCS. The government uses a special
scheme to manage its stakes rather than pursue direct involvement in operations. The
scheme is based on the SDFI, which is an instrument holding production assets on behalfof the government that administers a cash flow transfer system between Equinor as
marketer of the SDFI oil and gas and the government.
Petoro, a 100% government-controlled agency, manages the SDFI, a portfolio of thegovernment’s directly owned shares in exploration and production licences, and is the legal
licensee for the state’s interests in production licences, fields, pipelines and onshore
facilities. Petoro’s main objective is to maximise value and achieve the highest possible
income from the Norwegian state’s owned portfolio on the NCS. Three principal
responsibilities assigned to Petoro by the Ministry of Trade, Industry and Fisheries are:

managing the government’s holdings in offshore projects

financial management, including accounting, for the SDFI.

ENERGY SECURITY

8. OIL AND NATURAL GAS

monitoring Equinor’s sale of the petroleum produced from the SDFI, as specified in thesales and marketing instructions issued to Equinor

The government has no plans to reduce its holdings in upstream activities in Norway.

Infrastructure

125

IEA. All rights reserved.

The Norwegian gas transportation system comprises 8 800 km of pipelines, mostly
constituting one integrated system, as well as three major gas processing plants (Kårstø,
Kollsnes and Nyhamna) and six receiving terminals in Europe (two in Germany, two in the
United Kingdom, and single terminals in Belgium and France) (Figure 8.2). The transportcapacity of the Norwegian pipeline network is currently about 120 bcm per year and enjoys
low tariffs, as most infrastructure is paid off with only running costs to cover.
Hammerfest LNG, outside Hammerfest in Finnmark county, is Norway’s sole LNG export
facility, built in 2007 (operated by Equinor). Hammerfest receives and processes natural
gas from the Snøhvit field in the Barents Sea.

8. OIL AND NATURAL GAS

The upstream transport system for Norwegian gas, i.e. the pipelines and terminals, ismainly owned by the industry partnership Gassled. This common ownership structure wasestablished in December 2002 when all the Norwegian gas transport systems in place atthat time, dispersed among many owners, were combined into a large, new andunincorporated joint venture. Gassled comprises the gas processing plants as well as
pipelines linking producing fields in the North Sea and parts of the Norwegian Sea to thesefacilities and/or providing onward transport to the United Kingdom and continental Europe.
New pipelines and transport-related facilities are intended to be included in Gassled fromthe time they are put to use by third parties, and are thus part of the central upstream gas
transport system. Gassled is owned by industry operators, with Petoro (SDFI) holding
46.7% and Equinor 5%, making it majority state-owned. CapeOmega, the largest private
126

IEA. All rights reserved.

Figure 8.2 Map of Norway’s gas infrastructureinfrastructure owner on the NCS, holds the second-biggest share of 26.32%. Gassled has
no employees and is organised through various committees with specific assignments todeliver on its tasks, being more an ownership than an operational structure.
Gassco is the operator for Gassled and other gas infrastructure, and is wholly owned by
the Norwegian state. Gassco is responsible for operations (planning, monitoring,co-ordination and administration of transport from the fields to the receiving terminals),
allocation of capacity and development of the transport system. Gassco’s task is toco-ordinate the processes for further development of the upstream network of gas
pipelines and to assess the need for further development. The capital element in tariffs
that users of the infrastructure pay also covers investment made by the owners, while
Gassco itself does not make a profit or a loss from its operator’s activities. Gas transport
tariffs depend on the cost of infrastructure and are governed by special regulations issued
by the MPE. This ensures that the economic returns are earned from producing fields andnot from the transport system, which is only to serve as an export facilitating infrastructure.

ENERGY SECURITY

8. OIL AND NATURAL GAS

Gas companies’ access to capacity in the system is based on their needs for gas transport.
To secure good resource management, transport rights can be transferred between users
when needed, and Gassco is responsible for capacity management.
Norway’s upstream oil infrastructure is well developed, with an extensive network of
subsea pipelines linking offshore oil fields with onshore terminals. Transport infrastructure
makes up a smaller part of the value chain for oil than for gas. In many cases, oil is loaded
directly onto tankers on the offshore fields (buoy-loading). For some of the larger fielddevelopments in Norway, it was considered most appropriate to build onshore oil
terminals. Other fields have subsequently been connected to this infrastructure. The oiltransport system is regulated according to third-party access regulation. The cost oftransport is lower in relation to the product price, and buoy-loading directly onto tankers at
oil fields is an alternative to using pipelines and terminals. There is not an integrated
system of oil pipelines and terminals: the infrastructure is divided into four different systems
connected to the terminals at Sture, Mongstad and Kårstø in Norway and Teesside in the
United Kingdom. The owners and users negotiate agreements on access to oil transport
infrastructure between themselves. Like negotiations on the use of infrastructure on thefields, these negotiations are governed by the regulations relating to the use of the facilities
by others.

Licencing

An area must be opened for petroleum activities before any operations are permitted.
During an opening process, the authorities ensure that they have an overview of all the
relevant arguments for and against petroleum activities in the area in question. In addition,
the general public and the parties affected are given an opportunity to put forward theirviews. A resource assessment of the area is also made as part of the opening process.
127

IEA. All rights reserved.

State management and control of the oil and gas industry is ensured through legislationthat requires companies to obtain licences and approvals from the MPE for all phases of
petroleum activities. There are two types of licencing rounds: 1) award in predefined areas(APA); and 2) numbered licencing rounds. APA licences now cover the major parts of the
NCS open for petroleum activities. In 2021, the MPE issued 53 new APA licences to
28 different companies.

8. OIL AND NATURAL GAS

Every decision on whether or not to open new areas for petroleum activities in the country
are taken by the Storting, after being preceded by a thorough debate, including public
hearings of representatives of society.
The first phase is exploration, when subsea petroleum resources are mapped and proved.
If commercially viable discoveries are made, activities enter a new phase, with the aim ofdeveloping the field and producing from it, at the same time ensuring sound resource
management and maximising value creation. When it is no longer possible to produce
profitably from a field, operations must be closed down and the installations disposed of(made safe in place or removed). In this respect, it should be noted that according to
Norwegian licencing policy, all new entrants seeking to become licensees on the NCS are
subject to a financial scrutiny to ascertain whether they have the required financial
capabilities and adhere to their decommissioning obligations. A significant amount of
decommissioning activity will have to take place on the NCS in the coming decades, which
has been planned for by the government for many years and is part of licencing
requirements.
The MPE awards production licences to the companies that submit the best applications
on the basis of criteria that are announced in advance. The MPE also designates anoperator for each project that is responsible for operational activities authorised by thelicence. A production licence is valid for an initial period of up to ten years, and while
extensions are possible, the initial holder of a permit cannot be sure it will be renewed asdecisions are taken after assessing licensee performance in field development. Retentionof a license is contingent on continued investment at sufficient levels in developing thefield to ensure maximum value creation for the country. A licence can be revoked in whole
or in part if the government notes that it is not being operated properly in terms ofinvestments, reservoir viability or environmental conditions. No company is offered an
exclusive production licence on an entire project and must involve a minimum of two
entities, which is intended as a protection mechanism against leaving opened fields
unproductive due to the problems of an individual company. A production license may
comprise one or more blocks or parts of blocks. The licensees become the owner of thepetroleum that is produced from their licensed acreage. All licensees on the NCS are
responsible for selling the oil and gas they produce (with the exception of Equinor, whichis also obliged to sell petroleum belonging to the state).
Before developing petroleum deposits, licensees must submit a plan for development andoperation of a new deposit to the MPE for approval. If the project includes pipelines or
onshore terminals, a separate plan for installation and operation of these must also be
submitted and approved.

