Electricity subsidies to cost NOK 41 billion

Sky-high subsidies deemed to be absolutely necessary

Photo: Stian Lysberg Solum / NTB
This year, the Norwegian state will spend more on electricity subsidies than previously estimated.

ANDERS R. CHRISTENSEN
NTB

New calculations show that the Norwegian state will spend NOK 40.7 billion on electricity subsidies in 2022. Without electricity subsidies, a family in the southern part of Norway would have to pay NOK 73,000 for electricity this year.

“This shows that the government has responded to the electricity crisis with strong measures. It has been absolutely necessary for people to get help with their electricity bills,” said Geir Pollestad, financial policy spokesperson for the Center Party to NTB.

On Aug. 19, the Ministry of Finance responded to a written question from Pollestad on how much the state expects to spend on measures in response to high electricity prices.

In May, the Ministry of Finance estimated that the measures would cost NOK 22.8 billion this year, but on Aug. 15, the government introduced new measures after the sharp rise in electricity prices over the summer. The measures involve, among other things, increased and accelerated electricity subsidies for households, so that from Sept. 1 on, the state will cover 90% when the average price exceeds 70 øre per kilowatt hour.

Thus, the estimate for the electricity package now stands at NOK 40.7 billion for the year. That is NOK 18 billion more than anticipated in May.

Households receive NOK 35 billion in state support

The largest single item in the bailout package is the electricity subsidy for households and housing associations, now estimated to cost NOK 34.8 billion. Electricity tax revenues have been reduced by NOK 2.6 billion, and increased household subsidies account for NOK 1.5 billion. In addition, there are several other measures, which altogether amount to NOK 1.8 billion.

Pollestad believes that the Norwegian mindset of collective ownership is what has made such strong subsidies possible.

“The subsidy is absolutely necessary for people, and it is possible because of a policy that returns a large part of the income from power production back to the community and the people. It would not have been possible if hydropower had been privatized,” he said.

VG wrote that an estimate the bank Nordea  made at their request shows that the state has earned an extra NOK 27 billion from the extraordinary electricity prices from Jan. 1 to July 19 this year.

Reimburses NOK 40,260 on average

Oil and Energy Minister Terje Aasland (Labor Party) also responded on Aug. 19 to a written question from Socialist Left Party’s parliamentary representative Kari Elisabeth Kaski in regard to how much more the government estimates that electricity customers overall will have to pay in electricity bills compared with the price estimates that were released in April, Europower writes.

Price region NO2, which includes southern Vestland Rogaland, Agder, Telemark, and old Vestfold, has had the highest electricity prices recently. According to the latest estimate, the government figures that an average family in this area with an annual consumption of 16,000 kilowatt hours would have an electricity bill of NOK 73,240 this year.

The electricity subsidy will cover NOK 40,260 of this sum, so that the consumer will actually have to pay NOK 32,980.

The estimate also shows that the electricity cost for normal electricity consumption in eastern Norway and western Norway will end up at NOK 68,560 this year. Here, the government contributes NOK 36,460 in support, so that the customer will have to contribute NOK 32,100.

“Will continue as long as prices are high”

Pollestad believes that even though the government’s measures have been necessary, he wants to avoid new situations like this.

“The support will continue as long as prices are high. In addition to the NOK 40 billion, there will be a plan for the business community, and we will limit exports when reservoirs are low. Just as important as the subsidies are the lasting measures we are working on to change the system and manage the market so that we avoid this type of situation in the future,” Pollestad said.

This article originally appeared in the September 2, 2022, issue of The Norwegian American. To subscribe, visit SUBSCRIBE or call us at (206) 784-4617.