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ENERGY

TRANSITION

NORWAY

2023

A national forecast to 2050

Commissioned by:

DNV Energy Transition Norway 2023

The 2023 edition of the Energy Transition Norway 2050

reconﬁrms that Norway is not on track to meet Paris

Agreement targets for reducing greenhouse gas emissions.

Despite cross-political support for 55% and 100% GHG

reductions by 2030 and 2050, respectively, Norway

is heading for 27% less in 2030 and 80% in 2050.

When Norway ratiﬁed the Paris Agreement in 2016,

nearly all its electricity was from hydropower. We also got

140 TWh of energy from fossil fuels. To replace that fossil

consumption to reach climate targets, roughly 100 TWh of

additional renewables capacity for electricity and making

hydrogen and ammonia was needed. The electricity grid

needs strengthening across Norway, and carbon capture

and storage is part of the equation. We are far from

achieving this and thus face an expected net electricity

deﬁcit in 2028 lasting until 2032, that could see Norway

paying European price levels or more for electricity.

This report shows the need for 390 TWh renewable power

in 2050, nearly three times more than today, through

converting existing fossil generation, building new

green industries, and enabling hydrogen production

for domestic use and export. Additional solar and hydro-

power are important, especially in the short term, but

make limited contributions. Onshore wind is affordable

and may contribute 40–50 TWh. Offshore wind, especially

ﬂoating offshore wind, will be the main contributor with

more than 100 TWh near 2050.

All renewables are weather-dependent, and we should

expect intense supply and demand dynamics at national,

regional, and local levels. Balancing the grid requires

hydropower plants, huge numbers of batteries, and

data-driven algorithms working in real time.

Europe depends on Norwegian gas to meet demand and

stabilize the geopolitical situation. This demand is expected

to increase in the short term but decline steeply in the long

term. Norway can maintain its signiﬁcant market share in

energy supply to Europe, but through a new export mix of

electricity alongside hydrogen (initially blue and then

green) and ammonia as energy carriers. Again, this cannot

be achieved without sufﬁcient renewable power.

The decarbonization effort in Norway and globally is an

enormous business opportunity for the Norwegian

industry. Huge opportunities lie ahead in industrializing

ﬂoating wind farms, setting up a complete value chain for

batteries for the energy system and transport, and in

hydrogen and ammonia. In addition, conventional industry

products need to be carbon-neutral going forward to

comply with customers’ future requirements. If not, we’ll

lose market share.

Norway’s urgent need to build a signiﬁcant amount of

new renewable power requires an attractive ﬁnancial

framework and streamlined concessions and permitting.

Norsk Industri is worried that there are close to zero new

applications for hydropower and onshore wind. This

suggests the political framework is unattractive. New

green industries as deﬁned by the government require

ﬁnancial frameworks comparable to those in the EU.

Time is of the essence. We have only six years left to

meet 2030 ambitions. Our politicians need to take bold

decisions to get us back on track. We all have the

responsibility to make a better tomorrow.