Norwegian offshore production is considered to be among the least harmful to theenvironment among all producing regions in the world (Offshore Energy, 2022). Apart fromvery stringent environmental and decommissioning standards on the NCS, the average
CO2 emissions per unit of oil equivalent produced stood at 8 kg in 2021, only comparable
to the Middle East. The Norwegian upstream sector also has the highest carbon priceamong global producers and a decades-long regulation that natural gas flaring is only
permitted when necessary for safety reasons, leading to marginal methane emissions.
Still, the Norwegian parliament has asked the government, together with the industry, to128

IEA. All rights reserved.

Environmentpresent a plan for reducing emissions from oil and gas production on the NCS by 50%
before 2030, compared to 2005, and work toward achieving net zero emissions by 2050.
The MPE and industry foresee that achieving the 2030 target will be challenging, viewing
a 35% emissions reduction as more feasible by 2030. In the near term, most of theemissions reduction potential will be achieved through electrification (with power fromshore) of offshore platforms (gas turbines account for 85% of total oil and gas emissions).
In 2019, as a result of a political dispute in the parliament, the government extended a ban
on drilling activities on the so-called LoVeSo area (Lofoten, Vesteralen and Senja islands)
for another four years after strong social opposition. Upstream activities in the Barents Sea
are also questioned by some parts of society, although no final decisions have yet beentaken and Russia’s invasion on Ukraine and related energy crisis may influence future
decisions.

Oil and gas exports

ENERGY SECURITY

8. OIL AND NATURAL GAS

Though Norway’s oil production covers about 2% of global oil demand, it is an important
contribution to global energy security by serving as a stable and predictable supply.
Russia’s 2022 invasion of Ukraine may provide an added incentive for Norway to continue
delivering crude to global markets and even increase output wherever possible. Half of
Norway’s oil has historically been delivered to three countries: the United Kingdom, theNetherlands and Sweden, albeit in recent years over 15% is shipped to the People’s
Republic of China, notably from the Johan Sverdrup field that opened in 2019.
Norwegian production of natural gas covers approximately 3% of global demand, but
Norway is the third-largest exporter of natural gas in the world, only behind Russia andQatar. As much as 98% of Norway’s natural gas production is exported to Europe, as
domestic consumption is almost non-existent. Norway’s role as a gas exporter to the EU
is even more pronounced, accounting for around 25% of EU gas demand, second after
Russia (30% in 2021). Yet again, in view of severe sanctions on Russia, Norwegian gas
supplies to the EU may play an even stronger role. Norwegian gas arrives to the EU
through receiving terminals via the pipeline system or as LNG from the Hammerfest LNG
plant. Germany is the largest single destination of Norwegian gas, with volumes to the tuneof 48.8 bcm delivered to the country in 2021. Total exports peaked in 2017 at 123 bcm,
and decreased in the following years until 2020, to rebound to 113 bcm in 2021. They are
expected to reach 118 bcm in 2023. An additional pipeline, the Baltic Pipe with a capacityof 10 bcm that will transit Denmark and connect to Poland, is scheduled to begin operationin late October 2022 and will further diversify Norwegian gas export routes.

Natural gas plays only a marginal role in Norway’s energy demand. Norwegian gas
consumption stood at 6.3 bcm in 2020 (1% of TFEC). Demand for natural gas comesmainly from the industry sector (92%), followed by electricity and heat generation (6%),
and the transport sector (2%).

129

IEA. All rights reserved.

Natural gas supply and demand8. OIL AND NATURAL GASConsumption of natural gas in the electricity and heat generation sector reached 1.2 bcm
in 2010, but decreased to below 0.3 bcm in 2020, while consumption in the transport sector
reached 0.1 bcm in 2008 and has remained at that level since. There are only two natural
gas distributors in Norway: 1) Gasnor, a small-scale LNG producer and a natural gas
distributor in Avaldsnes region; and 2) Lyse Neo, based in Stavanger, which sends gas toa very limited geographical area in the south-western part of the country (with about 2 500
customers in total). Both companies were also granted the status of gas DSOs since
1 February 2021. There are no plans to increase domestic consumption of natural gas or
expand infrastructure in Norway.
Since gas consumption is minimal, security of gas supply is not considered an issue in
Norway. Natural gas customers are always also connected to the electricity grid. Especiallyfor heating in winter, Norwegian consumers can heat their homes with other means
besides natural gas. Also, as nearly all of Norway’s limited gas consumption comes fromchemical production and manufacturing, there is hardly any peak demand nor is there any
seasonality in domestic gas offtake. For similar reasons, there are no particulardemand-side measures for the domestic gas market in Norway.

Oil products supply and demand
The share of oil in TFEC in Norway is significant at 35% in 2020. In 2020, demand for oil
products stood at 211 kb/d (Figure 8.3). Despite a strong focus on decarbonisation andthe high proportion of EVs, Norway has not seen a significant decline in total oil productconsumption in the past decade, with consumption remaining largely flat, aside from 2020.
The lack of demand reduction was a result of low prices and consumers retaining internal
combustion engine vehicles, even if they have purchased an EV. Going forward, theoutlook is for decreasing oil products consumption, due to projections of higher prices andthe government’s strong persistence with promoting EVs. However, oil will remain
dominant in the freight, marine and aviation sectors in the medium term.
Figure 8.3 Oil product demand by sector in Norway, 2000-2020
250

kb/d

Non-energy use
Other

200

International
bunkers
Electricity and heatgeneration
Residentialbuildings
Services buildings

150
100
50

Industry0

Transport

Oil products consumption has remained fairly flat in Norway for over a decade, after peaking
in 2007; demand in the transport sector began to decline in the mid-2020s as EV uptake
increased.
Note: 2020 data are estimated.
Source: IEA (2022a).

130

IEA. All rights reserved.

IEA. All rights reserved.

