(Bloomberg) — Heavy rains in recent weeks have refilled Norway’s depleted hydroelectric reservoirs and reduced the risk that electricity exports to the United Kingdom could be halted this winter.
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That’s a boost for other markets, including Germany and the Netherlands, that rely on electricity from the Scandinavian nation sometimes referred to as Europe’s green battery because of its vast and cheap hydropower resources. At the height of the electricity crisis in August, the Norwegian government indicated that sales abroad could be limited to protect domestic supplies.
“Now we’ve had rain, luckily, so the situation is much better,” Energy Minister Terje Aasland said in an interview. “We’re heading into a more secure winter in terms of security of supply than was the starting point earlier.”
The UK typically relies on imports to meet around 10% of demand. Flows from Norway could be even more important this winter than in previous years, as cheap nuclear power from France may not be readily available due to long outages at its aging plants. But Britain’s National Grid Plc said last week there would be enough domestic generation to avoid blackouts.
Norway is not a member of the European Union, but it is part of the single energy market, and the rules state that countries are not allowed to cut flows to neighbors for extended periods. The nation gets almost all of its electricity from running water through turbines. Historically, it has been able to export a huge surplus and still has some of the lowest prices in Europe.
Reservoir levels in southwestern Norway — where the main cables connecting to other markets come ashore — remain below average but are much higher than a few months ago. The difference is about 8 percentage points, while in August it was about 25 percentage points below the 2000-2019 average.
“Everyone was worried that Norway would not be a significant exporter over the winter, but I would say the outlook has changed in recent weeks,” said Fabian Ronningen, senior energy market analyst at Rystad Energy A/S.
In August, Norway’s government began work on a control mechanism that would allow the country to limit exports if hydroelectric reservoirs sink too low. The plan is still to be completed this fall, Aasland said.
“It’s important to have certainty to ensure security of supply because that’s what gives hydropower the quality it has,” he said.
State utility Statkraft AS was among power producers protecting household supplies by blocking water, CEO Christian Rynning-Tonnesen said in an interview.
“This is intentional. it’s because we’re saving water for the winter,” he said. “We kept the third quarter to have more production capacity in the winter season.”
–With help from Todd Gillespie.
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