FOREWORD

Nils Klippenberg

Chairman Electro and

Energy — Norsk Industri

CONTENTS

Foreword 2

Highlights 4

1 Introduction 6

1.1 About this Outlook 6

1.2 Assumptions and policies 8

2 Energy demand 12

2.1 Transport 14

2.2 Buildings 18

2.3 Manufacturing 19

2.4 Non-energy 22

2.5 Energy demand carriers 22

3 Energy supply 24

3.1 Oil 26

3.2 Natural gas 28

3.3 Electricity 29

4 Energy trade 40

5 Emissions 46

6 Norwegian transition in an EU context 52

References 58

Project team 59

Contents

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ENERGYTRANSITIONNORWAY2023Anationalforecastto2050Commissionedby:DNVEnergyTransitionNorway2023FOREWORDThe2023editionoftheEnergyTransitionNorway2050term.NorwaycanmaintainitssignificantmarketshareinreconfirmsthatNorwayisnotontracktomeetParisenergysupplytoEurope,butthroughanewexportmixofAgreementtargetsforreducinggreenhousegasemissions.electricityalongsidehydrogen(initiallyblueandthenDespitecross-politicalsupportfor55%and100%GHGgreen)andammoniaasenergycarriers.Again,thiscannotreductionsby2030and2050,respectively,Norwaybeachievedwithoutsufficientrenewablepower.isheadingfor27%lessin2030and80%in2050.ThedecarbonizationeffortinNorwayandgloballyisanWhenNorwayratifiedtheParisAgreementin2016,enormousbusinessopportunityfortheNorwegiannearlyallitselectricitywasfromhydropower.Wealsogotindustry.Hugeopportunitieslieaheadinindustrializing140TWhofenergyfromfossilfuels.Toreplacethatfossilfloatingwindfarms,settingupacompletevaluechainforconsumptiontoreachclimatetargets,roughly100TWhofbatteriesfortheenergysystemandtransport,andinadditionalrenewablescapacityforelectricityandmakinghydrogenandammonia.Inaddition,conventionalindustryhydrogenandammoniawasneeded.Theelectricitygridproductsneedtobecarbon-neutralgoingforwardtoneedsstrengtheningacrossNorway,andcarboncapturecomplywithcustomers’futurerequirements.Ifnot,we’llandstorageispartoftheequation.Wearefarfromlosemarketshare.achievingthisandthusfaceanexpectednetelectricitydeficitin2028lastinguntil2032,thatcouldseeNorwayNorway’surgentneedtobuildasignificantamountofpayingEuropeanpricelevelsormoreforelectricity.newrenewablepowerrequiresanattractivefinancialframeworkandstreamlinedconcessionsandpermitting.Thisreportshowstheneedfor390TWhrenewablepowerNorskIndustriisworriedthatthereareclosetozeronewin2050,nearlythreetimesmorethantoday,throughapplicationsforhydropowerandonshorewind.Thisconvertingexistingfossilgeneration,buildingnewsuggeststhepoliticalframeworkisunattractive.Newgreenindustries,andenablinghydrogenproductiongreenindustriesasdefinedbythegovernmentrequirefordomesticuseandexport.Additionalsolarandhydro-financialframeworkscomparabletothoseintheEU.powerareimportant,especiallyintheshortterm,butmakelimitedcontributions.OnshorewindisaffordableTimeisoftheessence.Wehaveonlysixyearslefttoandmaycontribute40–50TWh.Offshorewind,especiallymeet2030ambitions.Ourpoliticiansneedtotakeboldfloatingoffshorewind,willbethemaincontributorwithdecisionstogetusbackontrack.Weallhavethemorethan100TWhnear2050.responsibilitytomakeabettertomorrow.Allrenewablesareweather-dependent,andweshouldNilsKlippenbergexpectintensesupplyanddemanddynamicsatnational,regional,andlocallevels.BalancingthegridrequiresChairmanElectroandhydropowerplants,hugenumbersofbatteries,andEnergy—NorskIndustridata-drivenalgorithmsworkinginrealtime.EuropedependsonNorwegiangastomeetdemandandstabilizethegeopoliticalsituation.Thisdemandisexpectedtoincreaseintheshorttermbutdeclinesteeplyinthelong2CONTENTSContentsForeword23Highlights41Introduction61.1AboutthisOutlook61.2Assumptionsandpolicies82Energydemand122.1Transport142.2Buildings182.3Manufacturing192.4Non-energy222.5Energydemandcarriers223Energysupply243.1Oil263.2Naturalgas283.3Electricity294Energytrade405Emissions466NorwegiantransitioninanEUcontext52References58Projectteam59DNVEnergyTransitionNorway20231HIGHLIGHTSNorwaynotontrackfor2030and2050Lackofnewpowerproductionemissiontargetsplacesindustrialdevelopmentanddecarbonizationatrisk−Implementedandplannedactionsarenotcreatingthedramaticchangeneededtoreachtheshort-term−TheexistingelectricitysurplusinNorwaywillshortlygoalsbeconsumedbyincreasedelectricitydemandfromhouseholds,industry,theelectrificationoftransport,−Norwayaimstocutemissionsby55%by2030andandelectrificationofseveraloilandgasinstallations90-95%by2050.Weforecast27%reductionby2030and80%by2050comparedwith1990−Limitedopportunitiesforaddingnewelectricitygenerationshorttermwilllikelycreateanelectricity−Themoreurgentactionisdelayed,thenarrowerthedeficitbythelate2020swindowforreachingthetargetsbecomes,especiallythenearer-termambitionsfor2030−Thedeficitiscurrentlybeingmanagedby‘default’demandreduction:newindustrialgrowthisbeing−Onlytransportandtheoilandgassector’semissionsdiscouragedbyuncertaintyinfutureelectricityarefallingclosetothelevelsnecessarytoreachprices,anunclearregulatoryframework,andalackofNorway’s2050targetgridconnections−By2050,significantcarboncapture(8Mt)andcarbon−Offshorewindhasthehighestpotentialtoaddremovals(2Mt)reduceNorway’semissionbyhalf,significantelectricitytoNorwegianpowersysteminhelpingtogetclosertoreachthetarget,butneedsthe2030s,butdelaysinconcessionsandauctionsfurthereffortsplacethispotentialatrisk−Thereismountingpressureforhigh-incomecountries,−Gridexpansionisneededtoincreaseflexibility,suchasthoseinEuropeandrestofOECD,toreachremovebottlenecksandmaximizethevalueofwindnetzerowellbefore2050toallowtheworldtoreachpower.Thecurrentpaceofgridbuild-outistooslowtheambitionsoftheParisAgreement4HighlightsNorwegianenergyexports:short-termTheenergytransitioncreatesseveralgreengrowth,steepdeclineinthelongtermindustryopportunitiesforNorway−Europeandemandfornaturalgasisfallingandwillfall−TheglobalenergytransitionwillseeasignificantmuchfurtherthanexpectedbeforetheUkrainewarincreaseinrenewableenergysourcesandotherasaconsequenceofEuropeanclimateandenergydecarbonizationtechnologies,offeringgrowthsecurityconsiderationsopportunitiesforgreenindustries−Norway’sgasexportsdecline35%andoilexport93%−EnergyexportsfromNorway,especiallyrenewableto2050energyandlowcarbonhydrogen,willlikelybeattractiveatanytimeduringthenext30years,butthe−AgrowingshareofNorwegianenergyexportswillprimewindowofopportunityforgreenindustrialbeconvertedtoelectricity,hydrogenanditsderiva-growthandbuildingnewvaluechainsisthenexttives,butwillonlyrepresentafractionoftoday’sfiveyearsenergyexportrevenues−Norwayhasacompetitiveedgeinmanydecarboni-−Norwayhasauniqueopportunitytosupplybluezationtechnologies,particularlyfloatingoffshorewind,hydrogentoEuropebythemid-2030s,switchingtowhichwillseesteepgrowthgloballytowards2050greenhydrogenbythe2040s−Large-scalehydrogenvaluechains,initiallybluebut−DNVforecasts22GWoffshorewindinproductionbyturningincreasinglygreenleveragingsurpluspower2040and43GWby2050.Norwegianwindpowergeneration,cangeneratesignificantexportrevenuegenerationincreasesto210TWhin2050,ofwhichcomplementingelectricityexports80%isoffshorewind.Surpluswindpowerislikelytobeusedtoproducehydrogenforexport,whilemost−Carboncaptureandstorage(CCS)willplayacriticaloftheelectricityexportwillbebasedonhydropowerroleinreducingemissions,andNorway'sexpertiseinandoffshorewindCCScanbeleveragedfordecarbonizingnaturalgasandcreatingopportunitiesinhydrogenandammoniaproduction.StorageofCO2ontheNorwegianContinentalShelf(NCS)isahugeopportunitywithlimitedcompetition,especiallyclosetoEurope−Inmaritimetransport,Norway'sleadershipinLNG,batteries,andhydrogenforshort-seashippingcanbeexpandedtodeveloplow-andzero-carbonsolutionsforglobaldeep-seashipping5DNVEnergyTransitionNorway20231INTRODUCTION1.1AboutthisOutlookInlinkingourglobalforecasttoNorway’senergysystem,wehavehadtomakeseveraladjustments.Notallglobal,ThisEnergyTransitionNorway(ETNorway)reportorevenregional,energydynamicsareequallyvalidwhendescribestheenergyfutureofNorwaythroughto2050.weapplythematcountrylevel.Theanalysis,themostlikelymodelframeworkbehindit,themethodology,theassumptions,andhencealsotheresultsOuranalysisproducesasingle‘best-estimate’forecastleanheavilyonDNV’sglobalforecast,theEnergyTransitionofNorway'senergyfuture,givenexpectedeconomic,Outlook2023(DNV,2023a)andtheEnergyTransitionpolicyandtechnologydevelopmentsandassociatedOutlook(ETO)model.Thisapproachyieldsaconsistentandcosts,aswellassomebehaviouraladjustments.Theenergy-balancedresult,asNorwayispartoftheglobalforecastalsoprovidesabasisforassessingwhetherenergysystem,andthecountry’senergysupplyandNorwayislikelytomeetitsenergyandclimate-relateddemandareaffectedbywhathappenselsewhere.Similarly,targets.whathappensinNorwaycanaffectothercountries.6IntroductionCHAPTER1relevancetotheenergytransition;firstandforemosttheunprecedentedenergyprices,butalsoGDPdevelopment,EUandNorwegianpolicyinterventions,andbehav-iouralchanges.OOuurrbbeeststeestsitmimaatete,,Ourbestestimate,LLoonngg-t-etermrmddyynnaammicisc,s,Long-termdynamics,nnootththeefufututurerewweewwaannttAnAosistnitnghgleeleffuoftourerreecacwasets,twn,noaotntstcsecennaariroiossMCMaoainnintpinpouoleilcidycydtretervenendldospsinmincelculnudtdeedd;;nnAootstsihnsInhogorlater-tdt-fetoedrrmreimtciimaoimsbntb,anatlaoolantncisneccesecsnoarriposoratinngottshhoerte-tneremrgimybtarlaandceesofoil,gas,CCoonntitninuueeddddeeveveloloppmmeennttccLoaoccLoaoufomnuptmngimtorgi-moonti-tventimoteermomnnremnenutdnetunsdtycnt,syehnt,eensnae.tgsamo.etg.meldio.NdciNgDsc,DsyC,,Csn,so,etetct.c.oLofofpnprgor-ovteevenrmntetdecyhchnnnaomololiogcgsy,y,,nnoottnunonotctsehsrhotaortirn-tt-ebterrmremaikmitmhbrbaoalaulangnchecsessandcoal,weincludeimportandexportofelectricity,unAunAonsctisecnsierhngtraogtleairlntei-nftbofeborrreerrmeaecakaciktmashttshbr,tonr,aounolaugotngthscchsseecssennaariroiosshydrogen,andammonia.WehaveextendedourmodeltoincludetheenergyexchangebetweenNorwayandEurope.ThisisanimportantdynamicinNorway’sBaMBasesehaushiaumneavmppvinopitooeiutoliuirroncargnsyalsymlctrmhcesahaandyanddesnge,stge,eeienes.gm:sc.g.:lsu.lo,sidnlomainekmnedkeeedd;dwillprBoevheaviinoucrraelachsainnggelys:ismompeortantinsteestsitmimaatete,,cautiononuntestedassumptionsmade,e.g.linkeduffutouturreerecwawestew,wnaoantntstcenariostoctooamactmhchhaieatnmngfgeiuninngttguse,reneenv.givra.iorNsonnDmfomCesesn,snteitlt-cf.uelextpooarcthsadngeincgliennevifroonrmNeontrwayandelectricityandhydrogenexportgrows.eeidcdyddetreveevneldolosppminmecelnuntdted;MBMeahainianpvpioooluilcirycayltrcterhenandndsgsieninsc:lcusludodemeded;;BBeehhaavvioiouurarallchchaannggees:s:sosommeeInterviewsoennnteutecnhctehnsnotoeloldoggyy,,nnoottcaacsausuutimtoionpntoioonnnusunmntetaesdtseteed,de.g.linkedaassusummpptitoionnssmmaaddee,,ee.g.g..linlinkkeeddOurmodellingapproachandthecalibrationofthemninebnbretrsea,akekt.hgthr.orNouuDgghChsss,etc.ctoocomammcmhiatimtnmgeeinnntgst,se,ene.gv.gi.r.NoNnDDmCCes,ns,etetct.c.totoaachchaannggininggeennvivrioronnmmeennttmodellinginputvaluesbecomeincreasinglysensitivewhenwemodelacountrycomparedwitharegionorOurapproachglobally.ThisisespeciallyprevalentwhenweconsiderOurmodelsimulatestheinteractionsovertimeoftheexogenousoroutsideassumptionssuchaspoliciesorconsumersofenergy(transport,buildings,manufacturing,factorsthatarecountry-specificandhaveasignificantandsoon)andallsourcesofsupply.Itencompasseseffectinforcingthemodeltoselectsolutionsthataresupplyanddemandofenergyglobally,andtheuseandnotnecessarilythecheapestoptionor‘mostlikely’.Suchexchangeofenergybetweenandwithin10worldregions.factorscouldbeachanginggeopoliticallandscape,energysecurity,jobcreationorglobalandlocalclimateTotailorthemodelforthisproject,weaddedNorwayascommitments.So,tobetterunderstandthemostlikelyastandaloneregionbysplittingregionEuropeintotwodevelopmentinthenear-tomedium-term,whentheseregions:'Norway'and'Europe-without-Norway'.Inthisissueshavethebiggestimpactandarealsoeasiertoway,wederiveseparateforecastresultsforNorwayforecast,wehaveconductedinterviewsanddiscussionsalongwiththeothertenregions.withpoliticians,advocacygroups,andbusinessleaderstogaininsightsonhowtheyviewthemedium-termTheanalysiscoverstheperiod1990–2050,withchangesfuturepolicylandscapeunfolding.Inadditiontounfoldingonamulti-yearscalethatisfine-tunedinsomeexternalexperts,wehaveheldinternaldiscussionswithcasestoreflecthourlydynamics.WecontinuallyupdatecolleaguesindifferentpartsofDNV.Muchappreciationourmodel’sstructureandtheinputdata.Inthisreport,toeveryonefortakingthetimetorespondandgivewedonotrepeatalldetailsonmethodologyandfeedbackondifferenttopics.assumptionsfromEnergyTransitionOutlook2023(DNV,2023a),butrefertothatreportforfurtherdetails.OuranalysisproducesasingleWearealsomindfulthatthisanalysishasbeenprepared‘best-estimate’forecastofNorway'swhileRussia'swaronUkraineisanongoinginternationalconflictandinthecontextoftheunsettledeconomicenergyfuture,givenexpectedeconomic,environmentatthetail-endoftheCOVID-19pandemic.Thesefactorsadduncertaintytoseveralparametersofpolicyandtechnologydevelopmentsandassociatedcosts.7DNVEnergyTransitionNorway20231.2AssumptionsandTechnologydevelopmentpoliciesDNVbasesitsforecastonthecontinueddevelopmentofproventechnologiesintermsofcostsandtechnicalKeyinputassumptionsintheETOmodelarelinkedtofeasibility,notuncertainbreakthroughs.However,duringparameterssuchaspopulation,economicdevelopment,theperiodcoveredbythisOutlook,thelistofthosethattechnologydevelopmentandpolicy.wecurrentlyconsider‘mostpromising’couldchangeduetoshiftsinlevelsoffinancialsupportorchangedpotentialPopulationforcostreduction.OthertechnologiesmayachieveaWeusethemostrecentresearchandresultsfromthebreakthrough,suchthattheybecomecost-competitive.Austria-basedIIASAWittgensteinCentreforDemographyandGlobalHumanCapital(WIC,2023).TheseresultsWithtechnologylearningcurves,thecostofatechnologyhavebeenupdatedin2023,andthedatacalibratedtotypicallydecreasesbyaconstantfractionwitheverymostrecentUNdataprojectsaglobalpopulationclosedoublingofinstalledcapacity.ThiscostlearningratetotheUNpopulationestimatesfor2050.Comparedwith(CLR)dynamicoccursbecauseongoingmarketdeploy-previousETNorwayreports,lowerfertilityratesandmentbringsgreaterexperience,expertise,andindustriallimitedimmigrationgiveNorwayaslightlylowerpopulationefficiencies,aswellasfurtherR&D.Technologylearningestimateof6.1million(mn)in2050from5.4mntoday.isglobal,anditistheglobalcapacitythatisusedinCLRcalculations.EconomicdevelopmentCoretechnology'costlearningrates'GDPpercapitaisameasureofthestandardoflivinginathatwehaveusedthroughto2050inourcountryandisamajordriverofenergyconsumptioninforecastinclude16%forbatteries,16%forourmodel.wind,and26%forsolarPVbutfallingto17%laterintheforecastperiod.DNVhasthisyeardecidedtousethelong-termeconomicdevelopmentdatafromOECD(2021).AtinfrequentCLRscannoteasilybeestablishedfortechnologieswithintervals,extraordinaryeventscauseanotablydifferentlowuptakeandwhicharestillintheirearlystagesofGDPandproductivitychanges.The2020COVID-19development.Insuchcases,calculationsrelyinsteadonoutbreakcausedsuchachange,withnegativegrowthinsightsfromsimilarbutmorematuretechnologies.figures.Becauseourmodelisnotsuitedforsuchshort-runCarboncaptureandstorage(CCS)—otherthanthatusedchanges,wehavechosentodeviatefromtheOECDGDPinenhancedoilrecovery—andnext-generationelectrolysismodelandinsteaduseeconomicgrowthfiguresfromtheareexamplesofthis.SolarPV,batteries,andwindInternationalMonetaryFund(IMF).TheIMFdatapointsturbinesareproventechnologieswithsignificanttoaGDPchangeforNorwaythatisgrowingfromthelowgroundsforestablishingCLRswithmoreconfidence.levelsin2020byanaverage1.6%peryearuntil2027,FurtherdowntheexperiencespectrumareoilandgasthereafterreturningtothegrowthratesgivenbytheextractiontechnologieswhereunitproductioncostsandOECDGDPmodel.accumulatedproductionlevelsarehighandeasytoestablish.However,hydrocarbonsfacepressuresfromForNorway,2022GDPwasUSD429billion(bn),orNOKthestructuraldeclineinoildemandintandemwithrising3,800bn,whilein2050itwillbeUSD667bn(NOK5,900bn).Thisimpliesacompoundannualgrowthrate(CAGR)of1.6%peryear.GDPpercapitaincreasesfromUSD78,900toUSD109,100perpersoninthesameperiod.Allnumbersarestatedin2017purchasingpowerparitytermsdenominatedin2022USDandthereforemustbeconvertedtogetrealornominalGDP.8IntroductionCHAPTER1extractioncostsandcarbonprices.Itisvirtuallyimpossiblethecoretechnologyisalmostallthereis,andsothetodisentanglethesetwoeffectsusingcostsandvolumeshighestCLRdominates.Forothertechnologies,likealone;wethereforeusehistoricaldatasetstoseparatelyunconventionalgasfracking,othercostcomponentsestimateCLRanddepletioneffects.Foralltechnologies,dominate.itisnecessarytoseparateoutthecostofthecoretechnology(e.g.solarPVpanels)fromsupportingCoretechnologyCLRsthatwehaveusedthroughto2050technologies(e.g.solarPVcontrolsystemsandinourforecastinclude16%forbatteries,16%forwind,installationkits).Typically,thelatterhavealowerCLR.and26%forsolarPVbutfallingto17%laterintheforecastForexample,PVcoretechnologiesandbalance-period.OilandgasdevelopmenthasaCLRof10–20%,of-supply(BOS)equipmenthaveCLRsof28%and9%,buttheannualcostreductionisminorbecauseitcantakerespectively.Forsometechnologies,likebatteries,decadesforthecumulativeinstalledcapacitytodouble.Population(MN)GDP/person(USD)GHGemissions(MNtonneCO2e)GDP(USDBN)GHGemissions/person(t/personCO2e)Norway20225.47890048.94299Norway10910010.420506.16701.79DNVEnergyTransitionNorway2023PolicyFIGURE1Awiderangeofpolicyobjectives—suchasclimategoals,PolicyfactorsincludedinourOutlookairquality,health,jobcreation,energysecurity—willdrivepolicychanges,inturndrivingchangeintheenergysystem.1.Renewable2.Energystorage3.Zero-emissionpowersupportsupportvehiclesupportInourglobalmodel,country-leveldataonexpectedpolicyimpactsareweightedandaggregatedtoproduce4.Hydrogen5.CCS,DAC6.Energy-efficiencyregionalfiguresforinclusioninourcalculations.ForsupportsupportstandardsNorway,weincorporateexistingandlikelyfuturepolicyfactorsintoourforecast.7.Bans,phase-out8.Carbonpricing9.Fuel,energy,andplans,mandatesschemescarbontaxationItisnotagiventhatenergyorclimateambitionsandtargetswillbemetateithernational,regional,orglobal10.Airpollution11.Plasticpollution12.Methanelevels.Assuch,ourforecastdoesnotassumethatNorwayinterventionwillachieveitsnationaltargetofreducinggreenhousegasinterventioninterventionemissionsby55%by2030comparedwithlevelsin1990.Targetsandambitionlevelsmayormaynotbetranslatedintorealpolicy.TherearenumerousexamplesofgoalsandtargetsnotbeingmetinNorway.However,ambitioustargetsareoftenfollowedbyspecificpolicymeasurestranslatingambitionsintorealityinfluencingtheemissionstrajectory.FromthemainETOreport(DNV,2023a)wehaveacomprehensivelistofpolicyfactorsinfluencingtheforecast.ThesamepolicyfactorsareincorporatedinthisanalysiswiththefollowingadjustmentsforNorway:Renewablepowersupport—Fixedandfloatingoffshorewindprojectswillinitiallyreceivefinancialsupporttosupplydomesticenergydemandandtoestablishadomesticmarket.AscostsdecreaseandtheproportionofelectricityexportedtoEuropegrows,offeringhigherprofitability,financialsupportwillgraduallyreduce.Inadditiontothesesourcesofincome,weexpecttheretobemechanismstoredistributeprofitsfromhigh-marginenergyexports,suchashydropowerandgreenhydrogenexports,tofurtherenhancethefinancialviabilityofoffshorewinddevelopment.Zero-emissionvehiclesupport—ThesupportschemeforpassengerEVsincorporatethenewschemefrom1Jan2023,withslightlyincreasingcostsforEVpurchasesofvehiclesabovethe500,000NOKpricepointastheseareineligibleforthe25%VATexemption.—ForEVsinthecommercialvehiclessegment,supportschemeswillcontinueastodaythengrowslowlyfromthelate2020suntilEVsaccountfor90%ofnewvehiclesalesin2040,whenweexpectmaximumuptakeofelectricdrivetrains.—Wehaveincludedthegovernment’sambitiononincreaseduseofbiofuelintransport.Thefractionofbiofueluseforinternalcombustionenginesincreasesfrom13%in2022to20%in2030andstaysthereuntil2040,thendeclineswithshrinkinguseofinternalcombustionenginevehicles.10IntroductionCHAPTER1Hydrogen—Weexpectsomeproductionprojectstobesubsidisedtocompensateforhighhydrogenpriceswherecarbondioxide(CO2)pricingstillmakeshydrogenuncompetitive.ThelevelofsupportisexpectedtobeUSD0.30/kgH2forbluehydrogenandashighasUSD2.5/kgH2forgreenhydrogen,untiltheearly2030s.—Weexpecttaxandgridchargesforgrid-connectedelectrolyserstobeonly25%ofthelevelsthatapplytootherindustrialconsumers.Thisisthecombinedresultoftwofactors.Oneisactivegovernmentsupport.Theotheristhatsomegrid-connectedelectrolyserswillberenewableelectricityproducersdeciding,basedonprice,betweensellingelectricitytothegridorforhydrogenproduction;iftheywithholdselling,theydonotneedtobuyelectricity.—Weexpectthecostofnaturalgasforsteammethanereformerstobelowerthantheindustrialgasprice,duetotheexpectationthatmanyreformerswillbesupplieddirectlytogasproducerswithoutgoingthroughthetransmissionnetworkandthemarket.Weassumethegaspriceformethanereformerstobe25%ofwholesalepricetoretailprice,onaverage.Carboncaptureandstorage—TheLongshipprojectwithCCSfromBrevikisincludedwithphase-inby2025/2026.AlsoincludedisCCSatKlemetsrudwithphase-infrom2027/2028.—TheCCSoperationsattheSleipnerandSnøhvitfieldsontheNorwegianContinentalShelf(NCS)areexpectedtobephasedout.ThecarboncapturedatSleipnerisnotexpectedtobereplacedbyanalternativeoperation.However,weexpectthatCO2willneedtoberemovedatliquefiednaturalgas(LNG)liquefactioninstallations,thusreplacingCO2capturedatSnøhvit,whereoperationswillbephasedoutinthelate2030s.—AllotherCCSwillbedevelopedonacommercialbasis,albeittakingincreasingcarbonpricesintoaccount.Carbonprice—Carbonpricesarereflectedascostsforfossilfuelsinthepowerandmanufacturingsectors.Intheseareas,NorwayispartoftheEUemissionstradingscheme(ETS),andcarbonpricesequivalenttotherestofEurope(reachingUSD250/tCO2in2050)areused.—ANorwegiancarbonpricereaching2,000NOK/tCO2bythe2030sisincludedin‘energysectorownuse’,suchasforoilandgasextraction.—Inotherareasofthemodel(e.g.agriculture,householdemissions)carbonpriceisnotuseddirectly,buttaxationoffuels,energy,andcarbonisincorporated,causingadditionalcosts.Fueltax—Fossil-fueltaxincreasesataquarterofthecarbon-pricegrowthratefortheroadtransportsubsector.Powercapacitylimitations—Forpoliticalreasons,Norwayisunlikelytomakelargecapacityadditionsforonshorewind,hydropowerorsolarPVforexport—evenifprofitable.—Foroffshorewind(bottom-fixedandfloating),wedonotexpectanysimilarpowercapacitylimitations,andcapacitywillbeaddedwhenprofitable,alsoforexport.—Norwayisexpectedtoaddgeneratingcapacitytosupportincreasingdemandfordomesticenergyuse.Sincehydropowerandwindproductionvaryannually,Norwaywillaccepttheneedtoaddcapacitytomaintainasurplusof10%aboveaveragedemandlevels.—Forexportingelectricity,weexpectfurtherinterconnectioncapacityof5GW,andassumeitsgradualintroductionduringthe2030s.Totalinterconnectorcapacityin2050is4.2GWtotheUKand14GWtoEurope.—Wedonotexpecthydrogenexporttobelimitedbypipelinecapacity,butitcanbeexportedwhenneededeitherthroughnewpipelinesorrepurposednaturalgaspipelines.Agricultural(Othersector)practicesreducingmethane—Reductionofmethaneemissionsfromlivestockthroughfeedsupplement.Improvedmanuremanagementdeliveredtobiogasproduction,increasingto10%ofutilizationin2030andgrowingto30%by2050.Reducedemissionsfromfoodwasteandemissionsfromlanduse.—Allcombinedpracticesresultinareductionby2030of14%from2022oradeclineof39%comparedto1990.11DNVEnergyTransitionNorway20232ENERGYDEMANDNorway’senergyconsumptiondependsonasupply/demandbalance.Historically,ithashadsufficientenergyresourcestomeetdomesticdemandandexport.Electricityhasthelargestshare(44%)inthecountry’senergymix,andefficiencymeasuresanddecarbonizationareexpectedtodrivethisto66%in2050.Historically,energydemandhasgrowninlockstepwithTheenergymixwillchangeinthecomingdecades,populationgrowthandimprovementsinstandardsofdrivenbyenergysecurityandeffortstomeetemission-living.Norway’spopulationgrowthisslowingbutwillstillreductiontargets.In2022,47%ofthemixwasfossil-based;reach6.1millionpeoplein2050.Economicgrowthwillby2050,thiswillbehalved.Weexpectelectricityaverage1.6%from2022to2050,whentheeconomywillconsumptiontoriseinthefutureandforeseeelectrifi-be55%biggerthantoday’sUSD429bn(NOK3,800bn).cationacrossmanyend-uses,suchastransport,manufacturing,andpetroleumindustries.AdditionalMorepeoplerequiringmoreenergyservicesforelectricitydemandwillalsocomefromnewindustriestransportation,heating,lightingandconsumergoodsanddatacentresandhydrogenproduction.typicallymeansincreasedenergydemand.Thiswassountilaround2008,whendemandgrowthbegantolevelWeseeaslightincreaseinNorway’senergydemandoffduetoimpressivedevelopmentsinenergyefficiency(Figure2.1)from936PJin2022to951PJin2050.achieved,forexample,throughadvancesinlightingandDespitetheusualdriverssuchaspopulationandGDPheat-pumptechnologies.growthincreasingenergydemand,themarginal12EnergydemandCHAPTER2increasecanbeattributedtoefficiencygainsenabledelectricity,suchgainsarelimited,butelectrifyinggasbyelectrification.Energydemandisexpectedtoandoilproductionwillimproveefficiencies.Itisalsodecreaseintransportwithasignificanttransitiontoworthhighlightingtheevolvingandmorechallengingelectricvehicles(EVs),butwillgrowinthemanufacturingpowersupplybalancetowards2050.Thisisdrivenbyandbuildingssectors.rapidgrowthofgreenindustrieswhereenhancedefficiencyandflexibilityonthedemandsidewillplaykeyEnergyefficiencyisakeydriverofthetransitionoverourrolesinachievingabetterpowerbalance,relievingtheforecastperiod.ItisimportantfortheNorwegianpowergrid,andreducingtheurgencyofgridexpansion.system,especiallygoingforwardwithhighelectricitypricesandapressedenergysupplyinEurope.EnergyEfficienciescomenotonlyinenergysupplybutinhowitefficiencyisalsousuallythemostcost-effectivewaytoisused.Electrifyingend-usedemand,seenalreadywithreduceemissionsandshouldbeatthetopofthelistuptakeofelectricpassengervehicles,yieldsfurtherwhenpublicauthoritiesandcompaniesconsiderefficiencygains.Thebiggestimprovementisexpectedemissionmitigation.inroadtransportasEVswillcontinuetoedgeoutless-efficientinternalcombustionenginevehiclesFormanycountries,themaindriversofenergy-efficiency(ICEVs).Othermeasuresraisingefficiencyindemandimprovementsincludeelectrificationoftheenergysectorsincludeapplianceswitching,increasinginsulationsystemandtherapidlygrowingshareofrenewablesinthroughimprovedbuildingstandards,anduptakeofpowergeneration,eliminatingenormousheatlosses.heatpumpsforresidentialbuildingsandlow-heatBecausehydropowersuppliesmuchofNorway'smanufacturingprocesses.13DNVEnergyTransitionNorway20232.1Transportpurchaseandoperationalbenefits.Overtime,batterycost-learningrateswillrendersuchpoliciessuperfluous—Transport—includingroad,rail,aviationandmaritimeatleastforpassengervehicleswhereweforeseeasignifi-—accountedfor27%ofNorwegianfinalenergydemandcantdeclinefromtoday’slevels.Vehiclemanufacturersarein2022,almostentirelyintheformofoilasfuel(87%).WeadaptingtheirstrategiestocopewiththeloomingmarketforecastthatoverallenergydemandwilldeclinealmostdominanceofbatteryEVsinthepassengersegment,28%from250petajoules(PJ)in2022to181PJby2050drivinguptakeandfurtherloweringcost.Formostuses,(Figure2.2).EVswillsoonbecomemorecosteffectivethanICEVs;EVstypicallyconsumelessthanathirdoftheenergythatICEVsPassengerandcommercialvehiclescombinedarethedoandcostmuchlesstomaintain.largestsourcesofenergydemand,constituting61%oftotalenergydemandin2022.WithroadtransportsettoTocontinuethesubstantialEVuptake,boththeaveragebelargelyelectrifiedby2050,itsshareinenergydemandrangeofEVsandthedensity/numberofchargingstationsreducesto41%.Overall,transport'stransformationwillneedtoincreaseandwillgrowinthefuture.InNorway,includeoil’sshareinitsfuelmixdroppingto29%in2050theaveragebatterycapacityperpassengervehicleisaselectricityandlow-carbonfuelscometodominate.expectedtoincreasefromthecurrent61kWhtoapproxi-Theotherthreedemandsectorsmodelleddonotmately94kWhin25years,resultinginextendedvehicleimproveefficiencytothesamedegree.rangeandmakingEVsevenmoreappealing(Figure2.3).RoadHowever,EVuptakeintheneartermhingesoncontinuedTheNorwegianParliamenthasdecidedonanationalgoalpolicysupport.Ourforecastfactorsinasignificantlevelofthatallnewcarssoldby2025shouldbezero-emission.Wesuchsupport,evenifcostswillslightlyincreaseowingtoathereforeanticipateongoingpoliciesaimedatreducingprogressivedeclineofsupportthatstartedwiththenewemissionsfromroadtraffictocontinuewithsignificantschemefrom1Jan2023forthemostexpensiveEVs.incentivestocompaniesandindividualsencouragingWhilenewvehiclesalesin2023areexpectedtobelowerswitchingfromICEvehicles(ICEV)toEVsthroughthanin2022,policiesshouldfocusnotonlyonthe14EnergydemandCHAPTER2proportionofnewvehiclesalesbeingEVs,butalsoonsignificantlybetweennowand2030.Bythemid-2030s,replacingexistingfossil-fuelledvehicles.ridesharingandautomationwillstarttomakeanimpactandwillslowlyreducethetotalnumberofvehiclestoEVswillaccountfor91%ofnewpassengervehiclesalesinabout3.3millionby2050,16%below2022levels.Norwayin2025,and97%by2030(Figure2.4).EVuptakewillbesomewhatslowerforcommercialvehicles,whichWhilethetotalnumberofvehicleswilldecline,theirincludeseverythingfromsmallertrucksandutilityutilizationwillbehigher,soneithertherelatedenergyvehiclestomunicipalbusesandlong-haulheavyroadservicesrequired,northetotalnumberofkilometrestransport.Batterycostanddrivingrangearethekeytravelledwillnecessarilyreduce.Totalkilometragewilldeterminantsinthecompetitionbetweenbatteriesandincrease20%bymid-century.Asimilardynamicisinternalcombustionengines,andhenceontheelectrifi-anticipatedforcommercialvehicles,butthenumberofcationopportunitiesofvariousvehiclesegments.Wevehiclesinthissegmentwillrise17%by2050.However,expect18%ofcommercialvehiclestocontinueusingaevenwiththisvehiclegrowthandrisingoveralldemandmixoffossil-andbio-basedfuelsin2050.Wehavealsoforvehicle-kilometresdriven,NorwaywillnotexperienceincreasedbiofueluseintransportinlinewithGovern-asimilargrowthinenergydemand.ment'sambitiontoreducetransportemissions,butnotcompletelyfulfillingthegoalof30%by2030.Biofuel’sNorwayisaworld-leadingcountrywhenshareinfuellinginternalcombustionenginesincreasesitcomestoelectrifyingpassenger-vehiclefrom13%in2022to20%in2030.transport,andwepredicta50:50splitbetweenEVsandpassengerICEVsontheNorwayisaworld-leadingcountrywhenitcomestoroadby2030.electrifyingpassenger-vehicletransport,andwepredicta50:50splitbetweenEVsandpassengerICEVsontheroadby2030.Thisratioisnotachievedforcommercialvehiclesuntillate2030s(Figure2.5).NotealsothatwedonotseethetotalnumberofvehiclesinNorwaygrowing15DNVEnergyTransitionNorway2023Figure2.6showsroadtransportenergydemandnearly28%isforNorwegiandomesticaviation,partofwhichishalvingfrom152PJin2022to75PJin2050,mainlywell-suitedforelectrification.Thegovernmentplanstobecauseoftheshiftfrominternalcombustionengineselectrifydomesticflightsby2040,meaningNorwaytoelectricdrivetrains.Thesubsector’senergydemandcouldbeafront-runnergloballyintheelectrificationofforoildeclines89%whiledemandforenergyfromshort-haulflights.Avinoranticipatesthepossibilityofelectricitygrowsmorethan10-fold.In2050,93%ofcarscommencingtrialsforelectricaircraftofupto19seatsonwillbeelectric,butelectricityisonlytwo-thirdsoftotalscheduledservicesfrom2027-2028,followedbycontinuedtransportenergydemand—whichrevealsboththetestingforlargeraircraft(50–90seats)(Avinor,2022).efficiencyofelectricityandthecorrespondinginefficiencyoflegacyfuels.Thatsaid,weforecastthatsustainableaviationfuels(SAF),particularlybiofuelblends,willbethemainAviationcontributorstoaviationemissionreductions,especiallyAirtravelhassubstantiallyincreasedsincethepandemicforinternationalandlong-haulflights.Whichlow-carbonandisexpectedtoreturntopre-COVIDlevelsby2025orzero-carbonsolution,ormixoffuelsolutions,willwithcontinuedgrowthtowardsmid-century.Theannualdominateisnotyetknownasthealternativesarenumberofpassengerflights(Figure2.7)isprojectedtocurrentlyfairlyevenlymatchedoncostandavailability.reach44millionby2050,58%morethanpre-pandemicBy2050,48%(36PJ)ofNorwegianaviation’sfuelmixwilllevels.stilldependonoil,buttheshareofbiofuelswillincreaseto21%(16PJ).Hydrogenandsyntheticlow-carbonfuelsFuelusewillnotgrowatthesamepace.Thisisduetoaccountfor20%(15PJ)andelectricaviation11%(9PJ),energy-efficiencygainsfromhigherloadfactorsandasinFigure2.7.developmentsinenginesandaerodynamics.Currently,72%ofthesubsector’senergydemandinNorwayisforMaritimeinternationalaviation,whichweexpecttocontinueusingMaritimetransportisbyfarthemostenergy-efficienttraditionalcombustionenginetechnology.Theremainingmodeoftransportintermsofenergypertonne-16EnergydemandCHAPTER2kilometre.Almost3%ofworldfinalenergydemand,andenergyefficienciescombinedwithmassivefuelincluding7%ofoil,isconsumedbyshipstoday,mainlydecarbonization,whichwillinvolveswitchingfromfueloilinternationalcargoshipping.Norwegianenergydemandtogasandammoniaandotherlow-andzero-carbonfrommaritimeactivitiesisfornationalshippingandfromfuels.NorwayhasbeenattheforefrontofadoptinginternationalshippingbunkeringinNorwegianports.Inliquefiednaturalgas(LNG)andbatteriesforhybridand2022,thetotaldemandwas38PJ,80%ofitfordomesticall-electricsolutions.Withshort-seashippingandlocaluse.Thereisafastrecoveryfromthepandemic,andthisferriesutilizingacombinationofelectricpropulsionanddemandwillgrowby2030.By2050,however,itwillbeaelectricshorepower,theenergydemandforelectricityquarter(24%)lessthanin2022.willincrease.Initiallythough,gasandlaterlow-carbonfuels(ammonia,methanol)willbethemainalternativeIn2023,theIMOupdateditsGHGstrategyforglobalfuelsourcesforshipping(Figure2.8).shipping,aimingfor:Rail—AreductionincarbonintensityofinternationalTheNorwegianrailsubsectorconsistsofalltrackedshippingbyatleast40%by2030comparedto2008.transportationincludingurbanrailtransport,suchassubwaysandtrams.Presently,1%(2.6PJ)ofNorway’s—Uptakeofzeroornear-zeroGHGemissiontechnolo-totaltransportenergydemandisforrail,ofwhich77%isgies,fuelsand/orenergysourcestorepresentatleastbasedonelectricityand23%onoil.Towards2050,rail5%,strivingfor10%,oftheenergyusedby2030.willstillaccountfor1%oftotaltransportenergydemand,butelectricitywillriseto85%ofthefuelmix.—GHGemissionsfrominternationalshippingtoreachnetzerobyoraround,i.e.closeto,2050.Globally,alackofsufficientenforcementmechanismsmeansthatthemaritimeindustrymayfallshortofthesestrengthenedambitions.ButNorwayisontracktomeetthedecarbonizationgoalsthroughimprovedutilization17DNVEnergyTransitionNorway20232.2BuildingsGDPpercapitaincreases,percapitaelectricityuseforappliancesandlightingalsorises.NorwayisatthehighIn2022,almostathird(30%)ofNorway’senergywasendofthisrelationship,andhigh-incomelevelsmanifestconsumedbybuildings,makingitthelargestenergythemselves,forexample,inhomeentertainmentdemandsector.78%ofbuildingenergydemandissystems,secondrefrigerators,orkeepingindoorandsuppliedbyelectricityandtherestbybiomass,directoutdoorlightsonallnight.However,recenthighheatand,toalesserextent,oil.Weforeseegrowthinelectricitypriceshavesharpenedfocusonenergybuildingsenergydemandby2050,drivenbyincreasingsavings,andwithsupportfromENOVAforhouseholdGDPpercapitaandfloorarea.Thiswillbeoffsetbyefficiencyimprovements.Weforecastthatenergyincreasedefficienciesinappliancesandheating.demandforappliancesandlightingforbothresidentialWealsoseeenergy-efficiencyimprovementsintheandcommercialbuildingswillincrease40%betweenstructureofbuildings,drivenbystricterregulations.2022and2050.WeestimatefinalenergydemandforappliancesandSpaceheatingaccountsfor50%ofallthesector’slighting,cooking,spacecooling,spaceheating,andenergydemandandisthesegmentwiththebiggestwaterheating.Spaceandwaterheatingarethesector’sexpectationofefficiencygains.Heatenergydemandlargestenergyuses,accountingfor50%and21%ofwillremainstableoverthenextdecadescomparedtodemand,respectively(Figure2.9).2022(144PJ),evenwhileheatingagrowingnumberofbuildings.MeasuresenablingthistransformationwillTheresidentialappliancesandlightingsegmentencom-includemoreinsulation;mandatoryenergyperfor-passeverythingfromreadinglights,phonechargersmancecertificatesandconnectionstodistrictheatingandcomputers,torefrigerators,washingmachines,andsystems;improvedautomationthroughdigitalization;dryers.Despiteimprovementsinenergyefficiencyforandgreaterheatingefficiencybyphasingoutoil-firedthesepurposes,historicalevidencesuggeststhatasheatingandwidespreaduseofheatpumps.18EnergydemandCHAPTER22.3ManufacturingHydroNorsealuminiumproductionfacilityatSundalsøraThemanufacturingsectorinouranalysisconsistsoftheextractionofrawmaterialsandtheirconversionintoThereishistoricalevidencethattheindustrialsectorfinishedgoods.However,fuelextraction—coal,oil,evolvesasthestandardoflivingincreases—asmeasurednaturalgas,andbiomass—andconversion,arebyGDPpercapita.Asaffluenceperpersonrises,aregionaccountedforunder'Energysectorownuse'(Chapter3).transitionsfrombeinganagrarian(primary)economyManufacturinginourOutlookcoversfoursubsectors:throughtobeinganindustrial(secondary)one,andfinally,toaservice-based(tertiary)economy,whereuponConstructionandmining—includesminingandtheindustrialsectordeclines.Inouranalysis,wehaveconstruction(e.g.roads,buildings,andinfrastructure).mappedthedifferentsectorsoftheeconomyfromhistoricalrecordsandthenextrapolatedthosetrendsintoBasematerials—includesproductionofnon-metallicthefuture.Adetaileddescriptionoftheglobaldemandminerals(includingconversionintocement),chemicals,andsupplymodelofmanufacturedgoodsandassociatedandpetrochemicals;non-ferrousmaterials,includingdemandforenergycanbefoundinETO2023(DNV,aluminium;woodanditsproducts,includingpaper,pulp,2023a).InNorway,theindustrialsectorandespeciallytheandprint.basematerialsubsectorisalargecontributortomanufac-turingsectorGDP.Ironandsteel—includestheproductionofironandsteel.Norway’smanufacturingsectorconsumed278PJinManufacturedgoods—includesproductionofgeneral2022,accountingfor30%ofthecountry’sfinalenergyconsumergoods;foodandtobacco;electronics,appli-demand.Basematerialsaccountformorethantwo-thirdsances,andmachinery;textilesandleather;andvehicles(70%)ofthetotalmanufacturingenergydemand(Figureandothertransportequipment.2.10)andareprimarilycharacterizedbyproductionofnon-ferrousmetals(e.g.aluminiumandmanganese),andpetrochemicals.Energydemandfromconstructionandminingcontinuestogrowtowards2050,whileironandsteeldecreases.Weexpectmanufacturingenergydemandtogrowto322PJ/yrby2050.19DNVEnergyTransitionNorway2023Energydemandforthebasematerialssubsectorwas195PJin2022.Itisenergyintensivebecauseitconvertsrawmaterialsintofeedstockforotherindustries.Energyconsumptioninthebasematerialsectorismainlyfromindustrialhigh-heatprocesses(65%)andoperatingmachines,motors,andappliances(35%),asinFigure2.11.Energydemandisexpectedtogrowsharplytowards2030,afterwhichgrowtheasesto240PJin2050.Thisoverallgrowthof23%from2022levelsisdrivenlargelybyincreasedelectricitydemandfromexpandingindustrialsectorssuchasbatterymanufacturing,aluminium,andhydrogenproduction.Cement,plastics,andotherchemicals’energyusewillseeanincreasetowards2040,beforeslowlydecliningtowards2050.MostoftheNorwegianironandsteelsubsector’scurrentenergydemandisforheat,therestbeingformachinery,equipment,andironorereductionduringsteelproduction(Figure2.11).Currently34PJ(12%ofmanufacturingenergydemand),ironandsteel’senergydemandwillbeathird(32%)lessin2050ascoalisphasedoutandelectricityandhydrogenareusedmore(Figure2.12).Globallyincreasingsharesofrecycledsteelinsteelproductionwillalsocontribute20EnergydemandCHAPTER2todecreasingtheenergydemandwithreducedneedMostNorwegianconstructionandminingcurrentenergyforvirginironore.demandisforheatandMMA,withasmallshareforonsiteindustrialvehicles(Figure2.11).Energydemandfromthemanufacturedgoodssubsectorhassteadilydeclinedsince2000andrepresents10%ChangesinNorwegianmanufacturing’senergymix(26PJ)ofmanufacturingdemand.Weexpectthisdependontechnologicalinnovation,resourceavailability,subsector’senergydemandtoremainsteadyuntiltheandonpoliciesandincentives.With63%ofthesectormid-2040sthengraduallyincreaseto30PJin2050.alreadyelectrified,furtherelectrificationoffersonlyElectricitypresentlyhasthelargestshareinthesubsector’slimitedefficiencygains,sochangebetweennowandenergymix,andweseethisgrowingtowards2050as,2050insourcingenergyismostlikelyinhigh-heattogetherwithhydrogen,itreplacesnaturalgas.Alargeprocesses.Fromthe2030s,weexpectdecarbonizedshare(61%)offinalenergyformanufacturedgoodsishydrogentoincreasinglyreplacecoalandnaturalgasasusedforheat.Another38%isusedtooperatemachines,theenergycarrierformanufacturingprocesses.Wemotors,andappliances(MMA).Drivenbyautomationforecastgrowthfrom0.3%oftheenergymixin2030toanddigitalization,energydemandforMMAinthe4%in2050forhydrogen.Directelectrificationwillsubsectorwillgrowtowards2050(Figure2.11).Bythen,continuetodominatethemanufacturingenergymix,withclosetohalfofthesubsector’senergydemandwillderivean82%shareby2050,drivenbyincreasingadoptionoffromMMAwhileefficienciesinheatingkeepenergyelectricityinactivitiessuchasbatterymanufacturinganddemandsteadyaround2022levels.datacentres,andbyelectrificationofprocessestomitigateemissions.WiththeincreasingshareofelectricityEnergydemandforconstructionandminingwas22PJinandhighelectricityprices,wehaveseenandforesee2022,slightlyincreasingtowards2050.Towards2050industriesstrugglingwithhighoperationalcosts,thereisanoticeableshiftawayfromoil,replacedbypotentiallyaffectingtheircompetitivenessinglobalincreasingsharesofelectricityandhydrogen(Figure2.12).markets,oreventheircontinuedviability.21DNVEnergyTransitionNorway20232.4Non-energy2.5EnergydemandcarriersIn2022,11%or106PJofprimaryfossil-fuelconsumptionBycombiningenergydemandforthesectorscovered,wasusedfornon-energypurposes.ThiscategoryweforecastNorway’sfinalenergydemandbyenergyrepresentstheuseofcoal,oil,andnaturalgasascarrier(Figure2.14).