The transport sector is the most significant oil-consuming sector, accounting for 41% of oil
demand in 2020, while industry accounted for around 20%. Oil consumption in thetransport sector fell by 8% in 2020 due to restrictions on mobility resulting from Covid-19
releated restrictions. Oil consumption in residential buildings has been effectively phased
out following the implementation of a ban on the use of fuel oil in heating.

Oil products production
Norway produced 567 kb/d of oil products in 2020 from both refining production andproduction from NGLs, a 6% decrease from the year before (Figure 8.4). The decrease inproduction can be attributed to lower utilisation rates at the Slagen refinery, which was
subsequently permanently closed in June 2021. Production consisted of 119 kb/d of diesel,
81 kb/d of gasoline, 37 kb/d of LPG, 34 kb/d of naphtha, 26 kb/d of fuel oil and around
8 kb/d of kerosene. A significant quantity of LPG is also produced from upstream
production (propane and butane make up part of NGLs).

ENERGY SECURITY

8. OIL AND NATURAL GAS

Oil products net trade
The majority of Norway’s oil product production is exported, with net exports standing at
303 kb/d in 2020, a significant decrease from 2019 when it was 345 kb/d (Figure 8.5) due
to lower production levels. Norway is a net exporter of gasoline, gasoil/diesel, naphtha andfuel oil while it imports small quantities of jet/fuel kerosene and fuel oil. However, Norway’s
net oil product exports are expected to decline significantly after 2021 due to lower
production levels resulting from the closure of the Slagen refinery.
Norway's top net exporting destinations for oil products in 2020 were the Netherlands(62 kb/d), Belgium (46 kb/d), Nigeria (42 kb/d), the United Kingdom (41 kb/d), Denmark(26 kb/d) and France (12 kb/d). Norway imported oil products from Russia (21 kb/d) andthe United States (11 kb/d).
Figure 8.4 Oil products production in Norway, 2000-2020
800

kb/d
Other products

700

Refinery gas

600

Kerosene

500

Naphtha

400

Fuel oil

300
200

Liquefied petroleum
gas
Gasoline

100

Diesel0

NGL

Oil products production will fall significantly following the permanent closure of the Slagenrefinery in 2021.
NB: In Norway, large amount of oil production comes from natural gas liquids (NGLs).
Source: IEA (2022a).

131

IEA. All rights reserved.

IEA. All rights reserved.

8. OIL AND NATURAL GAS

Net exports

Figure 8.5 Norway’s oil products net trade by country, 2000-2020
kb/d

400

RussianFederation
Belgium

350

France450300

Denmark

250

Netherlands

200
150

United States

Net imports

100
50

United Kingdom

0

Nigeria

- 50

Other

- 100

IEA. All rights reserved.

Norway is a net oil product exporter, but net exports will decline as a result of the closure of the
Slagen refinery.
Source: IEA (2022a).

Biofuels
Norway has a high biofuels-blending mandate of 24.5% for motor fuels, with a sub-target
of 9% for advanced biofuels, which are “double-counted”, leaving a “net” mandate of
15.5%. Consumption of advanced biofuels has increased substantially in recent years.
A public consultation on an update to the biofuels mandate was held recently; in the
consultation, the biofuels mandate for road traffic was proposed to increase to 16.25%
from July 2022 and 17% from 2023, with an increase in the advanced biofuels
sub-mandate from 9% to 10.75% in 2022 and to 12.5 % in 2023. It was also proposed to
introduce a new biofuels mandate for non-road machinery (construction machinery,
farming equipment, etc.), with a requirement of 6% or 10% advanced biofuels.
While Norway has made significant progress in increasing biofuels consumption intransport, it has not developed domestic biofuels production to the same degree, relying
heavily on imports. Given Norway’s abundance of biomass feedstock, notably from its
forestry sector, the country could have a competitive advantage in producing advanced
biofuels that can be used to decarbonise harder to abate transport sectors, such as freight,
marine and aviation, as well as become a larger exporter of these low-carbon fuels.

Oil market structure

As of the end of 2020, Norway had 1 709 filling stations. The largest station chain was
Uno-X with 475 locations. Circle K (owned by the Canadian company Couche-Tard, andpreviously by Statoil) had 413 stations. St1 Norway (owned by the Finnish company St1)132

IEA. All rights reserved.

The Norwegian midstream and downstream oil sector is fully liberalised with limited
regulatory obstacles to market entry and no price controls.

had 274 stations. Esso came fourth, with 249 stations, followed by Best with 129. The fourlargest companies had an 83% share of all petrol stations in the country. The number offilling stations has steadily declined over the past decades, but has been relatively stable
over the last few years. Air BP and Aviation Fuelling Services Norway are the main jet fuelsuppliers. Additionally, Mabanaft started supplying Oslo Gardermoen Airport in July 2020.

Prices and taxes
Motor fuel prices in Norway are among the highest of IEA member countries, with arelatively high rate of taxation. Norway’s automotive diesel price is the fourth-highest
among IEA member countries, at 1.9 USD/L for Q4 2021, with a tax rate of 51%(Figure 8.6). The gasoline 95 price is also fourth-highest among IEA member countries, at
2.0 USD/L, with a tax rate of 56% (Figure 8.7).
Figure 8.6 Price comparison for automotive diesel in the IEA, Q4 2021
USD/L
3.0

ENERGY SECURITY

8. OIL AND NATURAL GAS

Tax component

2.5
2.0
1.5
1.0
0.5
0.0

IEA. All rights reserved.

Figure 8.7 Price comparison for unleaded gasoline (95 RON) in the IEA, Q4 2021
3.0

USD/L

Tax component

2.5
2.0
1.5
1.0
0.5
0.0

IEA. All rights reserved.

Motor fuel prices in Norway are among the highest in the IEA, largely due to a significant tax
component.

Source: IEA (2022b).

133

IEA. All rights reserved.

Notes: Automotive diesel data are not available for Mexico or Sweden. Unleaded gasoline data are not available forJapan, Mexico or Sweden.

8. OIL AND NATURAL GAS

Oil infrastructure
Figure 8.8 Map of Norway’s oil infrastructure

Oil refining

Various projects are being considered to reduce emissions at the Mongstad refinery, but noinvestment decisions have yet been taken. Due to overcapacity in the global refining sector
and declining domestic demand, a reduction in the refinery’s capacity or a potential closure
is possible. However, a premature closure of Mongstad would leave Norway with substantial
oil product import requirements, potentially compromising the security of oil supply. As the
Mongstad refinery is well-connected with other energy-related activities in the region, its
continued operation could provide opportunities for the production of low-carbon fuels andother technologies needed for the energy transition, with export potential.
134

IEA. All rights reserved.

There is only one operational refinery left in Norway, Equinor's 230 000 b/d Mongstad planton the west coast. The refinery is part of a larger complex which includes the processingof NGLs, a crude oil terminal, a co-generation plant and the world’s largest technology
centre for CO2 capture from flue gas. The refinery processes both domestic crude andimports, mainly from West Africa.

