Flat network charging across Norway will increase network costs

18. January 2019 | News

Achieving climate goals requires significant investment in the electricity network. The associated costs are borne by customers. If network charges are equalised nationally, overall costs will increase and electrification will be made less cost-effective.

If a flat network charging regime were introduced across Norway, the total costs of operating and developing the electricity network would be higher than under the current regime.
Three effects in particular contribute to this result:

  • A politically-motivated intervention in the level of grid charging will weaken companies’ incentives to control costs and delay necessary restructuring of the sector.
  • Customers wouldn’t receive accurate price signals as to where it was economically efficient for them to locate if all network charges were equalised. This may necessitate otherwise avoidable network reinforcement.
  • Businesses that have already located themselves based on the applicable network charges and the network capacity available would face higher network charges and would thereby be exposed to a significant change in their economic environment.

Current variations in network charges are largely the result of differences in the costs of large and small network companies; the main differences are not split by town and country.

Most residents would face higher network charges under a flat charging regime. A redistribution of network charges would increase network tariffs for close to 2 million customers. We estimate that 2.2 billion NOK in charges would be redistributed in the event that a flat charging regime were introduced.

The complete equalisation of network charges is not a good solution. However, there are several areas in which the tariff regime could be improved, while also helping to equalise charges across the network companies.

These results are taken from a recently-completed report by THEMA for Agder Energi, BKK, Eidsiva Energi, Hafslund E-CO and Lyse.

Read the report (in Norwegian):

THEMA Rapport 2018-13 >> Konsekvenser av nettleieutjevning

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Espen Fossum
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