Speech on the 3rd German-Norwegian Energy Conference

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Introduction

Ladies and gentlemen,

Let me first take this opportunity to thank the German-Norwegian Chamber of Commerce for the invitation!

This is a good opportunity for us to meet and share some views on how we can further improve our close relationship in the energy field.

Norway is part of the European energy market through the EEA agreement, and we are a major energy supplier to Germany. The development of German and European energy policies are therefore of great importance to Norway. For us it is quite natural to have a close and – I may add – excellent dialogue with Germany. I would like to use the opportunity to commend my German colleagues for our good cooperation in general.

 

The world’s energy challenges – Norwegian energy policy

Today, the world is facing two great challenges: Energy demand will increase as the population grows and more people are lifted out of poverty. At the same time, we face the challenge of climate change.

We need to cut emissions dramatically in order to avoid a temperature increase of more than 2 degrees Celsius compared with pre-industrial levels.

There is no easy solution and no quick-fix. We need to act on a number of areas simultaneously in order to address the challenges.

We need to invest in low-emission technologies. We need to invest heavily in renewable energy production. And we need to intensify our work on energy efficiency.

But even with the most ambitious scenarios for energy efficiency and renewables, the world will need fossil energy for the foreseeable future – also within the 2-degree-scenario. This means that we also must focus on technologies to make the production and use of fossil fuels cleaner.

On renewable energy, I think it is fair to say that a lot of things are happening – and moving in the right direction. The German “Energiewende” is both impressing and inspiring. The EU Renewables Directive means that all EU countries will increase their share of renewable energy substantially.

The Renewables Directive sets the target for Norway at 67.5 per cent renewables by 2020. This entails an increase of around 9.5 percentage points from 2005.

An important instrument for achieving this target is the Norwegian-Swedish Green Certificate Scheme. This scheme is the first cross-border support scheme for renewable energy that has been established by two countries.

Recently, the government presented a White Paper on its climate policy. We will strengthen our work on climate technology, and will establish a fund for this purpose. One of the aims is to reduce emissions and energy use in the industry towards a low emission future.

We will strengthen the public enterprise ENOVA – our main instrument for promoting energy efficiency and renewable heating. ENOVA will focus particularly on industry and the building sector in the years to come.

We will also take new steps to make our petroleum production as clean as possible. As early as the 1970s, there were clear restrictions on flaring. In 1991 Norway introduced a CO2-tax on offshore emissions. We recently decided to increase this tax further.

This gives incentives for the petroleum sector to cut emissions and make use of new technology. Examples of this are the use of power from shore and Carbon Capture and Storage, CCS.

We already have an extensive use of power from shore in our petroleum sector. Today, 40 percent of Norwegian natural gas production is powered by hydropower.

We also work diligently on Carbon Capture and Storage, CCS. I will come back to this.

On climate policy, I think it is fair to say that Germany and Norway are two of the front-runners internationally. We are both working for ambitious and binding targets in the international climate negotiations. We hope that the world is able to take new steps in the right direction during the ongoing climate negotiations in Doha.

 

The bilateral relationship with Germany

At the governmental level, we are cooperating closely, and we are working to further strengthen our relationship.

So far this year, we have had several dialogues on energy policy with Germany, both at the federal and the ministerial level. Main issues on the agenda have been: Natural gas; Electricity – balancing capacity and interconnectors; Offshore wind; and Carbon Capture and Storage. All issues to be addressed at this conference.

In August last year, we established a German– Norwegian working group on trading balancing capacity.  The working group has been important for exchanging information concerning the development of electricity systems, including new interconnectors.

The governments of Norway and Germany have a long and mutually beneficial cooperation on issues relating to carbon capture and storage. We face many of the same opportunities and challenges and we benefit from knowledge-sharing.

We cooperate under the auspices of the North Basin Task Force and lately we have also agreed to establish a bilateral working group on CO2 storage. A first meeting is scheduled in December.

Several German companies are active on the Norwegian Continental Shelf. RWE Dea is the German company with the longest history on the Norwegian Continental Shelf. The company has been an active partner for almost 40 years, and as an operator since 1991. Other important German companies on the Norwegian Continental Shelf are E.ON E&P, Wintershall, VNG and Bayerngas.

The German companies have grown in size through competing in licensing rounds and through buying licenses and existing companies on the Continental Shelf. All the German companies are active in our latest licensing round for mature areas. We also expect that the German companies will participate in the coming licensing rounds.

On renewables, we also see large German companies with activities in Norway, such as Siemens and Voith Hydro.

 

Natural gas

An important prerequisite for cooperation in the energy field is infrastructure.

We have had a pipeline connection for natural gas to the German market since 1977 with the Norpipe pipeline from Ekofisk. We expanded our export capacity first with the Europipe I pipeline in 1995 and Europipe II in 1999.

Our maximum export capacity to Germany is approximately. 58 billion cubic meters per year.