In June 2021, ExxonMobil permanently closed the 116 000 b/d Slagen refinery and plans
to convert it into a fuel import terminal.

Oil transportation
An extensive network of subsea pipelines links offshore oil fields with onshore terminals.
Oil infrastructure on the NCS is divided into four different systems. Pipelines from fields in
the North Sea run to the Sture, Mongstad and Kårstø (condensate) terminals in Norway,
and to the Teesside terminal in the United Kingdom. At the Norwegian terminals, oil isstored in rock caverns before most of it is loaded onto tankers for export. Crude oil is often
loaded directly onto tankers at the offshore fields, although onshore terminals were built
near some of the larger fields.
Norway’s most significant oil port by tonnage is the Mongstad oil terminal, located near
Bergen/Stavanger on the west coast. The terminal is operated by Equinor and is jointly
owned by Equinor and Petoro. The Mongstad terminal is linked by pipeline to offshore
fields and is also connected to Norway’s only remaining refinery. Other significant oil ports
include Sture (operated by Equinor, and also on the west coast close to Bergen) andSlagen (operated by Exxon, located near Tønsberg). Refined products are mainlytransported by sea tankers from the Mongstad refinery to terminals around the country.

ENERGY SECURITY

8. OIL AND NATURAL GAS

Oil storage
Norway has 17 main storage facilities, located along the coastline, all owned bydownstream companies. The largest storage sites are located at Mongstad, Oslo andSlagen. The total storage capacity of oil storages in Norway is 4.4 million cubic metres.

Oil emergency policies
Oil emergency organisation and decision making
The oil security system in Norway is part of the national security structure, the Civil
Emergency Planning, under the Prime Minister’s Office, within which separate ministries
take responsibility for assuring security in their respective fields. The Ministry for Trade,Industry and Fisheries is responsible for oil contingency planning, emergency
preparedness, emergency stockholding and crisis management in Norway.

The national emergency strategy organisation (NESO) is comprised of representatives
from the Ministry for Trade, Industry and Fisheries; the MPE; the Ministry of Foreign Affairs;
the Ministry of Finance; Statistics Norway; and the Council for Fuel Preparedness, anindustry advisory group. In the event of a supply emergency, the NESO can be convened
within a matter of hours.
135

IEA. All rights reserved.

The 2006 Regulation relating to Petroleum Product Storing for Emergency Purposes andthe 2011 Act on Business and Industry Preparedness give the Ministry for Trade, Industry
and Fisheries wide-ranging powers to prepare for and manage oil supply crises, including
implementing a stock release; ordering fuel companies to deliver to specified consumers;
temporarily taking operational control of fuel companies’ assets; and instructing fuelcompanies to provide data relating to imports, exports, storage, and the distribution of
crude oil and oil products.

8. OIL AND NATURAL GASThe Council for Fuel Preparedness was formally established in 2018 to advise thegovernment on issues related to the supply and distribution of oil products in Norway, as
well as to increase collaboration between government and the industry on issues relating
to fuel security. It is made up of representatives from the main fuel suppliers in Norway.
According to the terms on which it participates in the work of the IEA, Norway is not obliged
to adhere to the oil emergency response measures of the Agreement on an International
Energy Programme, the founding treaty of the IEA. However, in practice, Norway does
participate in all of the IEA’s oil emergency work and participates in IEA collective actions.

Emergency response measures
A stock release is the principal means by which Norway would contribute to an IEA
collective action, as well as respond to a localised supply crisis that cannot be resolved
without government intervention. If a stock release was approved, it would be in the formof a lowering of the stockholding obligations placed on suppliers obligated to holdemergency stocks. The release of stocks would be mandatory for fuel suppliers, asprescribed by the 2006 Act on Petroleum Product Storing for Emergency Purposes.
While the 2011 Act on Business and Industry Preparedness specifies that the government
has the broad power to control the distribution of fuels in times of crisis, there is no specificregulation concerning the implementation of demand restraint measures in Norway.

Stockholding
While Norway has no stockholding obligation with the IEA, the 2006 Act on Contingency
Storage of Petroleum Products places a stockholding obligation on industry. The act
stipulates that companies which produce or import more than 10 000 m3 of oil products per
year are obliged to hold emergency stocks equivalent to 20 days of the total volume of oil
products they supplied to the market in the previous year. Companies are allowed to holdup to 40% of their obligation as crude oil, condensate or semi-finished products;
emergency stocks are co-mingled with stocks held for commercial purposes (Figure 8.9).
Figure 8.9 Total industry oil stocks components in Norway, December 2021
Residual fuel oil
1%

Other products
15%

Middle distillates
16%
Crude oil62%

Motor gasoline
6%

Sixty-two per cent of industry stockholding relates to crude oil while 38% consists of oil
products.
Source: IEA (2022c).

136

IEA. All rights reserved.

IEA. All rights reserved.

Assessment
Norway is the seventh-largest natural gas producer in the world, supplying 3% of global
gas consumption. It is also a significant oil producer, accounting for 2.3% of global oil
production in 2020. As a reputable and reliable producer, Norway has played a stabilisingrole in the world’s oil and gas supply, particularly in meeting European demand.
On the upstream side, Norway has been a global standard-bearer in the health and safety,
environmental standards, and stability of oil and gas production for decades. The
established system based on a predictable regulatory framework, well-known taxation
system and direct involvement of state assets in the exploration make the whole systemaligned and serve the overriding goal of Norwegian policy that the society benefits as muchas possible from the income generated from oil and gas production.
The government has no plans to reduce its holdings in upstream activities in Norway andthe system of established management over the state’s interests in the upstream activities
seems to be a model one, maximising returns to society while at the same time
guaranteeing stability of returns for investors. This alignment of benefits and obligations
has for a long time been a major incentive for foreign companies to compete for stakes in
the Norwegian upstream industry, which is set to remain the case for the coming years.

ENERGY SECURITY

8. OIL AND NATURAL GAS

However, success in achieving this goal does not mean that the Norwegian oil and gas
sector does not face challenges. The most important challenge it faces remains its futurein the post-2025 outlook. The country’s commitment to a clean energy transition and net
zero before 2050 pledge are new dimensions determining the future of oil and gas
exploration in Norway. However, replacing the role of the oil and gas production in thedomestic economy will be impossible in the short to medium term.
Decarbonising the upstream sector in Norway will present challenges, especially with very
high targets set by the parliament at 50% emissions reductions by 2030 compared to 2005.
The challenge is especially notable considering the NCS has the lowest CO2 emissions
among all producing regions in the world. Electrification of 50% of offshore production withclean hydropower from shore by 2026 is a promising idea. However, in the context of highelectricity prices and Norway’s attempts to electrify numerous other sectors that will driveincreased demand for electricity, political and public opposition has grown to the offshore
industry’s attempts to access onshore power, potentially hindering its attempts todecarbonise upstream operations.

