Heavy Rains in Norway to Boost Energy Exports and Facilitate UK Crunch

(Bloomberg) — Heavy rains in recent weeks have replenished Norway’s depleted hydropower reservoirs and reduced the risk of energy exports to the UK coming to a halt this winter.

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That is also a boost for other markets, including Germany and the Netherlands, which rely on electricity from the Nordic nation, dubbed the green battery of Europe for its vast and cheap hydropower resources. At the height of the energy crisis in August, the Norwegian government indicated that foreign sales could be curbed to protect domestic supplies.

“Fortunately now we have had rain, so the situation is much better,” said Energy Minister Terje Aasland in an interview. “We are facing a more certain winter when it comes to security of supply than was previously assumed.”

The UK typically relies on imports to meet about 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 extended outages in the aging plants. Still, Britain’s National Grid Plc said last week that enough domestic generation would be available to avoid blackouts.

Norway is not a member of the European Union, but is part of the internal energy market, and the rules state that countries cannot restrict power to neighboring countries for long periods of time. The country gets almost all of its electricity by running water through turbines. Historically, it has been able to export a sizeable surplus and still has one of the lowest prices in Europe.

Water reservoir levels in southwest 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 they were about 25 percentage points below the 2000-2019 average.

“Everyone was worried that Norway wouldn’t be a big exporter in the winter, but I would say the perspective has shifted in recent weeks,” said Fabian Ronningen, a senior energy market analyst at Rystad Energy A/S.

In August, the Norwegian government began work on a control mechanism that would allow the country to limit exports if hydro reservoirs sink too low. The plan is to complete this this fall, says Aasland.

“It’s important that we have security to ensure security of supply because that’s what gives hydropower the quality it has,” he said.

State-owned Statkraft AS was one of the power generators protecting domestic supplies by holding back water, Chief Executive Officer Christian Rynning-Tonnesen said in an interview.

“That’s on purpose; it’s because we’re saving water for the winter,” he said. “We held back in the third quarter to have more production capacity in the winter period.”

–With help from Todd Gillespie.

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