Norway: Wind Power Prospects Will Weather Cheap Electricity

Statkraft's surprise decision to cancel its flagship wind power project in Norway will not stop new wind developments, the country's energy regulator and industry representatives said.

The state-owned group said this month it had decided toditch a major investment in large-scale wind power in central Norway because low power prices made it unprofitable.

On Friday Credit Suisse's infrastructure fund and Swiss utility BKW AG expressed interest in the 1,000 MW project.

The price of electricity on the Nordic power market has slumped to a seven-year low due to an increase in renewable power, especially wind power in Denmark and Sweden, stagnating demand and mild weather.

But it is expected to rise towards the end of this decade,  supported by a planned shutdown of the oldest nuclear reactors in Sweden and new links to Germany and Britain that could help to export the power surplus.

Power in the Nordic market averaged 29.61 euros per megawatt-hour (MWh) in 2014.  The 2022 contract is trading at around 33 euros/MWh.

Norway's Oil and Energy Minister Tord Lien has warned that more projects could be scrapped due to low profitability, but longer term investment would continue.

"Of course, it's a blow in a short-run, but it will not decide what will happen with wind in Norway in the long-run," Per Sanderud, head of Norway's energy market regulator NVE, which issues licenses to build new power plants, told Reuters.

"We still have the best wind power resources in Europe and Europe needs more renewable power," he added.

Norway has been trailing badly its Nordic neighbours in wind power.

By the end of 2014, it had about 820 MW of wind power installed compared with 5,425 MW in Sweden and 4,845 MW in Denmark, data from the European Wind Power Association shows.

"These are tough times, but we just have to make better projects and to drive costs down more," Oeyvind Isachsen, the head of Norway's wind power association Norwea, told Reuters.

Norwea estimates the levelized cost of new onshore wind farms should fall to 0.4 crowns ($0.05) per kilowatt-hour (kWh) from the current 0.5 crowns to make the projects profitable.

The levelized cost represents the cost of building and operating a power plant over its lifetime.

Installing more efficient turbines could help.

"A turbine from 2008 will die in this market, but the turbine of 2016 will do much better," Isachen said.


(Editing by Nina Chestney and William Hardy)