Norway has exported gas to Germany for more than thirty years. Last year, Norwegian gas deliveries to Germany reached over 25 bcm, which is one third of German gas consumption.

The recently announced gas sales agreement between Wintershall and Statoil is a positive sign that gas will remain an important source of energy in Germany.  Increased use of gas in Germany can also lead to lower CO2 emissions.

One can see the agreement as a confirmation that gas from Norway is competitive in the German energy market. It is also a confirmation of the strong and longstanding ties between Germany and Norway in the oil and gas sector.

We have only produced 28 per cent of the total recoverable gas resources. Norway has both the resources and the infrastructure to be a significant gas exporter to Germany for a very long time.

Norwegian gas sales are expected to reach a level between 105 and 130 billion cubic meters annually during the next decade.

However, gas production is an activity that requires large upfront investments and producers therefore need long term market predictability.

For Norwegian gas producers, a clear signal from European policy makers on the role of gas in energy mix is important. So is a coherent and predictable regulatory framework. This is crucial to ensure necessary long term investments in the upstream system.

IEA’s World Energy Outlook, which was launched last month, states that gas is the only fossil fuel for which global demand grows in all scenarios – including the 2 degrees scenario.

Natural gas can contribute flexibility to an intermittent power system when the sun is not shining and the wind is not blowing.

Also, by replacing coal-fired power plants with gas-fired powered plants, significant emission reductions can be made.

 

Electricity – Interconnectors/balancing capacity and offshore grid development

In June this summer, it was announced that the next electricity interconnectors from Norway will go to Germany in 2018 and to the UK in 2020.

I am pleased to note that Statnett now has signed a cooperation agreement with KfW and TenneT to develop, construct and operate a 1400 MW subsea cable between Norway and Germany with planned commissioning in 2018.

This cable is an important step forward in the good energy cooperation between our two countries.

Cross-border trade of electricity gives value added, better utilization of the energy systems, it increases the security of supply and allows more integration of renewable energy into the energy system.

New interconnectors will be established if they are socio-economically profitable. The impact on Norwegian security of supply will be an important part of this assessment.

There is an increased need for balancing resources to integrate intermittent renewable energy in Europe. Norwegian hydropower will provide some balancing resources, but not more than a small percentage of the amount needed in Europe totally.

When it comes to an expansion of Norwegian balancing capacity; the technical potential is large. However, costs, internal grid conditions and environmental considerations must be taken into account. Under the prevailing conditions, a large expansion of Norwegian balancing capacity is not foreseeable. Still, existing and new interconnectors will enable better utilisation of the balancing resources that are available today.

Together with eight other nations, Germany and Norway also cooperate in the North Sea Countries Offshore Grid Initiative. Norway finds this initiative valuable. In Brussels earlier this week, we agreed to move this work forward.

 

CCS –exchange of experience

If we are to achieve the 2 degrees goal - there is a global limit to how much CO2 we can allow to be emitted into the atmosphere.  Given the world’s huge reserves of coal, we simply cannot use all of our fossil reserves – unless CCS is deployed on a very large scale. 

Norway remains strongly committed to CCS. The government, the industry and research institutions are devoting substantial resources to develop and qualify CCS technology.  I am pleased that the Technology Centre Mongstad is in operation. The Technology Centre is an important element of the government’s energy and climate policy. The aim of the centre is to create an arena for the development, testing and qualification of CO2 capture technologies. 

Developing CCS is challenging, and I think it is clear that no single country can carry this technology forward on its own. We therefore want Technology Centre Mongstad to be a truly international joint effort, and we invite companies and governments to work with us at Mongstad.

Speaking of CCS, it would be wrong not to mention that CCS is facing some serious challenges. The challenges appear at different levels: Complex and costly projects, comprehensive processes, legal and regulatory issues, commercially immature technology and the issue of public acceptance. The complexity explains – and justifies to a certain extent – the regrettable cancellations of some CCS projects in Europe during the past year. Furthermore, the implementation of the EU CCS directive has proven difficult in many countries mainly due to lack of public acceptance for storing CO2 onshore.

We have a fortunate situation in Norway, since the activities happen close to shore and storage will only take place offshore. In general, there is strong support in the Norwegian public due to the climate mitigation potential CCS represents.

Close interaction between the state and the industry is important in order to generate long-term sustainable solutions. To stimulate development, deployment and dissemination of CCS technologies at a global scale, cooperation is key. We need to join efforts in order to contribute to a much needed reduction in global CO2 emissions. There is not one solution to reverse global climate change. I believe it is important to work on renewable energy, CCS, and energy efficiency to combat climate change.

 

Conclusion

To conclude - it is important that we continue to have close cooperation with Germany on key energy issues related to energy markets and other major energy and environmental challenges. This includes all levels, both business, professional and industrial bodies, public authorities and, of course, politically.

Thank you for your attention!