A fixed electricity price at a reasonable level may sound like a dream for many after the price shocks of recent years. In Norway, Prime Minister Jonas Gahr Støre (Labour Party) now wants to test this model.
He proposes that the Norwegian state, from October 1 this year, ensures that Norwegian households can choose a fixed electricity price of 40 öre per kilowatt-hour for electricity to homes and holiday homes.
With a Norway price, we give people control over the electricity price, says Støre.
"It would cost"
The proposal comes at a tight political moment, where the government alliance with the Norwegian Centre Party cracked earlier this week.
A similar model in Sweden would require a green light from the EU and how it would be financed is unclear, according to Christian Holtz, electricity market analyst at the consulting firm Merlin & Metis.
It would cost the state a lot of money, says Holtz, who believes it would require an increased energy tax to be implemented in Sweden.
Colleague Johan Sigvardsson at Bixia is on the same track:
If the price becomes more expensive than the fixed price, the state steps in, and thus the taxpayers.
Both experts warn of the effects of fixed electricity prices in Norway, including the pricing on the Nordic electricity exchange. They see a risk that the price peaks for electricity for Swedish households may become higher in the future if the fixed Norwegian electricity price is introduced. It can also lead to a long-term increase in electricity demand in Norway, which can result in a general price increase.
The incentive to reduce consumption disappears with a fixed price, says Sigvardsson.
"It would be unfortunate"
Holtz has similar concerns.
Norwegian households will no longer react to price signals. Over time, one can imagine that Norwegian households' electricity consumption increases and that the flexibility in their electricity consumption decreases. It would be unfortunate.
It removes the incentive for energy efficiency. It also removes all incentives for households to be flexible in their electricity consumption, which becomes more and more important as we have more weather-dependent electricity production.
Norway's government, with Prime Minister Jonas Gahr Støre, proposes a fixed electricity price of 40 öre per kilowatt-hour for households' homes and holiday homes from October 1.
The fixed price is to be an alternative that households can choose instead of the existing protection against electricity price peaks, where the Norwegian state covers 90 percent of the electricity price that exceeds 75 öre per kilowatt-hour.
In addition, the government wants to reduce the VAT on the grid fee in Norway to 15 percent from the current 25 percent, already this summer.
Another proposal is to stop the state-owned Statnett's work on new power cables to other European countries and to also stop the implementation of EU directives on renewable energy. This is to avoid linking the Norwegian electricity market more closely with the rest of Europe and thus protecting the country against price peaks abroad.
Støre is also calling for Nordic cooperation to evaluate different measures that can reduce large electricity price fluctuations.