Despite unparalleled government promotion of electric vehicles leading to a strong
consumer uptake, oil demand in transport has not decreased much in Norway in the past
decade, aside from 2020 marked by the Covid-19 outbreak. This is a result of many
consumers retaining internal combustion engine vehicles, even if they have alsopurchased EVs. However, with Norway having the world’s highest uptake of EVs (at 85%
of new car sales in 2021), domestic oil consumption in transport is inevitably set to137

IEA. All rights reserved.

The national debate on the future of extraction and the opening up of new exploration
areas is a hotly debated political and social topic in Norway. The government will have toengage further to clarify its positions to society and set policies serving the public’s
expectations.

8. OIL AND NATURAL GAS

decrease. With a single refinery left in the country, the government may need to address
fuel supply and production of low-carbon fuels.
Reducing oil consumption in transport will also be supported by the continued promotionof biofuels. Norway has introduced a very high biofuels blending mandate at 24.5% andmade significant progress in increasing biofuels consumption in transport. However, it has
not developed domestic biofuels production to the same degree and relies on imports,
which may lead to unnecessary dependency while the country’s potential in that regard
remains untapped.
Repurposing of offshore gas infrastructure post-2030, if export levels decrease asplanned, needs to be planned well ahead and involve all stakeholders, especially given
Norway’s common ownership of infrastructure through the Gassled partnership.
Additionally, while the oil and gas industry continues to employ a large number of highly
skilled workers, as the market transitions to low-carbon energy sources, attention should
be given to how to transition the personnel and make them adaptable to changing needs.
Recent events surrounding Russia’s aggression against Ukraine raise yet another set ofconcerns in terms of the scale and pace of clean transitions and energy security concerns
are back again in mainstream discussions. Given the key role of Norway’s oil and gas
exports to Europe, these arguments add to a complexity of challenges the country faces.

138

IEA. All rights reserved.

While challenges facing Norwegian oil and gas sector are considerable, the government
has a sufficient set of tools and resources to meet them in a manner consistent with the
expectations of the society. Norway shall, however, remain mindful to the expectations of
the international community, for which Norway is both a guarantor of security of supply
and a leader in the energy transition.

Recommendations
Oil
The government of Norway should:
 Evaluate whether the liability management framework is robust enough in light of futuredecommissioning activity and consider including a financial stress test and requiring
security deposits as part of the framework.
 Regularly review the combined fiscal regime (royalties, taxes and carbon tax) to ensurethat it continues to incentivise companies to invest in emissions reduction projects.
 Work alongside the offshore oil and gas industry to develop a clear strategy andbinding targets for emissions reductions toward the goal of achieving net zero
emissions from upstream activities on the Norwegian continental shelf.

ENERGY SECURITY

8. OIL AND NATURAL GAS

 Support worker transition by providing training and development opportunities, helping
to prepare for energy transition needs.
 Leverage its biomass advantage to increase domestic production of advanced biofuels
to meet ambitious biofuels blending mandates and reduce oil consumption in
hard-to-abate transport sectors (e.g. freight, marine, aviation), as well as for export.
 Carefully monitor the longer-term competitiveness of the Mongstad refinery under theenergy transition, given its role in supplying transport fuels, the integrated nature of
the refinery in supporting related industries and its potential to produce low-carbon
fuels.

Natural gas
The government of Norway should: Ensure that oil and gas can be sustained under environmentally stringent conditions
to ensure security of supply for Europe and globally, considering changing demand
due to the global supply situation (including implications of Russia’s invasion of
Ukraine) and the energy transition.
 Ensure that the oil and gas industry has sufficient access to decarbonisation options,particularly with regard to onshore and offshore power sources required for theelectrification of offshore production.
 Engage in a public debate with all stakeholders on the future of the oil and gas industry,including exploration in the northern Norwegian Sea and Barents Sea.

139

IEA. All rights reserved.

 Plan for the future utilisation of gas infrastructure, when gas exports are projected to
decline after 2030, including possible redeployment for hydrogen transport and carbon
capture and storage.

8. OIL AND NATURAL GAS

References
IEA (International Energy Agency) (2022a), World Energy Balances (database),https://iea.org/data-and-statistics/data-product/world-energy-balances (accessed on
18 February 2022)
IEA (2022b), Monthly Oil Statistics (database) https://iea.org/data-and-statistics/dataproduct/monthly-oil-statistics (accessed in March 2022)
IEA (2022c), OECD Energy Prices and Taxes Quarterly (database) https://iea.org/data-andstatistics/data-product/oecd-energy-prices-and-taxes-quarterly (accessed in March 2022)
Norsk Petroleum (2022), Norsk Petroleum (website), https://norskpetroleum.no140

IEA. All rights reserved.

Offshore Energy (2022), Norway shows lowes and Canada highest upstream carbon
footprint, Rystad says, https://offshore-energy.biz/norway-shows-lowest-and-canadahighest-upstream-carbon-footprint-rystad-says

Review criteria
The Shared Goals, adopted by the IEA Ministers at their 4 June 1993 meeting in Paris, provide theevaluation criteria for the in-depth reviews. The IEA Shared Goals are available on line.

ANNEXESANNEX A: Review team and supporting stakeholders

Review team and preparation of the report
The IEA’s in-depth review visit of Norway took place on line from 17 to 28 January 2022. The review team
met with government officials, energy suppliers, market participants, interest groups, consumer
associations, research institutions and other stakeholders. This report was drafted based on information
obtained in these meetings, the review team’s assessment of Norway’s energy policy, the government’s
response to the IEA energy policy questionnaire and subsequent research by the IEA. The members of
the team were:

IEA member countries
Lars Georg Jensen, Denmark (team leader)
Tamaryn Napp, United Kingdom
Cristina Cardoso, Portugal
Anne-Marie Clancy, Ireland
Michael Moser, Switzerland
Rein Vaks, Estonia
Thomas Moore, United States
Dennis Trigylidas, Canada

International Energy Agency
Aad van Bohemen
Divya Reddy
Milosz Karpinski
Ronan Graham
The team is grateful for the co-operation and assistance of the many people it met throughout the visit.
Thanks to their kind hospitality, openness and willingness to share information, the virtual visit was highly
informative, productive and enjoyable. The team expresses particular gratitude to the Norwegian Ministryespecially to Monica Skog Jackson, Inger Østensen, Lisbeth Muhr, Knut Mansika and Charlotte Elvsaas.
The team is also sincerely grateful to Secretary General Andreas Eriksen and several other senior officials
from the Ministry for Petroleum and Energy for meeting with the review team.
141

IEA. All rights reserved.

for Petroleum and Energy for organising the visit and for all its support throughout the review process,ANNEXESDivya Reddy managed the review visit process and drafted the report, with the exception of Chapter 8,
which was prepared by Milosz Karpinski and Ronan Graham of the IEA.
The report was prepared under the guidance of Aad van Bohemen, Advisor to the Energy Markets andSecurity Directorate. Helpful comments and updates were provided by the review team members and IEA
staff, including Simon Bennett, Toril Bosoni, Chiara D’Adamo, Paolo Frankl, Insa Handschuch,
Craig Hart, Kevin Lane, Sara Moarif and Fabian Voswinkel.
Clémence Lizé, Alessio Scanziani, Anders Caratozzolo and Eunjin Choe managed the data and prepared
the figures. Roberta Quadrelli, Erica Robin, Stève Gervais and Jungyu Park provided support on
statistics. Therese Walsh managed the editing process, Jennifer Allain copy edited the report,
Taline ShahinianandAllisonLeacu

managedthedesignprocess,

Astrid DumondandIsabelle Nonain-Semelin managed the production process. Jad Mouawad and Jethro Mullen supported
the press launch.

