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PA predicts low power prices in the foreseeable future

sigurd sveen | finansavisen | 31 May 2017

PA energy expert, Lars Erik Maurud, is quoted in an article in Finansavisen. Lars Erik sets out his view that we will see low power prices for the foreseeable future.

He said: “Some actors in the power industry will be surprised at the extent of the changes we will see over a short period of time. And what's happening now is not very positive for Norwegian power producers” and continued saying, " I think we will see low power prices in the foreseeable future.”

The Norwegian power industry realised many years ago that they were entering a long period of low prices. But most also expected that the market balance would improve sometime after 2020. Lars Erik now believes these predictions will not become a reality. An event earlier this year made him see the scale of what is happening in the power market these days when Dong Energy and German Energy Baden-Württemberg (EnBW) won auctions to build wind power without subsidies in Germany. “There has been a small earthquake in this industry caused by the fact that that wind power is now on the grid and achieving parity with other power sources. That will also have big implications for Norwegian power producers," says Lars Erik.

The Norwegian power industry has been very passive in its response to the price drop we have seen, and now the whole industry is turning on its head. The price of wind power is falling significantly faster than previously thought, and it shows that we will not be moving towards better times in the power industry. Of course, it is positive for the renewable industry that they can operate subsidy free. But it also says something about the price level we can expect in the future, and not least as a result of the volumes coming our way. I am expecting massive development of wind farms at sea.”

In Norway, large amounts of money has been invested in wind power, as shown by Statkraft's gigantic development in central Norway. Nevertheless, Norway is a small player compared with Sweden, which has decided to continue the EIA certificate by 18 TWh to 2030Most forecasts of power consumption are quite flat despite the fact that society’s energy use is becoming increasingly electrified. This shows that the work on energy efficiency work is now having an effect. At the same time, power generation is continuing to increase, meaning the pressures on the market are still downwards,” says Lars Erik.

The power industry has long assumed that using cables to sell power overseas would come to the rescue. Then you could sell some of the generated power to markets with much higher prices, while domestic power prices would also rise.

Lars Erik is not sure that this analysis will stand the test of time. Recently, Britain had its first working day without coal-fired power generation. And in Germany, they are flooded with renewable energy on sunny days with a lot of wind. Power producers who think everything will be good when we get cables will be in for a big surprise. One third of the time, large volumes of wind and sun power will be coming into the market.”

      

Find out more about our work in Norway.

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Lars Erik Maurud

Lars Erik Maurud

PA energy and utilities expert

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