Bellona
CICERO
DNV
Drivkraft Norge
Energi Norge
EquinorFederation of Norwegian Industries
FME Include
FME NTRANS
Havvindklynga
Institute for Energy Technology (IFE)Landsorganisasjonen Norge (LO)
Natur og Ungdom
Naturvernforbundet
Nelfo
NordPool
Norsk Industri
NorweaNorwegian Ministry of Climate and Environment
Norwegian Ministry of Finance
Norwegian Ministry of Petroleum and Energy
Norwegian Oil and Gas
Norwegian Research Centre (NORCE)
Norwegian University of Science and Technology (NTNU)SINTEF
Statkraft
University of Oslo
ZERO

142

IEA. All rights reserved.

Organisations visited

ANNEX B: Energy balances and key statistical data
Unit: Mtoe
SUPPLY

1973

1990

2000

2010

2018

2019

2020

TOTAL PRODUCTION

8.06

119.48228.03208.46

206.63194.72208.48

Coal

0.29

0.20

0.42

1.30

0.10

0.08

0.05

Peat

-

-

-

-

-

-

-

1.51

83.66

167.75100.68

85.86

80.80

95.73

Natural gas

-

24.15

46.28

94.79

106.77100.87

98.04

Biofuels and waste1

-

1.03

1.36

1.52

1.50

1.57

1.59

Nuclear

-

-

-

-

-

-

-

6.27

10.42

12.19

10.04

11.93

10.79

12.12
0.85

Oil

Hydro
Wind

-

-

0.00

0.08

0.33

0.48

Geothermal

-

-

-

-

-

-

-

Solar/other2

-

0.02

0.02

0.06

0.12

0.12

0.11

TOTAL NET IMPORTS3

5.82-96.56-201.48-175.79-176.26-167.85-180.14

Coal

Exports

0.09

0.17

0.39

1.14

0.08

0.05

0.03

Imports

0.67

0.84

0.99

0.75

0.78

0.78

0.79

Net imports

0.58

0.67

0.60

-0.38

0.71

0.72

0.76

Exports

3.55

77.25

161.62

92.91

83.40

81.51

94.78

Imports

10.13

4.43

4.48

5.97

9.13

9.22

9.21

Int'l marine and aviation bunkers

-0.90

-0.86

-1.18

-0.86

-0.87

-0.82

-0.42

Net imports

Oil

Natural gas

Electricity

5.68-73.69-158.31-87.80-75.15-73.12-86.00

Exports

-

22.17

42.14

88.48

101.26

95.92

93.47

Imports

-

-

-

0.01

0.01

0.02

0.03

Net imports--22.17-42.14-88.48-101.30-95.95-93.50

Exports

0.45

1.40

1.77

0.61

1.59

1.06

2.15

Imports

0.01

0.03

0.13

1.26

0.72

1.06

0.39

Net imports

-0.45

-1.37

-1.64

0.65

-0.87

0.00

-1.76

TOTAL STOCK CHANGES

0.41

-1.85

-0.39

0.12

-0.53

0.83

-0.88

TOTAL SUPPLY (TES)4

14.29

21.07

26.16

32.79

29.83

27.69

27.46

Coal

0.91

0.86

1.05

0.76

0.82

0.80

0.82

Peat

-

-

-

-

-

-

-

7.56

8.13

9.02

13.08

10.12

8.46

8.82

Natural gas

-

1.98

4.14

6.38

5.51

4.98

4.54

Biofuels and waste1

-

1.03

1.37

1.73

1.86

2.05

1.95

Nuclear

-

-

-

-

-

-

-

Hydro

6.27

10.42

12.19

10.04

11.93

10.79

12.12

Wind

-

-

0.00

0.08

0.33

0.48

0.85

Geothermal

-

-

-

-

-

-

-

Solar/other2

-

0.02

0.02

0.06

0.12

0.12

0.11

-0.45

-1.37

-1.64

0.65

-0.87

0.00

-1.76

Coal

6.4

4.1

4.0

2.3

2.8

2.9

3.0

Peat

-

-

-

-

-

-

-

52.9

38.6

34.5

39.9

33.9

30.6

32.1

Oil

Electricity trade5

ANNEXESANNEXESOilNatural gas

-

9.4

15.8

19.5

18.5

18.0

16.5

Biofuels and waste 1

-

4.9

5.2

5.3

6.2

7.4

7.1

Nuclear

-

-

-

-

-

-

-

43.8

49.4

46.6

30.6

40.0

39.0

44.1
3.1

Hydro
Wind

-

-

-

0.2

1.1

1.7

Geothermal

-

-

-

-

-

-

-

Solar/other 2

-

0.1

0.1

0.2

0.4

0.4

0.4

-3.1

-6.5

-6.3

2.0

-2.9

-

-6.4

Electricity trade 50 is negligible, - is nil, .. is not available, x is not applicable. Please note: rounding may cause totals to differ from the sum of the elements.

143

IEA. All rights reserved.

Shares in TES (%)

Unit: Mtoe
DEMAND
FINAL CONSUMPTION

1973

1990

2000

2010

2018

2019

2020

TFC

13.36

17.44

19.80

21.32

21.16

21.22

20.53

Coal

0.82

0.78

0.95

0.58

0.59

0.60

0.62

Peat

-

-

-

-

-

-

-

7.31

7.36

7.51

8.43

7.94

7.72

7.41

Oil
Natural gas

-

-

0.59

0.78

0.88

0.98

0.89

Biofuels and waste1

-

0.90

1.20

1.40

1.28

1.47

1.40

Geothermal

-

-

-

-

-

-

-

Solar/other2

-

-

-

-

-

-

-

5.23

8.32

9.42

9.73

9.97

9.94

9.74

-

0.07

0.13

0.39

0.50

0.51

0.47

Coal

6.2

4.4

4.8

2.7

2.8

2.8

3.0

Peat

-

-

-

-

-

-

-

54.7

42.2

37.9

39.6

37.5

36.4

36.1

Electricity
Heat

ANNEXESANNEXES

Shares in TFC (%)

Oil
Natural gas

-

-

3.0

3.7

4.1

4.6

4.3

Biofuels and waste 1

-

5.2

6.1

6.6

6.1

6.9

6.8

Geothermal

-

-

-

-

-

-

-

Solar/other 2

-

-

-

-

-

-

-

39.1

47.7

47.6

45.6

47.1

46.9

47.5

-

0.4

0.6

1.8

2.4

2.4

2.3

TOTAL INDUSTRY6

6.95

7.87

9.03

8.56

8.75

8.80

8.75

Coal

0.76

0.77

0.95

0.58

0.59

0.60

0.62

Peat

-

-

-

-

-

-

-

2.99

2.77

2.43

2.88

2.96

2.89

2.84

Electricity
Heat

Oil
Natural gas

-

-

0.59

0.68

0.74

0.82

0.75

Biofuels and waste1

-

0.38

0.60

0.53

0.37

0.43

0.42

Geothermal

-

-

-

-

-

-

-

Solar/other2

-

-

-

-

-

-

-

3.20

3.94

4.43

3.83

4.04

4.00

4.05

-

0.02

0.02

0.05

0.05

0.05

0.05

Coal

10.9

9.7

10.5

6.8

6.8

6.8

7.1

Peat

-

-

-

-

-

-

-

43.1

35.2

27.0

33.7

33.9

32.9

32.5

Electricity
Heat
Shares in total industry (%)

OilNatural gas

-

-

6.5

8.0

8.4

9.4

8.6

Biofuels and waste 1

-

4.8

6.6

6.2

4.2

4.9

4.8

Geothermal

-

-

-

-

-

-

-

Solar/other 2

-

-

-

-

-

-

-

46.0

50.0

49.1

44.7

46.2

45.5

46.4

-

0.2

0.2

0.5

0.5

0.6

0.6

2.30

3.41

4.06

4.83

4.75

4.80

4.48

Electricity
Heat
TRANSPORT4OTHER7

4.11

6.16

6.72

7.94

7.67

7.62

7.30

Coal

0.06

0.01

0.00

-

0.00

0.00

0.00

Peat
Oil

-

-

-

-

-

-

-

2.07

1.24

1.07

0.94

0.83

0.75

0.73

Natural gas

-

-

0.00

0.04

0.03

0.05

0.04

Biofuels and waste1

-

0.52

0.60

0.75

0.53

0.55

0.57

Geothermal

-

-

-

-

-

-

-

Solar/other2

-

-

-

-

-

-

-

1.98

4.33

4.93

5.85

5.82

5.81

5.55

-

0.06

0.11

0.34

0.45

0.46

0.42

Coal

1.6

0.2

-

-

-

-

-

Peat

-

-

-

-

-

-

-

50.2

20.2

15.9

11.9

10.8

9.8

10.0

Electricity
Heat

Oil
Natural gas

-

-

-

0.6

0.5

0.7

0.5

Biofuels and waste 1

-

8.4

9.0

9.5

6.9

7.2

7.8

Geothermal

-

-

-

-

-

-

-

Solar/other 2

-

-

-

-

-

-

-

48.2

70.3

73.4

73.8

75.9

76.3

76.0

-

0.9

1.6

4.3

5.9

6.0

5.7

Electricity
Heat

0 is negligible, - is nil, .. is not available, x is not applicable. Please note: rounding may cause totals to differ from the sum of the elements.

144

IEA. All rights reserved.

Shares in other (%)

ANNEXES
Unit: Mtoe
DEMAND
ENERGY TRANSFORMATION AND LOSSES

1973

1990

2000

2010

2018

2019

2020

Input (Mtoe)

6.31

10.58

12.42

11.27

13.35

12.31

13.83

Output (Mtoe)

6.28

10.46

12.26

10.60

12.57

11.56

13.21

Output (TWh)73.03

121.61142.51

123.22

146.18134.41153.59

Coal

-

0.1

0.1

0.1

0.1

0.1

0.1

Peat

-

-

-

-

-

-

-

Oil

0.2

-

-

0.1

0.3

0.3

0.1

ELECTRICITY GENERATION8

Output shares (%)

Natural gas

-

-

0.1

3.9

1.5

1.5

1.0

Biofuels and waste 1

-

0.2

0.2

0.4

0.3

0.3

0.3

Nuclear

-

-

-

-

-

-

-

Hydro

99.8

99.6

99.5

94.7

94.9

93.4

91.8

Wind

-

-

-

0.7

2.7

4.1

6.5

Geothermal

-

-

-

-

-

-

-

Solar/other 2

-

0.1

-

..

-

-

-

0.89

3.78

5.26

6.69

7.25

7.09

6.96

TOTAL LOSSES
of which:Electricity and heat generation9

0.03

0.06

0.06

0.38

0.42

0.38

0.29

Other transformation

0.12

0.05

0.05

-0.29

-0.26

-0.21

-0.20

Own use and transmission/distribution losses

0.73

3.67

5.15

6.60

7.08

6.92

6.87

Statistical differences

0.05

-0.15

1.10

4.78

1.43

-0.62

-0.04

INDICATORS

1973

1990

2000

2010

2018

2019

2020

120.09210.97302.85354.11403.45406.89403.77

Population (millions)

3.96

4.24

4.49

4.89

5.31

5.35

5.38

TES/GDP (toe/1000 USD)10
Energy production/TES

0.12

0.10

0.09

0.09

0.07

0.07

0.07

0.56

5.67

8.72

6.36

6.93

7.03

7.59

Per capita TES (toe/capita)

3.61

4.97

5.83

6.71

5.62

5.18

5.10

Oil supply/GDP (toe/1000 USD)10

0.06

0.04

0.03

0.04

0.03

0.02

0.02

TFC/GDP (toe/1000 USD)10

0.11

0.08

0.07

0.06

0.05

0.05

0.05

Per capita TFC (toe/capita)

3.37

4.11

4.41

4.36

3.98

3.97

3.82

CO2 emissions from fuel combustion (MtCO2)11

23.4

27.5

31.9

38.7

37.5

36.6

35.1

CO2 emissions from bunkers (MtCO2)11

2.8

2.7

3.7

2.7

2.8

2.6

1.4

73-90

90-00

00-10

10-17

17-18

18-19

19-20

TES

2.3

2.2

2.3

-1.2

-0.7

-7.2

-0.8

Coal

-0.3

2.0

-3.2

1.5

-2.9

-2.7

2.8

Peat

-

-

-

-

-

-

-

Oil

0.4

1.1

3.8

-2.5

-7.9

-16.4

4.3

GDP (billion 2015 USD)GROWTH RATES (% per year)

Natural gas

-

7.7

4.4

-3.5

10.6

-9.6

-8.8

Biofuels and waste1

-

2.8

2.4

1.4

-2.7

10.4

-5.2

Nuclear

-

-

-

-

-

-

-

Hydro

3.0

1.6

-1.9

2.9

-2.5

-9.6

12.3

Wind

-

-

39.5

18.3

35.8

42.8

79.0

Geothermal

-

-

-

-

-

-

-

Solar/other2

-

0.8

11.3

11.0

-5.5

2.1

-9.3

TFC

1.6

1.3

0.7

-0.2

0.6

0.3

-3.2

Electricity consumption

2.8

1.2

0.3

0.1

1.9

-0.2

-2.0

Energy production

17.2

6.7

-0.9

0.6

-5.0

-5.8

7.1

..

..

..

..

..

..

..

GDP

3.4

3.7

1.6

1.7

1.1

0.9

-0.8

TES/GDP

-1.0

-1.4

0.7

-2.9

-1.9

-7.8

-0.1

TFC/GDP

-1.7

-2.3

-0.8

-1.9

-0.6

-0.6

-2.3

Net oil imports

145

IEA. All rights reserved.

0 is negligible, - is nil, .. is not available, x is not applicable. Please note: rounding may cause totals to differ from the sum of the elements.

Footnotes to energy balances and key statistical data
1

Biofuels and waste comprise solid biofuels, liquid biofuels, biogases, industrial waste and municipal

waste. Data are often based on partial surveys and may not be comparable between countries.
2

Other includes ambient heat used in heat pumps.

3

In addition to coal, oil, natural gas and electricity, total net imports also include biofuels.

4

Excludes international marine bunkers and international aviation bunkers.

5

Total supply of electricity represents net trade. A negative number in the share of TES indicates

ANNEXESANNEXES

that exports are greater than imports.
6

Industry includes non-energy use.

7

Other includes residential, commercial and public services, agriculture/forestry, fishing and othernon-specified.
8

Inputs to electricity generation include inputs to electricity, CHP and heat plants. Output refers only

to electricity generation.
9

Losses arising in the production of electricity and heat at main activity producer utilities andautoproducers. For non-fossil-fuel electricity generation, theoretical losses are shown based on plant
efficiencies of approximately 100% for hydro, wind and solar photovoltaic.
10

Toe per thousand US dollars at 2015 prices and exchange rates.

11“CO2 emissions from fuel combustion” have been estimated using the IPCC Tier I Sectoral

Approach methodology from the 2006 IPCC Guidelines. Emissions from international marine and aviation

146

IEA. All rights reserved.

bunkers are not included in national totals.

ANNEXESANNEX C: Glossary and list of abbreviations
In this report, abbreviations and acronyms are substituted for a number of terms used within theInternational Energy Agency. While these terms generally have been written out on first mention, thisglossary provides a quick and central reference for the abbreviations used.

APA

award in predefined areas

CCS

carbon capture and storage

CCUS

carbon capture, use and storage

CEM

Clean Energy MinisterialDH

district heating

DSO

distribution system operator

EEA

European Economic Area

EEDEnergy Efficiency Directive

ESR

Effort Sharing Regulation

ETS

Emissions Trading System

EU

European Union

EUR

euro (currency)EVelectric vehicleGDPgross domestic product

GHG

greenhouse gas

ICT

information and communications technology

IEA

International Energy Agency

LNG

liquefied natural gas

LPG

liquefied petroleum gas

LULUCFland use, land-use change and forestry

MPE

Ministry of Petroleum and Energy

NCS

Norwegian continental shelf

NDC

nationally determined contribution

NGL

natural gas liquid

NOK

Norwegian kroner (currency)

NVE

Norwegian Water Resources and Energy Directorate

NVE-REM

Norwegian Energy Regulatory Authority

PHEV

plug-in hybrid electric vehicle

PPB

Petroleum Price Board

PPP

purchasing power parity

PVphotovoltaics

R&D

research and development

147

IEA. All rights reserved.

Acronyms and abbreviations

RCN

Research Council of Norway

RD&D

research, development and demonstration

SDFI

State’s Direct Financial Interest

TES

total energy supply

TFC

total final consumption

TFEC

total final energy consumption

TSO

transmission system operator

USD

United States dollar (currency)

VAT

value-added tax

ZEV

zero-emission vehicle

ANNEXESANNEXES

Units of measurebcm

billion cubic metres

g CO2gramme of carbon dioxide

GW

gigawatt

GWh

gigawatt hourkb/dthousand barrels per daykg

kilogramme

kg CO2

kilogramme of carbon dioxidekmkilometrekVkilovoltkWhkilowatt hourMtmillion tonnes

Mtoe

million tonnes of oil equivalentMWmegawatt

t CO2-eq

tonne carbon dioxide equivalenttoetonne of oil equivalentTWhterawatt hour

V

volt

148

IEA. All rights reserved.

Mt CO2-eq million tonnes carbon dioxide equivalentThis publication reflects the views of the IEA Secretariat but does not necessarily reflect those ofindividual IEA member countries. The IEA makes no representation or warranty, express or implied, inrespect of the publication’s contents (including its completeness or accuracy) and shall not be
responsible for any use of, or reliance on, the publication.
Unless otherwise indicated, all material presented in figures and tables is derived from IEA data andanalysis.
This publication and any map included herein are without prejudice to the status of or sovereignty
over any territory, to the delimitation of international frontiers and boundaries and to the name of any
territory, city or area.
IEA. All rights reserved.
IEA Publications
International Energy Agency
Website: www.iea.org
Contact information: www.iea.org/about/contact
Typeset in France by IEA - June 2022
Cover design: IEA

Norway 2022

Energy Policy Review
The International Energy Agency (IEA) regularly conducts in-depth peer reviews of the energy
policies of its member countries. This process supports energy policy development andencourages the exchange of international best practices and experiences.
Since the last IEA review in 2017, Norway has remained a global pillar of energy security, providing
the world with stable supplies of oil and gas produced in an environmentally conscious manner.
Norway has updated its already ambitious targets to reduce greenhouse gas emissions, withplans to achieve 90-95% reductions (excluding sinks) from 1990 levels by 2050.
Norway has considerable work ahead to meet these ambitious targets. Since its electricity
generation produces nearly zero emissions already and the country has substantially electrified
its energy demand, many of the easy wins for reducing emissions have already been achieved.
The remaining reductions will be more complex, challenging and costly, notably in transport andindustry.
Norway has many natural advantages to facilitate a successful energy and climate transition. In
particular, it can be well-positioned to lead the world on new technologies for decarbonising
hard-to-abate sectors, such as electric vehicles, carbon capture and storage, and hydrogen, if theright policies and incentives are put in place.
In this report, the IEA provides energy policy recommendations to help Norway effectively
manage the transformation of its energy sector in line with its goals.