‘Final’heremeansenergydeliveredindustrialfeedstock.Muchoftheenergyintheformoftoend-usesectors.Itexcludesenergylossesandenergynaturalgasgoestopetrochemicalsasthelargestsectorownuseinpowerstations,oilfields,refineries,consumer(65%)offeedstock,andtherestisoilusedinpipelines,andsoon.constructionandforproducingnon-metallicminerals(Figure2.12).EvenforNorway,withoneoftheworld’smostrenewableenergy-basedpowersystems,theongoingtransitionwillHalfofthesector’snaturalgasconsumptionwasusedtofurtherincreasetheshareofelectricityinfinalenergyproduceplasticsin2022,withtherestgoingtomakingdemand.In2022,electricityrepresented44%(412PJ)offertilizers,paints,andotherchemicals.Toalignwiththethecountry’sfinalenergyuse.In2050,itwillaccountforEUtargetofrecycling55%ofallplasticpackagingby66%(625PJ).Cheaprenewables,technologicaladvances,2030,Norway’srateofplasticrecyclingneedstoimprove,andpolicyaretogetherdrivingsteadyelectrificationofnecessitatingamorecomprehensivemanagementoftheenergydemand.Onshorewind,limited-scalesolarPV,andrecyclingvaluechainwithinthecountry.Therateof(eventually)offshorewindbackedbypolicy,willsupportplasticrecyclingwillbeboostedbymoreefficient(andgrowthindemandforelectricityfordomesticuse,andforpotentiallycircular)chemicalrecyclingmethodssupple-export,whichwillaccountforarisingshareofthedemand.mentingorreplacingtraditionalmechanicalrecycling.PlasticsproductionwillcontinuetoincreasetoapeakinElectricsystemshavesmallerenergylossesthanfossil-2038tomeetgrowingdemand,butthendeclinesandbiomass-fuelledsystems.Whentechnologicaltowards2050.progressmakeselectricityavailableandviableforuseinever-moresubsectorsandnewapplications,userswillincreasinglymaketheswitch.ForNorway,thetransitiontohighersharesofelectricityintheenergysystemisdrivenbydecarbonizationambitionsinthetransportsector,andingasandoilproductionaswellasincreasedrenewable-basedmanufacturingprocesses.Weforeseeelectricityincreasinglyreplacingcoal,oil,andlatergasinthefinalenergydemandmix.Replacingthesesourcesasenergycarriersandfeedstockwillincreasedemandforelectricity,alsoamplifiedbynewdemandforelectricityforelectrolysis-basedhydrogenproduction.Incombi-nation,thiswillraiseelectricity’sshareinthefinalenergydemandmix.ThetotaldemandandsupplyofNorwegianenergyresourcesisdiscussedinsubsequentchapters.Cheaprenewables,technologicaladvances,andpolicyaretogetherdrivingsteadyelectrificationofenergydemand.22EnergydemandCHAPTER2ElectricferriesintheOslofjord23DNVEnergyTransitionNorway20233ENERGYSUPPLYInourEnergyTransitionOutlookto2050,weforecastafutureinwhichtheworld'senergydemandstopsgrowingevenastheglobalpopulationincreases,andtheeconomycontinuestoexpand.Theglobalenergymixisalsochangingrapidly.ForNorway,describedinChapter4.Thecountryalsoexportsandthiscreateschallengesforcontinuedfossil-energyexportimportssomeelectricityonadailyandseasonalbasis.butopensopportunitiestosupplylow-carbonelectricityApartfromexceptionallydryyears,theannualbalanceandhydrogentoEurope,mainlythroughexistinghastraditionallybeenanetexport,whichwillchangeinhydropowerandthefutureexpansionofoffshorewind.thefuturewithincreaseddemandfromthemanufacturingsectorandelectrificationoftheNorwegianContinentalPrimaryenergysupplyisthetotalamountofenergyShelf(NCS)supportedbyinterconnectioncablesandneededtomeetenergydemand.Figure3.1illustratesproductioncapacityincreasinginEurope.TheflowtoNorway'shistoricalandprojectedenergyconsumptionandfromNorwaywillthusimpacttheNorwegiangridoriginatingfromdiverseprimaryenergysources,consid-mix,whichisshowninFigure3.1asincludingelectricityeringgrosselectricityandhydrogentrade.Thefigureproductionfrom,forinstance,nuclear,aspartoftheshowsthatthecountry'sprimaryenergysupplydeclinedEuropeangridmix.byover10%from2018to2019,reaching1,220PJ,andweanticipateitwillremainrelativelystableuntilmid-century.Apartfromexceptionallydryyears,theannualbalancehastraditionallybeenaInadditiontoitsdomesticconsumption,Norwayexportsnetexport,whichwillchangeinthefuturesubstantialamountsofenergy,mainlyoilandgas,asThedomesticenergymixtodayismostlyelectricity-andoil-based,whereasnaturalgasismainlyusedoffshore.Inourforecast,weseefossilfuelsbeingreplacedbyrenewables,mainlywind.By2050,renewableprimary-energysupplywillrepresent76%ofthedomesticenergymix,upfromthe44%in2022.ThankstotheaggressiveadoptionofEVsinNorway,andtoacertainextentintherestofEurope,primaryoilusewillreduce3.8%yearonyearinNorway.Tocounteractthisreductioninoiluseintransportandothersectorssuchasoilandgasproduction,primaryenergyfromwindwillgrow9%yearonyearfrom45PJin2022to460PJin2050.24EnergysupplyCHAPTER325DNVEnergyTransitionNorway20233.1Oilelectricmobility.Thedeclineinoildemandfromcom-mercialvehicleswillbeslower.By2050,theroadForthelast30years,Norway’sdomesticoildemandhassubsector’soildemandwillhavereducedbyalmost89%beenonabumpyride.Demanddeclinedmarginallycomparedwith2022,adeclinelikethatinEurope(-84%).between1990and2022,from325PJto311PJ,withspikesandtroughsbetween.WhilehistoricalhighssawMaritimewillseeanevenfasterreduction,decliningtonumbersupto396PJin2007,demandwasatanunprec-lessthan6%ofcurrentoildemandby2050,from35toedentedlow-pointof276in2020duetotheCOVID-192PJ.Thestronggrowthofalternativefuelsforshipping,pandemic.AsFigure3.2shows,weforecasta66%dropsuchaselectricity,naturalgas,andlow-andzero-carbonindomesticoildemand,relativeto2022,withadecreasefuelsincombinationwithchangesinmaritimeenergytoabout107PJtowardsmid-century.Thisdeclineisdemandwilldrivethereduction.Aviation'sdependencesimilartodevelopmentsprojectedforEurope,whereweonoilwillbemoreprotracted,weprojectitsoildemandforecastareductionof64%comparedwith2022.Onawillincreaseby8%inthenexttwotothreeyearsbeforeitglobalscale,weforecastoildemandtodecline38%declinesto36PJin2050,40%lessthanin2022.Incomparedtothecurrentconsumptionlevelby2050.aviation,syntheticfuels,biofuels,andotherlow-andzero-carbonfuels,ratherthanelectrification,willdriveMorethanthree-quarters(69%)ofNorway’soildemanddecarbonization.isusedintransport;therestissplitbetweennon-energyuse,particularlyaspetrochemicalfeedstock,andotherTheshareofoilinenergydemandforbuildingswillenergyuse.Thetransportsector’sshareofoildemanddeclinefrom5%in2022to1%in2050,representinganincreasedinrecentdecadesfrom63%in1990upto69%absolutereductionfrom14to3PJ.Theprimaryapplicationin2022whenitstartedtodecline.In2022,about57%ofofoilinbuildings,specificallyforspaceandwaterthetransportsector’s216PJofoildemandcamefromheating,isexpectedtotransitiontowardelectrification.roadvehicles.Goingforward,passengervehiclessegmentwillexperiencethemostextensiveconversionAverysimilaroutcomeisexpectedinmanufacturing.toelectricity,boostedbyNorway’sleadingpositioninHere,thecurrent6%sharewilldecline9-foldtorepresent26EnergysupplyCHAPTER3about0.8%ofoildemandby2050.ThemaindriverhereProductionincreasesareexpectedoverthenexttwotoislessoiluseinindustrialheatprocesseswhereitisthreeyears,dueinparttothecapacityincreasesfromthereplacedbyelectricity.JohanSverdrupfieldandbecauseofthesupplyshocksassociatedwithRussia’sinvasionofUkraine.Thelonger-termpicture,is,however,oneofdecline(Figure3.3).Towardsmid-century,offshoreoilproductionwilldecreaseasseveraloilfieldsareapproachingtheirend-of-lifephase(e.g.Ekofisk,Statfjord,Gullfaks,SleipnerVest,Draugen).Increasedglobalcompetitioninashrinkingmarketwillplacedownwardpressureonoilprices,andrelativelyfewnewdiscoveriesareexpectedtobedevel-oped.Reducedoildemandwillmakeitlessattractivefortheindustrytoexpandproductionintochallengingenvironments,suchasdeepwaterand/orArcticlocations.Globally,asoilfieldsaredepletingfasterthanglobaldemandforoildeclines,continuedinvestmentinnewcapacityisexpected.ButincomingcapacityadditionsinNorwaywillnotreplacethecapacitybeingshutdown,becausenonewoilfieldswillbedevelopedafter2030.Thatsaid,oilproductioninNorwayin2050willbeatabout0.2Mbpd(seeFigure3.3)whichisstilltwicemorethandomesticdemandatabout0.1Mbpd.27DNVEnergyTransitionNorway20233.2NaturalgasBut,despitethis60%reductioninownuse,thenaturalgasdemandforhydrogenproductionwillsomewhatOnaglobalscale,weforecastthatworldnaturalgascounteractthedemandreductioninNorway.By2042,demandwillplateauto2030,andthendeclinefrom175133PJ/yearofnaturalgaswillbeconsumedtoproduceEJto149EJby2050,a15%reduction.Bymid-centuryhydrogeninNorway,representinga39%shareoftotalglobally,naturalgaswillovertakeoilinprimaryenergydemandforthegas.consumption.InEurope,whichreceivesalmostallofNorway’sgasexport,consumptionwillgraduallyThesecondlargestconsumptionofnaturalgasisasdeclineto61%ofthe2022levelin2050,aidedbythepetrochemicalfeedstock,representing20%in2022,naturalgassupplychokebroughtonbyRussia’sinvasionasharethatisexpectedtogrowto33%by2050ofUkraine.(Figure3.4).Almostnonaturalgaswillbeusedforpowergenerationin2050;themanufacturingandOverallnaturalgasdemandinNorwaywillonlyreducebuildingssectorswillaccountforabout9%and1%,39%towardsmid-centuryfrom2022levels,despitetherespectively,whichissomewhatcontrarytothereduceduseinoffshoreoilandgasfields.Atpresent,situationinEuropewherenaturalgasispredominantlythemainnaturalgasuseinNorwayislinkedtotheusedinbuildingsandpowerstations.Thisisexplainedenergysector’sownconsumption.Here,consumptionbyNorway’suniquehydropower-dominatedpowerhasplateauedfrom2010atabout320PJ.Naturalgassystem.consumptionwillcontinueforafewmoreyearsbeforedecliningsteadilythroughto2050,reaching216PJ.ThisOnaglobalscale,gasproductionwillremainstabledeclineislinkedtosignificantelectrificationoftheNCS,andmovetonewlocationsaroundtheworld.Intermsmainlythroughshorepower,butalsothroughwindofabsoluteoutput,thethreedominantplayersin2020turbineslikeHywindTampen,whichreplacegaswereNorthEastEurasia,theMiddleEastandNorthturbinesonoffshoreinstallations.Africa,andNorthAmerica.ButtheUkrainewarhasled28EnergysupplyCHAPTER3toseverecurtailmentofNorthEastEurasiannatural3.3Electricitygassupply,atleastintheperiodupto2030.ElectricitydemandFigure3.3showsNorway’snaturalgasproductioninIn2022,Norway’sannualelectricityconsumptionper2022wasabout134Bnm3anditisprojectedtobepersonwas25.8MWh.Thisisoneofthehighestperaboutthesameuntil2026beforeitdeclinesto77Bnm3capitaelectricityconsumptionsintheworld,thankstoin2050.Throughoutthistimespan,NorwaywillmaintainNorway’selectricity-intensiveindustriessuchasalumin-anexportshareofaround95%.Weforecastthatiumproduction;highpenetrationofelectricityuseinNorway’sLNGliquefactioncapacity,currentlyataroundheatingofresidentialandcommercialbuildingsandin5Mtperyear,willremainthesame.poweringtheoilandgasextractionindustry;andthecountry’sleadingroleintheelectrificationofroadandElectrificationofoilandgasproductionontheNCSmarinetransportation.Amplesupplyofrelativelycheapstartedasearlyas1996withTrollEast(A)connectingtoelectricityfromhydropowerplantshavebeenthemainthemainlandelectricitygrid.Withongoingelectrificationcontributortothisdevelopment.ThispercapitaoftheNCS,naturalgasuse,aspartofoilandgasconsumptionissettoincreasealmost2.5-foldto2050,extractionprocesses,willdecreaseby80%asgas-firedwithexplosivegrowthinnewdemandcategories.onsitepowerproductiononoffshoreinstallationsisreplacedbyelectricityfromthemainlandorfromTotalelectricitydemandinNorway,includingnetoffshorewind(Figure3.5).Itisexpectedthatpreviouselectricityimports(grossimportsminusgrossexportssinglecableconnectionsbetweenmainlandandineveryyear)isexpectedtoincreasefrom145TWhinoffshoreunitswillbecomemulti-userelectricitygrids2022to373TWhin2050.FoursectorswillspurthisontheNCS.Towardsmid-century,weforecasta54%growth:hydrogenproduction,transport,oilandgasshareofelectricityinthesupplyofNCSenergyneedsproduction,andtoalesserextent,spacecooling.(Figure3.5).Wewillseetheelectrificationofalltransportsegments,butfirstandforemostroadvehicles,with15TWh/yrconsumedby2.5millionpassengerand640,000commercialEVsin2050.Electricshort-haulflightswillconsume2.4TWhin2050.Ashydrogenande-fuelsstarttoreplacegasinmanufacturingandmarinegasoilintransport,respectively,fromthelate2020s,electricityconsumptionfromelectrolysisplantswillgrowsignifi-cantly,reaching1.6TWh/yrin2040and136TWh/yrin2050.Theenergysector’sownuserelatedtooilandgasproductionwillcontinuetogrowasbothnewandsomeexistingfieldsareelectrified.Electricityconsumptionwithinthesectorisestimatedtoreachaplateauof18TWhinthemid-2030sthendeclineinlinewithreducedactivitytowards2050whilerepresenting54%ofsegmentenergydemand.Totalelectricityuseinbuildingswillincreaseabout28%,from65to83TWhfrom2022to2050.Growthinprovisionofheat(space,water,andcooking)isexpectedtobeonly21%duetomoreefficientheatpumps,betterinsulation,andawarmingclimate.29DNVEnergyTransitionNorway2023Meanwhile,theappliancesandlightingsegmentwillInthefuture,weforeseeanevenmorediverseproduc-growbyabout40%,inlinewithbuildingexpansionandtionmix.Grid-connectedelectricitywilltriplefrom2022increasinglytech-heavylifestyles.Spaceheatingto2050whilehydropowergenerationgrowsbyonly16%.currentlyhasthehighestseasonalvariationsbetweenTheremainderofthegapwillbeclosedmostlybywind.winterandsummermonths,butthiswillstarttoevenoutOnshorewindhasseensignificantgrowth.However,aslesselectricityisusedforheatingandmorepowerispublicandinsomecasesjudicialopposition(Supremeconsumedbyappliances.AmoreevendistributionofCourtofNorway,2021)combinedwithwhatamountstoloadacrosstheyearwillreducetheratioofpeakloadtoalmostahaltintheissuanceofnewconcessionswilllimittheannualaverage.onshorewindgrowthintheshortterm.Unsurprisingly,increasingglobalwarmingwillbringFromthe2030s,offshorewind,withpoliciesfavouringhighersummertemperatures,whichresultsinhigherfloatingmorethanfixed,willgrowrapidly,drivenbyelectricitydemandforspacecoolinginNorway.From91reducedcosts,sustainedgovernmentsupport,andGWhconsumedin2022,spacecoolingelectricityincreasingopportunitiesforthetradeofelectricity.2050demandwillgrowtoabout1.5TWhin2050.electricitygenerationwillinclude6%solarPV,<0.5%gas,10%onshorewindand42%offshorewind(mostlyElectricitysupplyexported).Theremaining39%willbehydropower-based.Historically,Norway’selectricitysupplyhasbeendomi-Whilestand-aloneLi-ionbatterystorageincludingnatedbyhydropower(Figure3.7),andupto2005,overvehicle-to-gridsuppliesonly2%oftheelectricityin2050,99%ofdomesticelectricitywassuppliedbythissource.italsoplaysanimportantpartinbalancingdemandandAtthatpoint,othertechnologiesstartedtomakeinroads,supplyinNorwayinthefuture.suchthatin2022non-hydroelectricitygenerationwas14%,splitas8%fromwind,1.5%fromgas,0.3%fromElectricitygenerationbiomassand0.2%eachfromcoalandsolarPV.TherestAlthoughitispossibletocontrolhowmuchpoweriscomesfromimportedelectricity.generatedfromhydropowerstations,theiroperations30EnergysupplyCHAPTER3areimpactedbywaterlevelsinthereservoirs.ForthatprovidedbyEVsthroughvehicle-to-gridsystems.Wereason,wecategorizehydropowerasdispatchableassumethatthebatterycapacityofEVsavailableforgridgenerationwithstorageconstraints.AsFigure3.7shows,flexibilitywillgraduallyincreaseandreach10%ofthehydropowergenerationfluctuatesfromyeartoyearduebatterycapacityofallEVsin2035andremainatthatleveltovariationsinrainfall.Inourmodelling,weuseanthereafter.TheelectricitytradewiththerestofEuropeisaverageyeartoforecastthefuturequantitiesofwaterbasedonthewholesalepricedifferencesbetweeninflowtothereservoirs,sinceitisimpossibletopredictNorwayandtherestofEurope.Theoperationsofstoragethevariationsduetonaturalfactors.Asaverageprecipi-technologiesaremodelledbyaheuristicalgorithmthattationislikelytoincrease(NVE,2023),weincludeaslightaimstoutilizethestorageinthemostsuitablewaytoincreaseintheaveragecapacityfactorofhydropowerexploitpricearbitrageopportunities.powerstationstowards2050.TheETO'spowermarketoperatesonanhourlyscaleandWindandsolarPVarenon-dispatchablebecausecontrolfindsthemarketequilibriumateachhourbyaddinguptheoverhowmuchelectricitythesetechnologiesprovideispotentialsupplyanddemandatdifferentpricesandcalcu-limited.Wehaveusednormalizeddeterministicprofileslatingthepriceatwhichtotalsupplyequalstotaldemand.fortheirgenerationpatterns.Weaccountforthediffer-encesinonshoreandoffshorewindprofiles,whereThegraphicoverleafsummarizestheoperationofouroffshorehashighercapacityfactorsandasteadiermodel’spower-marketmodule,andthedynamicsofprofile.Thegenerationprofilesvaryoveryears,repre-powersupplyanddemandoverthesametypicalwintersentingtechnologicalimprovementsandgeographicalweekin2028,2038,and2048.Ourhourlymodelignoresdistributionofthewindturbinesandsolarpanels.anygridconstraints,meaningthatwithinthemodelanydemandcanbemetbyanygeneratorinthecountryorOurforecastalsoaccountsfortheimpactsofcross-region,regardlessoflocation.ForNorway,wedonotborderelectricitytradeandenergystorage,namelydistinguishbetweenthebiddingzonesandtreatthepumpedhydrostorage,batterystorage,andthestoragewholecountryasasinglemarket.31DNVEnergyTransitionNorway2023Norway’shourlysupplyanddemandTheNorwegianpowersystemwilltransformfrombeinganetimporterofpowerintheneartermtobecomeanetexporter,withoffshorewindcapacitybuild-out,andsupplyanddemandbalancedthroughgrid-connectedelectrolysers.Weillustratethisdramaticchangebyforecastinghourlydemandforthesamewinterweekinthreedifferentyears(2028,2038,2048).Norwayelectricitydemandbysegment;2023-2050Norwayelectricitysupplybysource;2023-20502023–2050:FigureaboveshowstheevolutionofdemandandsupplyintheNorwegianpowersystem,cumulateddailyandpresentedannually.Thepeakdemandandsupplystartsincreasingconsiderablyfrom2035,withcapacitybuild-outofoffshorewindintheNorthSea,inconjunctionwithNorway’sabilitytoexportthischeappower.Fromthe2040s,weforecastconsiderableamountsofgrid-connectedpowerbeingusedtoproducehydrogen,againforexportpurposes.Norwayelectricitydemandbysegment;week2;2028Norwayelectricitysupplybysource;week2;20282028:Norwayisanetelectricityimporterineverysinglehourofthisweekduetolimitedoffshorewindcapacitybuild-out,andhighwinterheatingdemand,whichpeaksduringmid-day.Inthecriticaleveninghours,thereisconsiderablepowerimportintoNorwayasthesystemfacesinflexibleandsustaineddemand.Limitedcapacityandstoragebuild-outhindersadequacy;andgiventhelowerpricesintherestoftheEuropeanmarketcomparedtothemarginalpriceofhydropower,adequacyisachievedthroughelectricityimports.32EnergysupplyCHAPTER3Norwayelectricitydemandbysegment;week2;2038Norwayelectricitysupplybysource;week2;20382038:Thereisacompletereversalofthesupplyanddemandsituationfoundin2028,andNorwayisanetelectricityexporter,eveninwinterby2038.Thefixedandfloatingoffshorewindcapacitybuild-outensuresthatthereissparepowertobeexportedduring90%ofthehoursinthisweek,duetothepriceadvantageoffshorewindhas,givenverylowmarginalcosts.FloatingoffshorewindhasalsoovertakenonshorewindpowergenerationbecauseofhighercapacityfactorsintheNorthSea.Duetothepossibilityofexport,curtailmentofwindpowerisquiteminimal,evenwithoutthepresenceofsignificantstoragecapacityinthegrid.Norwayelectricitydemandbysegment;week2;2048Norwayelectricitysupplybysource;week2;20482048:Powersupplyanddemandarecompletelytransformedcomparedwith2028and2038by2048.Grid-connectedelectrolysersovertakeheatingdemand,eveninwinter,throughouttheweek.WhileNorwayexportspowerduringasimilarnumberofhoursasin2038,exportsarereducedduetothesustaineddemandforpowerfromelectrolysers.Thepresenceofbothdedicatedgrid-connectedstorageandvehicle-to-gridpowerarecritical,astheyprovidepowerduringmid-day,peak-demandhours,andhencemaintainsupplyadequacy.Duringwindyperiods,whenwindpowerpricesarelow,thesamestorageischargedwithcheapoffshorewindelectricity,thusensuringminimalcurtailment.33DNVEnergyTransitionNorway2023CapacitydevelopmentsFigure3.8showsourestimatesfortheinstalledrenewablePowersystemswithconsiderablesharesofvariableenergycapacityinthefuture.Governmentsupportisrenewableelectricitysources(VRES)suchaswindandassumedtocloseafractionofthegapbetweenthecostsolarfacethe‘captureprice’problem.Thatis,sincetheseofthesetechnologiesandthecheapestcompetingtechnologieshavenear-zeromarginalrunningcosts,conventionaltechnology,hydropower.In2049,weelectricitypricestendtowardszeroduringhourswhenforeseeoffshorewindcapacity,bothgrid-connectedandelectricityproductionfromwindandsolararesignificantoff-grid,overtakinghydropowercapacityinNorway.Weandplentiful.Asmoreandmoresolarandwindentertheforecastahigheruptakeoffloatingoffshorewind(FOW)powersystem,thenumberofhourswhereelectricitycomparedwithfixedoffshorewind,despitethelowerpricesarezerotendtoincrease.Thisimpliesthatthelevelizedcostofthelatter.Themainreasonisadditionalelectricitypricesthesesourcescancapture,ordemandgovernmentalsupportaswellasnomajorlimitationstotendstobelow,thusleadingtodevelopersbeingoceanspace,wherefixedoffshorewindwillhavetouninterestedininvestinginthesesourceswhenrevenueco-existwithothereconomicactivitiessuchasfishing.prospectsdiminish.OurhourlycomparativeanalysisofNorwegianandButwedonotforeseethisbeingashowstopperforNorway.Europeanpowersystemsindicatesthatupto50%ofThereasonforthisisthathydropowerandpumpedhydro,annualoutputfromNorwegianFOWcanbeexportedtowhichhavehigherandstablevariablecosts,willcounteractEurope.Mostoftherestisusedtoproduceelectrolysis-thevariabilityofwindandsolarandsetthepriceincombi-basedgreenhydrogen,alsoforexportpurposes.nationwiththeEuropeanelectricitymarket.In2050,hydropowerwillstillhaveanon-trivialshareofbothhourlyTherearecertainoverlapsinthecostofnewdevelop-andyearlygenerationinNorway.Additionally,theabilitytoments,aswellasmanygeographicalandpoliticalfactors,exportwindpowertootherregionsandgainrevenuealsoresultinginthetechnologybuiltnotalwaysbeingtheoffsetsthedeclining‘captureprice’problem.lowestcostoption.Hence,wegetadistributionbasedon34EnergysupplyCHAPTER3TABLE3.1InstalledcapacityandtheannualaveragecapacityfactorofpowerstationsInstalledcapacity(GW)bytheendofyearCapacityfactor20222030204020502022203020402050Hydropower34.135.938.738.845%46%44%46%Onshorewind5.55.59.914.329%30%32%33%Floatingoffshorewind0.011.125.250%50%51%53%Fixedoffshorewind0.00.510.112.249%49%52%SolarPV0.42.76.810.815%15%19%20%Solar+storage0.00.36.615%18%19%Thermal1.01.11.53.728%-43%5%-53%8%-38%2%-35%0.91.7Onshorewindonshoreoff-gridcapacityforhydrogenproduction0.050.050.10.1Fixedoffshorewindoff-gridcapacityfor0.000.003.34.0hydrogenproduction0.000.001.42.0Floatingoffshorewindoff-gridcapacityforhydrogenproductionpriceandthoseotherfactors.Figure3.9illustratesfactoroftheinstalledcapacity.Inadditiontogrid-historicalandfutureannualpowercapacityadditionsbyconnectedcapacity,weincludeoff-gridcapacitypowerstationtypeestimatedusingthislogic.Capacitydedicatedforhydrogenproduction.Tosupportagridadditionsinthenearfutureincludenewcapacityunderwithvariablerenewablecapacity,weforecast1.4GWofconstruction.pumpedhydrostorageand36.5GWofstand-aloneLi-ionbatterystorageintheNorwegianelectricitygridAfterthesepowerstationscomeonline,investmentswillin2050.slowdowninthemid-2020s.The2030swillbethelastdecadewithsignificanthydropoweradditions.WithHydropoweralmostfullexploitationofhydropowerwithflexibilityandWithmorethan1,769plants(Energifaktanorge,2023),rampingup/downcapabilityalreadyby2023,thehydropoweristhebackboneoftheNorwegianelectricitycapacityadditionsinthefuturewillbeofsmallerplantsorsystem.Unlikehydropowercapacityinrelativelyflatupgradesintheirpowercapacitycapableofgeneratingcountrieswithlimiteddams,theNorwegianhydropoweroutputovershortperiods,butnotmoreenergyperyear.systemissupportedbyaverystrongreservoirstoragecapacity,withatotalof87TWhacrossthecountryFromthemid-2020s,solarPVadditionstakeplace,(Energifaktanorge,2023).Thiscapacityactsasabuffermotivatedbyelectricitydeficitsduringmid-daypeaksandagainstfluctuationsindemand,aswellasirregularitiesinthedesireforlocalenergysecurity.After2040,weforeseethewaterflowtothereservoirs.Italsohasthepotentialtothemajorityofnewcapacitytobeinwindpower,domi-actasabatteryforelectricitysystemsinEurope.OverthenatedbyalargeshareofFOW,tothepointwhereNorwaylast30years,theaveragecapacityfactorofNorwegianwillboast9%ofallinstalledFOWcapacityintheworld.hydropowerplantshasbeenbetween42%and58%withameanvalueof49%.Thisyear-to-yearirregularityTable3.1showsdevelopmentswithininstalledcapacityresultedinsomeyearsclosingwithanetimportofthroughtomid-centuryandtheaverageannualcapacityelectricity,butaveragegenerationcapacityhasbeen35DNVEnergyTransitionNorway2023aboveaveragedomesticdemand,allowingNorwaytobeofhydropowerandwind.Withnewinterconnectionstoanetelectricityexporterovertheyears.theUK,Germany,andtherestofScandinavia,NorwegianhydropowerwillexpanditsbalancingroleinthelargerHydropowerwillcontinuetoplayacentralroleinNorway’sEuropeanpowersystem.electricitysystem.However,theexisting34GWinstalledcapacitywillexpandonlyslightlybefore2050,toreach39WindGW.AlthoughthetechnicalpotentialforNorwegianNorway’swindindustryhasgrownsteadilysincethefirsthydropowerisestimatedtobearound46GWinstallationsin1993.Attheendof2022,thetotalinstalled(NVE,2011;Cleveland&Morris,2013),wepredictcapacitywasmorethan5.5GW,almostallintheformofcapacityadditionstohaltwellbeforethatowingtoonshoreprojects,withlessthan100MWoffloatingfactorsrelatedtopreservationofhabitats,licences,offshorewindprojects.However,mostonshorewindregulation,cost,andcompetition.Withanincreaseinturbinesareonthesouthwest,west,andnorthshores.annualrainfallasaresultofclimatechange,annualFavourablewindconditionsexceeding1,000W/m²windgenerationisexpectedtoreach150TWhinthe2040s.speeddensityinsomelocations,proximitytothegrid,andlargeareaswithrelativelysparsepopulationmakesWithincreasedvariabilityonthesupplysideofthetheNorwegianwestcoastadvantageousforwindelectricitysystemwithagrowingshareofwind,hydro-developments.powerwillneedtorespondtofluctuationsnotonlyindemand,butalsoingeneration.AdoptionofnewHowever,futureonshoreinstallationsarelikelytobetechnologiesallowinghydropowerplantstorampupanddelayedand/orscaleddownbypublicconcernslikedownmorerapidlywillbeinstrumentalintheintegrationnoise,impactonbirds,recreation,andadesireto36EnergysupplyCHAPTER3preserveuntouchedlandscapesandwilderness.UnlikeWithincreasedvariabilityonthesupplysidemanycountrieswithsignificantfossilsharesintheirpoweroftheelectricitysystemwithagrowingsharemixesandwherewindinvestmentsareregardedasofwind,hydropowerwillneedtorespondtoessentialfordecarbonizingandloweringthecostoffluctuationsnotonlyindemand,butalsoinelectricitygeneration,theNorwegianwindindustrygeneration.enjoyslesspublicsupport.ThepublicisalsowaryofargumentsforbuildingexcesswindcapacityforexporttoBy2030,theglobalvolumetriclearningeffectwouldtheEuropeancontinent,‘incorrectly’fearingitmaycausehalvetheLCOEofFOWandreducetheLCOEoffixeddomesticelectricitypricestoincrease.offshorewindbyathird(33%)(Figure3.10).Thealwayshighernon-turbineandinstallationcostsofFOWimplyGiventhatmitigatingclimatechangealsopreservesthatevenin2050,theLCOEofFOWwillbeabout27%naturalhabitats,wepredictthatgrowthinNorway’swindhigherthanthatoffixedoffshorewind.However,thefactcapacitywillbemostlyoffshore,constituting81%of210thattheNorthSeadeepensveryquicklyoffNorway’sTWhwind-basedgenerationin2050.Thisisdespitethewestcoastwilllimittheshareofbottom-fixedoffshoreheadwindsandchallengestheglobaloffshorewindturbines,alongwithre-prioritizationofshallowoceanindustryhasfacedinthelast12monthsinmanymaturefloorspace.So,thedrasticcostreductionstobeeconomiessuchastheUS,theUK,andotherEuropeanexpectedinoffshorewindareoneofthemajordriversofcountries(DNV,2023a).theuptakeofwindpowerinNorway.Regardless,thesuccessofoffshorewindalsohingesuponitsharingtheAsseeninFigure3.10,theincreaseinlevelizedcostofoceanspacewithotherdomainsanduses,suchasenergy(LCOE)forwindpoweralsoimpactedtheindustryfisheries,aquaculture,shipping,andrecreationgoinginNorway,withLCOEincreasesin2022and2023afterintothefuture(DNV,2022).almostadecadeofcontinuousreductions.Butsomereasonsforthecostincreasesareindeedtemporary,suchAnothermajordriveroftheuptakeofwindinNorwayassupply-chainsnarlsandlabourshortagesandaredueistheincreaseindomesticelectricitydemand,asacourse-correctionby2030.presentedearlierinFigure3.6.Duetothelimitedgrowthpossibilitiesofhydropower,windisinaprimepositiontofillthegapbetweenincreasingdemandandavailablesupply.Electrificationofoffshoreoilandgasproductionwillbeanadditionaldriverforoffshorewind.Withtheelectricityconsumedbyoffshoreplatformsincreasingtocoverupto54%oftheirenergydemandinthecoming30years,FOWturbineslocatedneartheplatformswillbeanaturalchoiceforsupplyingtherequiredpower.Finally,newinterconnectionstotheUKandGermany,combinedwiththehigherflexibilityneedsinEurope,willmeanthatrevenuesforNorwegianFOWoperatorsfromexportswillexceedrevenuesfromthedomesticmarket.37DNVEnergyTransitionNorway2023SolarPVDespitethisusefulness,stand-alonesolarPVwillalwaysWepredictinstalledcapacitytoincrease36-foldfrom420beinstalledmorethansolar+storage.ButinthedecadeMWin2022to15GWin2050,asseeninFigure3.11.Weleadingto2040,thegapbetweenthetwowillwiden.includetwocategoriesforsolar:solarPVpanelsconnectedEvenmorestand-alonesolarPVcapacitywillbetogridfromutility-scaleorrooftoparrays,andsolar+stor-installedasrooftopsolarbecomesmoreubiquitousagewherestorageisintegratedaspartoftheinstallation,whilesolar+storageplantsloseoutoncostcompetitive-producingineffectapowerplantwithdispatchablepower.ness.However,wereiteratethatutility-scalesolarPVwillremainmarginal,withthemainuseofsolarPVpanelsEventhoughsolarco-locatedwithstorageisinitiallybeinginrooftopinstallationsassupplementarypower.moreexpensive,theabilitytocaptureahigherelectricityThemaindisadvantageofsolarPVislowsolarirradiationpricewhensolarPVisnotoperatingwilleventuallyleadinNorway.toalmostathirdofthesolarPVcapacityincludingstoragecapacityasintegralbymid-century.HydrogenHydrogenisusuallyproducedeitherthroughtheDespitethelow-capacityfactorsreportedforsolar+electrolyticbreakdownofwaterintohydrogenandstorageinTable3.1,thecombinationhasitsuses.Whileoxygenorviasteammethanereforming(SMR)naturalcapacityfactorsareusefulindetermininghowmuchagas.SMRiscurrentlythepreferredoptionduetothegenerationoftechnologyisusedoverayear,theydonotexistingSMRinfrastructure.giveanyinsightastowhenthisgenerationprovidesthecapacity.Inthecaseofsolar+storage,itcanprovideHowever,weforecasttheSMRadvantagetodecreasestoredelectricityinperiodsofhighdemand,especiallyinwithhighercarbonpricesandongoingprocessthebridgingperiodofthelate2020sandearly2030s,improvementsforelectrolysis-basedhydrogenwhentheNorwegianpowersystemistransitioningtoaproductioncombinedwithlowerelectricitypriceswind-dominatedsystem.fromVREScapacity.38EnergysupplyCHAPTER3HydrogensuppliedviaelectrolysisisseenasoneofmanyWithincreasinglyabundantVRES,electrolysiswillstartflexibilityoptionstotakeadvantageoflowpowerpricesgainingtractionfromthe2040s,andbymid-centurywillwhenproductionfromVRESisplentiful,anddemandissupply95%ofhydrogenasanenergycarrier,and80%oflacking,asalsoshowninourhourlypowerdemandsupplythetotalhydrogenproduction.infographic.However,therearemanyothermarketsforsuchcheapelectricity;forexample,fordemandresponse,Weseehydrogenasalikelyzero-emissionenergycarrierpumpedhydro,battery-electricvehicles(storage),andforheatapplicationsinmanufacturing(Figure3.13).Byutility-scalebatteries.Therefore,itwillbesometimemid-century,13.5PJofhydrogenwillbeusedforindus-beforeabundantVRESresultsinasteepincreaseintrialheatprovisioninmanufacturing,a7%share.Mostofelectrolysis-basedhydrogenproductioninNorway.thehydrogenwillbeusedinthemanufacturingofForthisreason,SMRcoupledwithCCSwillbethemainaluminiumandotherbasematerials,followedbyironandproductionrouteforhydrogenforenergyinthe2030s.steelproductionandtheconstructionindustry.TheEuropeandemandforlow-carbonhydrogencoupledwithexistingnaturalgaspipelineinfrastructurewhichmayForthetransportsector,hydrogencanserveasanberepurposedfortransportinghydrogen,willincentivizeenergy-storagemediumcompetingwithbatterybluehydrogenproductioninNorway.storageinzero-emissionsusage,andasareplacementforoilandgas.Long-haul,heavyroadtransportthatHydrogensuppliedviaelectrolysisisseencannotrelyaseasilyaspassengervehiclesonbatteriesasoneofmanyflexibilityoptionstotakeformainenergystorage,willturntofuel-cellsolutions,advantageoflowpowerprices.despitethesebeingonlyhalfasenergyefficientasbatteriesandmorecomplexandcostly.HydrogenuseinNorwayforroadtransportwillpickupfrom2040onwardsbutonlyreach3PJby2050,representing4%ofroadtransportenergydemand.Withinmaritimetransport,coveredthoroughlyinDNV’sEnergyTransitionOutlook(2023a)andinourMaritimecompanionreport(DNV,2023c),weexpectsignificantuptakeby2050oflow-andzero-carbonfuelalternativesderivedfromhydrogen(e.g.ammoniaandsyntheticfuels).Theywillbepartlyimplementedinhybridconfigurationscombiningdieselandgas-fuelledpropulsionoptions,andwillprovideslightlymorethan55%ofthemaritimefuelmixbymid-century.Wepredictammoniaandsyntheticfuelscombinedwillprovide16PJ/yrofNorway’smaritimesectorenergydemand(Figure3.13)bythen.Norwegianaviationiswell-suitedforbattery-electricflightsonitsshort-haulnetworkconnectingcoastalcities.However,forlong-haulandinternationalflights,syntheticfuelsandpurehydrogenwillplayrolesindecarbonizingaviation.After2030,wheninfrastructurehasdevelopedandcostshavedeclined,weseesyntheticfuelsandhydrogenstartingtoreplaceregularjetfuelandby2050,20%(15PJ)ofaviationenergydemandiscoveredbytheseenergycarriers.39DNVEnergyTransitionNorway20234ENERGYTRADENorwaywillcontinuetobeasignificantnetexporterofenergybutatprogressivelylowerlevelsoverthenext30years.Thiscontrastswiththeshort-termpressureonNorwaytoincreaseexportstoEuropeasitweansitselfoffRussianfossilfuels.AlthoughnewfieldswillboostoilandgasexportsintheandgasexportswasUSD55bn(490bnNOK)/yearonimmediatefuture,theproductionboostwillnotbeaverageoverthelast10years(SSB,2023)butgrewtoanenoughtoexceedtheexportpeakof2001.Thelong-astoundingUSD214bn(1900bnNOK)in2022(NorsktermtrendofoilandgasexportswillshowasteadyPetroleum,2023).Usingconstantprices,acombineddeclinefromthemiddleofthisdecade(Figure4.1).68%reductioninoilandgasenergyexportrevenueby2050willtranslateintoUSD17.5bn(155bnNOK)inBy2050,oilexportswillbe7%of2022level,andgasannualrevenuebythen.Thisfigureisonethirdoftheexports35%lowerthanin2022.Electricityandhydrogenexportrevenuegeneratedbyoilandgasinanaverageexportswillbemarginalforafewyears,butwithyear,and8%comparedwiththerecordyearof2022.increasingdemandfromEuropeandpowercapacityHowever,therewillbeanincreasingamountofelectricity,increases,hydrogenandelectricityexportswillgrow.hydrogen,andammoniaexportgoingforward.30TWh/However,volumeswillremaincomparativelyminor,yearinnetelectricityexportsby2050translatetoanandelectricityandhydrogenrevenueswillbeunableadditionalincomeofUSD2bn(19bnNOK)/year.Hydrogentocompensateforthelostrevenuefromoilandgasexportofabout3.5MtH2/yrcouldyieldanadditionalexportsinthelongterm.ThevalueofNorwegianoilUSD7bn(61bnNOK)/yearrevenuein2050assuminga40EnergytradeCHAPTER4hydrogenpriceof2USD/kgH2.Inotherwords,onthehydrogenorammoniawiththesenewdecarbonizedpresenttrajectory,totalenergyexportsin2050willrunenergysourcesthenbeingexportedusingexistingsomeUSD28bn(NOK250bn)/yrbelowaverageannualinfrastructurewithsomeretrofitting.exportrevenueoverthepastdecade.ElectricityexportsNorway’stotalnettransfercapacitytoothercountriesisOilandgasexports8.9GW.Ofthis,3.7GWgoestoSweden,1.6GWtoNorway’sproductionmeetsabout2%ofglobaloilDenmark,0.7GWtotheNetherlandsand0.1GWtodemand.AsthecompetitivenessofNorwegianoilFinland(ENTSO-E,2023).AsshowninFigure4.2,theweakensrelativetoothercheapersourcesinaworldNordLinksubseacabletoGermany(1.4GW)andthewithdecliningoildemand,itsshareoftheglobaloilNorthSeaLinktotheUK(1.4GW)cameonlinein2021marketwillgraduallyreducetoaround1%by2050.Asaandarenowoperating.Tofacilitateneighbouringresult,totaloilexports(includingoilproducts)willfalltocountriesingrowingtherenewablesshareofenergy1Mbpd(75millionSm³oe/yr)in2030,0.32Mbpdconsumption,inthemid-2030sweforeseeanincrease(24millionSm³oe/yr)in2040and0.08Mbpd(6millioninNorway’scross-bordercapacitytoSwedenandSm³oe/yr)in2050.Denmarkbyanother1GWand1.3GW,respectively.InterconnectorsbetweenNorwayandUK(2.8GW)asTheoutlookforgasislessbleak,sincenaturalgaswillwellasGermany(1.5GW)andNetherlands(1.8GW)ismaintainastrongmarketpositionintheEuropeanexpected.Finally,weassumea650MWcablefromenergysystem,althoughlowerthanweforecastayearNorthernNorwaytoFinlandtobebuiltby2040.agoandevenlowerthantheyearbefore.ThelowerToday,Norway’selectricitygridisdividedintofiveforecastisadirectconsequenceofRussia’sinvasionofbiddingzones.Theactualcross-borderelectricitytradeUkraineandtheassociateddecisionofEuropetomoveisverydependentonthesupplyanddemandconditionsawayfromfossilfuels,especiallynaturalgas.Theinthesebiddingzonesandthemarketstheytradewith.continent’sdemandforgashaslikelypeakedthisyearandwillnotreturntohistoricallevels.Norwaysupplies41closeto25%ofEurope’sgasdemand(NorskPetroleum,2023).InparallelwiththedeclininggasdemandinEuropetowardsmid-century,Norway’sgasexports(includingNGLs)willstarttodeclinewithinthisdecade.In2050,Norwegiangasexportswillbe69billionm³/yr,35%lessthanin2022.TotalLNGexportfromNorwayisaround6billionm3/yrinanormalsituation.Butwiththe2020fireatMelkøyaandtherestoredfacility’sstart-upinJune2022,only3.7bnm3ofgaswasexportedlastyear,35%toFrance,62%tootherEuropeancountries,andonly3%tocountriesoutsideofEurope(BP,2023).WeforecastLNGexporttostayatexistinglevelsasgasdemandoutsideEuropewillbeincreasinglyuncertain.ButovertimeitwilldeclineinlinewithreduceddemandfromEurope.However,itcouldbethatLNGexportcapacitywillgrowinthefutureasgasexportviapipelinesisalsodecliningduetolowerEuropeandemand:themainformofexportwill,however,remainbypipelinetoEurope.Itcouldalsobe,asdiscussedbelow,thatnaturalgasisconvertedtoDNVEnergyTransitionNorway2023OurmodelsimplifiesthisstructurebyrepresentingThemainreasonforthisdeclineisachangefromNorwayandtherestofEuropeastwoelectricitymarketsexportingelectricitytoproducinghydrogenandwithoutanygridconstraintswithineachmarket.Thisexportingthegas.AdditionalwindcapacityinEuropesimplifiedmodelstilloperatesathourlyintervalsandwillmakeitmoreprofitabletoproducehydrogencalculatesthetradebetweenNorwayandtherestofinsteadofexportingelectricity.TheincreaseinexportEurope,basedonthepricedifferentialsineachmarket.ofelectricityisonlypartiallylinkedtoanincreaseinnetByusingthisapproach,wecanreplicatehistoricaltradetransfercapacity,becauseNorway’sabilitytoexportvolumesreasonablywell.electricityduringthesummermonths—thetimeofyearhithertoassociatedwithmostexports—doesnotInthelast20years,Norway’saverageannualnetelectricityexpandasfastascapacityadditions.Therealchangeexporthasbeenaround10TWh.Butgoingforward,thishappensinthewintermonths.Inthepast,Norwayhassituationisgoingchange.Intheshort-term,betweenbeenanetimporterinwintermonths.But,withample2025to2035,netimportsofelectricitywillrisebyuptogenerationcapacity,especiallyfromnewwindinvest-5TWh/yr.Anincreaseinelectricitydemandcombinedments,fromthemid-2030sNorwaywillbecomeanetwithlimitedcapacityadditionsarethereasonsforthis.electricityexporter,alsoduringwintermonths.But,thenewcapacityadditionsfromoffshorewindFigure4.3demonstrateshowelectricitytradeofNorwayimprovethebalancesuchthatNorwayisagainanetchangesinawintermonthfrom2028to2038.In2028,forexporterincreasingtheannualexportto63TWh/yrbythemajorityofthewintermonth(60%ofthehours)2040.ThishighannualexportsdonotcontinueNorwayimportselectricity,andinthehoursthatitdoesonwards,though.Withgrid-connectedelectrolysersexport,mostoftheexportsarecomprisedofhydropower.providingasustaineddemandforpower,electricityOnthecontrary,theimportsin2038areveryminimal,exportsdeclineto29TWh/yrby2050.Nevertheless,withNorwayexportingelectricitytoEuropeforaboutweexpectNorwaytoremainanetexporterofelectricity90%ofthehours.Amongtheexports,morethan50%isfrom2035onwards.offshorewind,andtheclearmajority,FOW.42EnergytradeCHAPTER4WindturbinesinMøreogRomsdalWehaveassumedthatnewoffshorewindcapacitywillnotonlybedrivenbydomesticdemandandrevenue,butalsobyincreasingEuropeanelectricitydemandandopportunitiesforhighexportrevenue.Weseethishappeninginaself-reinforcingprocess,whereyear-roundexportopportunitytriggersnewfloatingoffshorewindinvestments,andtheavailabilityofthisnewcapacityallowsmuchofthefloatingoffshorewind’sannualgenerationtobeexported.Mostoftheremainingcapacitywillbeusedtoproduceelectrolysis-basedhydrogenortorechargelong-termstorage.Oneimportantreasonfortheincreaseinannualnetelectricityimportsbetween2028and2032isbiggerfluctuationsinfutureelectricityprices.Ouranalysisshowsthatelectricitypricesinitiallywillincreaseandfacebiggerfluctuations.Asbothcapacityandexport/importvolumesincrease,notonlywillaverageelectricityprices43DNVEnergyTransitionNorway2023decline,butpricefluctuationswithintheyearwillalsohydrogen)withexportsstartingintheearly2030s.Byreduce.Thepricestabilityislinkedtoincreasedflexibility2040,weexpectanexportvolumeover1Mtandgrowingresourcesinthepowersystem,broughtbynewinter-toexceed3Mthydrogenby2050.Bythen80%oftheconnections,availabilityofEVbatteriesthroughvehicle-producedhydrogenwillbebasedonelectrolysisto-gridsystems,newutility-scalestoragecapacities,andpoweredbyrenewableenergy,predominantlywind.betterdemandresponseaffordedbywidespreadadoptionofsmartgrids.OnelimitationnotaccountedforAlreadyinstalledandfuturepipelinestotheUKandistheimpactofgridconstraints,whicharenotreflectedmainlandEuropewillenablehydrogentransportfrominourmodel’sdesign.AseachspecificbiddingzonewillNorwaytoEurope.Bluehydrogenfromnaturalgasbeconstrainedbyitslocalsupplyanddemand,aswellascoupledwithCCScouldprovideasteadyflowofitsinterconnectioncapacity,theactualvariationinpricehydrogenusingNorway'snaturalgasresourcesandmaybehigherthanthatpredictedbyourmodel.CCSknowledgeeffectively,supplementedbygreenhydrogenfromrenewableenergysourcessuchasHydrogenexportsoffshorewindorNorway’sgridelectricity.Theexport-Inthepresentdecade,hydrogenasanenergycarrierbasedbasedshort-tomedium-termfocusisonbluewillremaintooexpensivetobewidelyusedandthehydrogenaccountingfor56%ofNorway’shydrogendemandwillinsteadbecreatedthroughpolicysupportproductionby2035.Another20%willstillcomefromandincentivesfromgovernments(e.g.inEurope).Intheunabatednaturalgas-basedhydrogenproduction.2030s,theaveragepriceofhydrogenwillreducebyhalfHowever,bymid-centurythisratiochanges:over70%ofcomparedwiththeearly2020sanditsroleinindustrialNorway’shydrogenwillbegrid-based,14%intotalfromheatingwillbecomemorewidespread,thoughglobalnaturalgaswithCCS,13%fromdedicatedwind,and2%useofhydrogenasanenergycarrierwillremainsmallerfromunabatednaturalgas.thanitsnon-energyuse.The2040swillbethedecadeofdemanddiversificationasmorehard-to-electrifyBiguptakemarketsinEurope.suchasGermany,sectorswillbeforcedtousehydrogenoritsderivativesstronglypreferhydrogenfromrenewablesourcesovertodecarbonize,forexample,throughtheuptakeofthatproducedfromnaturalgas(evenifcoupledwithammoniaande-fuelsasmaritimeandaviationfuels.CCS).However,thecurrentturmoilingasmarketshasledtoareluctantacceptanceofthebridgingroleofEurope,withitsstronghydrogensupportpolicies,willbluehydrogen.leadglobalhydrogenuptakewith13%hydrogenanditsderivativesinits2050finalenergymix.EuropeisoneofWhileweforecastsignificantamountsofhydrogentobethreeleadingworldregionsthattogetherwillaccountexportedtoEuropeviapipelines,low-carbonammoniafor75%oftheglobalhydrogendemandforenergyisgoingtobetradedonkeelfromNorway.Inthelatepurposes,afigurethatalsoreflectsregions’sharesin2040s,low-carbonammoniaexportsfromNorwaywillinternationalmaritimeandaviationenergyconsumptionreachabout0.8Mtperyear,tobeshippedmainlytoinlinewiththesizeoftheireconomies.Europeanports.NorwayisinaverygoodpositiontosupportthistransitionBluehydrogenfromnaturalgascoupledinEurope.Today,NorwayusespredominantlynaturalgaswithCCScouldprovideasteadyflowofandcoalassourcesforhydrogenproductionforuseashydrogenusingNorway’snaturalgasindustrialfeedstock.Bymid-century,Norway’sdomesticresourcesandCCSknowledgeeffectivelyhydrogendemandmorethandoubles,butitshydrogenproductionwillgrowbyafactorof10.Thisopenspossi-bilitiesforhydrogenexporttoEurope,astheregion’sdemandwillexceeditssupply.InitiallytheproductionofhydrogenwillbefromnaturalgasusingCCS(blue44EnergytradeCHAPTER4EnergytradeBy2050,Norway’soilexportwillbe7%oftoday’slevel.Naturalgasexportswillbeat69bnm3in2050,35%belowtoday'slevels.Asmallbutgrowingshareofexportswillbeintheformofelectricity,hydrogenanditsderivatives.Suchproductionwillincreasinglybelargerthandomesticdemand,andNorwaywillexport29TWh/yrofelectricity,3.5Mt/yrhydrogenand0.8Mt/yrammoniain2050.MaritimeexportOilandgaspipelinesPowercablesUnits:GM3/yrUnits:MtNH3/yr9108978675645343221102010202020302040020002050LNGHydrogenandderivativesCrudeoilexportsUnits:Millionbarrels/yr1400120010008006004002000201020202030204020502000Crudeoilexports(includesoilexportsbypipelineandshipping)PipelinegastradetoEuropePowertradeUnits:GM3/yrUnits:MtH2/yrUnits:TWh/yr1407010120960810075080640560430403202021010201020202030204000201020202030204020502000Naturalgas20502000HydrogenNetelectricityexportNetelectricityimportOilandgaspipelines,powerconnectorsandshiplocationaresimplified45DNVEnergyTransitionNorway20235EMISSIONSTheenergysectoristhedominantsourceofanthropogenicgreenhousegas(GHG)emissionsgloballyandinNorway.CO2isthemaincontributortotheseemissionsandcomeslargelyfromthecombustionoffossilfuels.Inthischapter,wedescribehowweestimateNorway’sindustrialprocesses.Alargequantityofthesecomefromemissionsbysourceandsectortodevelopafullaccountusingfossilfuelsasfeedstockinthesteelandpetro-ofthem.Webeginwiththeestimatedenergy-relatedchemicalindustries.Non-energyemissionsalsoariseCO2emissionsderivedfromourforecast,thenlistthefromthecalcinationprocessincementproductionandremainingGHGsandtheirorigins.Sinceourmodellingfromotherprocess-basedemissionsfromanodes.focusesmainlyontheenergysystem,wemakeassump-tionsonthedecarbonizationpossibilitiesforother,OtherGHGsinNorway’sfootprintaremethane,nitrousnon-energyrelatedanthropogenicGHGemissions.Weoxide,andindustrialf-gases(fluorinatedgases,i.e.concludewithadiscussionondevelopmentsrelatingtoHFCs,PFCsandSF6),allwithmuchmoreaggressivethecaptureandstorageofsomeoftheseemissions.globalwarmingpotentialthanCO2.Tonne-wise,theseemissionsaresmallcomparedwithCO2,butconvertedEmissionsbysourcetoCO2equivalents,theycontributed17%oftotalGHGNorway’senergy-relatedCO2emissionshaverisenemissionsin2022andwillaccountfor40%in2050.steadilyforthreedecades,andadeclinehasonlybeenobservedinthelastsevenyears.InadditiontothoseNorway'sforecastGHGemissionstrajectoryto2050isarisingfromfossil-fuelcombustion,alargeshareofsobering.In2022,emissionswereslightlylessthaninNorwegianCO2emissionsarenon-energyrelatedfrom1990andwepredicttheirdeclinetoreach27%by203046EmissionsCHAPTER5and80%by2050,when10.4milliontCO2ewillbeemittedothermajorsourceinthe‘Other’categoryismethane(Figure5.1).Thisfallswellshortoftheambitionsforafromlandfills.Weexpectprogressinreducingemissionsdeclineofatleast55%by2030and90–95%by2050.fromagricultureandanimalmanagementby2030and2050,butthesearetiedtoactivitylevelandthusrelativelyDecliningemissionsarelinkedmainlytoelectrificationofdifficulttoreducethroughtechnicalmeans.WehaveroadtransportandtheassociatedreductioninoilincludedsomeprogressasdescribedintheNorwegianconsumption.OtherfactorsareageneraldeclineinoilGovernment’s‘Greenbook’(2023),resultingin14%andgasproduction;usingcleangrid-connectedelectricityreductionfrom2022levelsto2030.However,wedoinsteadofnatural-gasturbinestopoweroilandgasnotassumeNorwegianagricultureandanimalactivityproduction;andchangesinheat-intensivemanufacturinglevelswilldecline.Someactivities,suchasmechanicalprocesses.AsourETOmodeldoesnotincludenon-CO2machineryintheagriculturalsector,willhaveCO2GHGs,wehaveusedcurrentemissionlevelstoforecastemissionreductionscomparabletothoseinthetrendsforeachsub-source,orhavetiedtheemissioncommercialvehiclesegment.sourcetoanactivitywemodel.Forinstance,methaneemissionsfromoilandgasactivitiesaretiedtoactivityIn2022,transportemitted29%(14MtCO2e)oftotallevelsandcalibratedtohistoricallevelsinoilandgasemissions,thelargestsectoralshare.Thesewillfallexploration,whichareincludedinthemodel.significantlytowards2050butarenotontracktofulfilNorway’s2030ambitionofreducingtransportemissionsEmissionsbysectorby55%comparedwith1990levels.TheroadtransportFromasectoralperspective,allemissionshavebeensubsectoremitted8.7MtCO2ein2022.By2030,thiswillassociatedwiththemainsectorsdescribedinourETOdeclineto5.4MtCO2e,26%lessthanin1990,and37%model.Carbondioxideemissionsdominateallsectorslowerthanin2022.Themaindriverofthisreductionisexceptthe‘Other’category,whichinthiscontextiselectrification,especiallyinpassengervehicles,wheremainlyagriculture.Agriculturalemissionsarelargelyemissionsdecline54%from1990levelsby2030.Themethanefromentericfermentationandmanure.Thegovernment’sambitiontoincreasebiofuelusetohelp47DNVEnergyTransitionNorway2023decarbonizeroadtransportwillalsocontribute.BetweenManufacturingcurrentlyemits12.3MtCO2e,aquarterofnowand2050,roadtransportemissionswilldecline92%Norway’stotalGHGemissions.Justoverhalfofmanu-torepresent7%(0.7MtCO2e)ofNorwegianemissions.facturingemissionsarefromprocess-relatedCO2emissionsinheavyindustry,andtherestcomesfromAviation,rail,andmaritimecombustionemissionshavecombustionoffossilfuels.By2030,emissionswillhavebeendecliningsince2000andarecurrently38%ofdeclinedbyonlyasixth(17%)duetoexpectedgrowthinNorwegiantransportemissions.However,theseindustrialoutput.By2050,however,emissionsof4.6subsectors’emissionswillnotdeclineasfastasthoseMtCO2ewillbenearlytwo-thirds(63%)lessthan2022fromroadtransport.Helpedbysyntheticfuels,biofuels,levels.Thisisduemainlytofuelswitchingtocleanerandhybridelectricsolutions,overallGHGemissionssources(electricityandhydrogen)inindustrialheat,andfromthesetransportsegmentsareexpectedtofall70%togreateruseofcarboncaptureandstorage(CCS)ofbetween1990to2050,whentheywillbe1.2MtCO2e.emissionsfromwastestreams.Thesecondlargestsectoralemissionsisthe13.5MtCO2eBuildingsenergyuseinNorwayislargelylinkedto(28%oftotalemissions)from‘energysectorownuse’,electricheating.Somefossilfuelsarestillusedforspacemainlyforenergyextractionandproduction.Most(62%)andwaterheatingincommercialbuildings.TheremainingofthisisCO2fromgasturbinesgeneratingelectricityonemissionsaremethanefromburningbiomassforheating.theNorwegianContinentalShelf(NCS).AstheNCSCurrently,thebuildingssectorrepresentsonly1%(aroundcontinuestoelectrifymoreproduction,asefficiencies500ktCO2e)ofNorwegianemissions.Evenwithanincrease,andasinstallationswithoutelectrificationreachexpectedincreaseinbuildingmassandfloorspace,theseendoflife,emissionswilldeclineby30%between2022emissionswilldeclinefurtherduetobuildingstandardsand2030.By2050,emissionsfrom'energysectorownefficiencies,fuelswitching,andthefurtherintroductionuse'willhavereduced84%to2.1MtCO2since2022dueofheatpumpsystems,makingelectricheatingeventodecliningactivitiesontheNCSandanelectrificationmoreprevalent.By2050,emissionswillhavefurtherrateofjustover54%oftheenergyused.declinedby33%to340ktCO2eperyear.Thedevelopmentsweareawareoftodayandhavemodelledarenothappeningatsufficientscaletomakeasignificantcontri-butiontotheemissionsreductionrequiredtoachieveNorway’sclimateambitions.48EmissionsCHAPTER5TheJohanSverdrupfield.Image©Equinor/LizetteBertelsen,JonnyEngelsvollCarboncaptureandstorageactivities.However,thereisalikelihoodoftheCCSCarboncaptureandstorage(CCS)iscurrentlyalmostactivityatMelkøyabeingreplacedbyotheractivitiessolelyappliedinprocessesrelatedtooilandgaswherethecaptureofCO2isnecessaryforgasshippedextraction,wherethereisaviablebusinesscaseorneedonkeel.tofollowtechnicalspecifications.Weforecastthatinthefuture,largepointsources,mainlyinmanufacturing,Ourmodellingalsoincludes400ktCO2/yrcarbonwillincreasecarboncapturefromtheirwastestreams.captureatBrevikcementplantand400ktCO2/yrfromCollectively,however,thedevelopmentsweareawaretheKlemetsrudwaste-to-energyplant,withbothoftodayandhavemodelledarenothappeningatcapturestreamsanticipatedtocomeonlinegraduallysufficientscaletomakeasignificantcontributiontothefrom2025to2028.emissionsreductionrequiredtoachieveNorway’sclimateambitions.TheNorwegiangovernmentapprovedstatefundingofNOK16.1billionaspartoftheLongshipCCSinitiativeinToday,therearetwoCCSprocessesinNorway,both2020(Government.no,2020).Suchasignificantinvest-relatedtooilandgasactivities.AttheSleipnerfieldmentincentivizesincreasedCCSactivity,whichwesome850ktCO2/yrisremovedfromgasandinjectedincludeinourmodel,alongwithasignificantincreaseinintoanoffshoresandstonereservoir(GCCSI,2023).AtCO2price.TheeffectisanincreaseofemissionstheMelkøyaLNGfacility,anadditional700ktCO2/yriscaptured,startinginthelate2020sandslowlyaddingcapturedandtransportedbacktotheSnøhvitfieldandCCScapacityinnewsectorstobecapturingatotalofstoredinoffshorereservoirstopreventdryiceforma-8.4MtCO2/yrby2050(Figure5.3).Alargeshareofthetionintheliquefactionprocess.TheSleipnerfieldiscapturedCO2willbefrombluehydrogenproduction—expectedtocloseby2030(Equinor,2020)andSnøhvit6.6GtCO2/yrby2040.Capturewillthendeclinetowardsbythelate2030s(Offshore,2006).Wedonotanticipate2050asgreenhydrogenproductiongrowsandoutcom-thecapturefromSleipnerbeingreplacedbyotherpetesbluehydrogen.49DNVEnergyTransitionNorway2023Directaircapture(DAC)–directcaptureandsequestrationEnergytransitionindicatorsofCO2fromtheatmosphere–isstillanemergingtechnol-Norway’senergysystemisuniquecomparedwiththoseogy.Itshowspromiseforfurtherdecarbonizationbutisofothercountries.Ithasabundantnaturalenergycurrentlyonlyinpilotstateandwillneedtoproveitworksresourcesandarelativelysmallpopulation;alargeinlarge-scaleinstallations.Inourforecast,DACwillonlyenergyexport;andapowersectoralreadyamongthemakeameaningfuldifferenceby2040.Itisneverthelessamostdecarbonizedglobally.Figure5.4presentsmuch-neededtechnologytolimitglobalwarmingto1.5°CNorway’sdevelopmentagainstthreemainenergy-andcouldbeverymeaningfulforindividualcompaniestotransitionindicators:electrification,energy-intensityoffsettheirexistingemissions.SeveralinitiativesattractingimprovementsandcarbonintensityincomparisontoinvestorinterestwilllikelyleadtoearlyuptakeofDACinotherregions.Norway’sshareofelectricityinfinalenergyNorwayandcapturereaches1.9MtCO2/yrby2050,1%ofdemandwillreach66%in2050,farhigherthaninanyofglobalDACcapacity.theregionsinourglobalforecast.Energyintensityisreducedto1.8MJ/USDinmid-century,slightlymoreCombiningCCSonpointsourceswithDAC,weexpectthanintherestofEurope,whereitisexpectedtoreachatotalcaptureof10.3MtCO2/yrin2050,leaving10.41.5MJ/USD.CarbonintensitysignificantlydeclinesMtCO2uncaptured.RemainingCO2emissionsstembetween2030and2050,reachingafinalvalueof6.2fromsectorssuchastransport,whereemissionsaregCO2/MJ(81%reduction).Thislevelismuchlowerthandifficulttocapture,aswellasfromotherpointsourcesinEurope,whereweseeanintensityof10.6ggCO2/MJ,wherecaptureremainexpensiveandcomplicated.78%lessthan2022levels.ThemainreasonfortheseRemainingnon-CO2emissionsin2050(4.6MtCO2e)differencesisthatemissionsinEuropestemmainlyfromarefoundmainlyintheagriculturalsector(82%)andtransportandbuildings.ThesearesectorsthatNorwaywillbeincreasinglydifficulttoavoidorremovewithouthaselectrifiedsignificantly,givingNorwayanadvantageconsiderabledisruptiontofoodproduction.whenconsideringcarbonintensity.50EmissionsCHAPTER5MelkøyaLNGFacility,Hammerfest51DNVEnergyTransitionNorway20236NORWEGIANTRANSITIONINANEUCONTEXTNorwayfacesadifficultconundruminbalancingitsroleasasecuresupplierofoilandgastoEurope,buildingastrategicpositioninenergytransitionopportunities—whilemanaginginherenttransitionrisksforitsoilandgasresources—andmeetingitsowndecarbonizationambitionsunderjointEuropeancommitments.WheretheEUhassteppedupitstransitionefforts,emissionscuts,andraceforleadershipincleantech,Norway’sprogressisfarbehinditsannouncedambitions.TheenergytransitioninNorwayiscloselylinkedtoEUarethebackboneofeffortstoachieveEuropeanenergyclimategoals,energytransitionpolicies,andenergy-andclimateobjectivessuchasimplementingREPowerEUrelateddilemmas,andheavilyimpactedbyinternationalandaimingforarenewableshareinelectricitygenerationfactorsincludingthewarinUkraineandglobalsupply-togrowto69%(592GWsolarPVand510GWwind)inchainproblems.EUdemand,regulation,andpoliciesare2030(DG-Energy,2023).drivingenergydiscussionandpolicyinNorway.WithmuchofthekeylegislationoftheFitfor55packageManyproposedmeasuresandchangestoEUdirectivesadoptedin2023,theEUdeemsitselfontracktowardsitsarerelevanttotheEuropeanEconomicArea(EEA),ofgoalstoreduceEUemissionsbyatleast55%by2030andwhichNorwayisamember.Theseincludemeasurestoreachclimateneutralityby2050.Norwayhasreconfirmedgreenindustrialandenergysectors,anexamplebeingitsaimtocutemissionsatleast55%by2030(comparedtheRenewableEnergyDirectiveraisingfrom32%toto1990levels)and90–95%by2050,butourforecast42.5%(whilestrivingfor45%)theEUtargetforrenewableshowsthesegoalsareunachievablewithcurrenttrendsenergy’sshareoftheenergyconsumptionin2030;theandpolicies.TheClimateProgressReport2023(ESA,updatedEnergyEfficiencyDirective;areformand2023)concludesthatNorwayexpects“asignificantgapextensionoftheEUEmissionsTradingSystem(EUETS);towardsitscurrenttargets”andshouldaddmeasurestoandtheintroductionofaCarbonBorderAdjustmentcontributetotheEurope-wideeffort.Mechanism(CBAM)oncertainindustryandenergyimportsintotheEU.CleantransportinvestmentsareEUtransitionlegislationforgingaheadincentivizedbytheReFuelEUAviationinitiativeandNorwaysharestheEUambitionforEuropetobetheFuelEUMaritimeregulationaimingtoreducetheseworld’sfirstclimate-neutralregion.WiththeFitfor55transportsubsectors’environmentalfootprintbylegislativeproposalsfrom2021,theEUhopestoputitselfpromotingtheuptakeofsustainablefuels.UpdatedCO2onapathfor55%lessemissionby2030.MostpillarsofstandardsforcarsandvansintroduceprogressivetheFitfor55packageareinplace,withseveraladoptedEU-wideemissionsreductiontargetsinroadtransport.intolawin2023.TheirurgencywasheightenedbytheTheAlternativeFuelsInfrastructureRegulationshouldwarinUkraineleadingtoenergysupplyandpricecrises.ensureaccesstosufficientinfrastructureforrechargingThecrisespromptedtemporarymeasuresandacceleratedorrefuellingroadvehiclesandshipswithalternativefuels.thepackage’slegislativechangesandenergypolicyreforms.OneexampleistheREPowerEUplan(May2022)UncertainfuturedemandforNorwegianoilandgasboostingeffortstosave,diversify,andincreaseEuropeanNorwaysteppedupitsroleasasecuresuppliertorenewableenergyproductionandconsumption,therebyalleviatetheEU’sgasandoilshortagefollowingincreasingenergysecurity.RenewablepowerandgridsRussia’sinvasionofUkrainein2022andRussiacutting52NorwegiantransitioninanEUcontextCHAPTER624April2023,NorwegianPrimeMinisterJonasGahrStøremeetsUrsulavonderLeyen,PresidentoftheEuropeanCommission,tosigntheEU/NorwayGreenAlliance.Copyright:EuropeanUnion,2023.53DNVEnergyTransitionNorway2023gasexportstoEUcountries.GasproductionwasInaddition,expectedelectricitydemandfromtheoilboosted8%in2022andNorwaybecamethebiggestandgassectormightalsotieupgridcapacity.Norway’ssuppliertotheEU.TheNorwegianshareofEUpipeline2021ClimateActionPlanforeseesanincreaseinthenaturalgasimportsincreasedfrom38%inQ12022toNorwegiancarbontaxforemissionsfromtheenergy46%inQ12023,anditsshareofEUoilimportssector’sownusefromaround760NOKtodayto2,000increasedfrom10%inQ12022to13%inQ12023NOKin2030.Withtheoilandgasindustryaccounting(Eurostat,2023).foraroundaquarterofNorway’stotalGHGemissions,thecarbontaxmightprovidehigherincentivesforHowever,long-termdevelopmentsintheEU,aidedbyelectrificationofpetroleumactivities.StatnettassumestheaforementioneddeepeningofexistingandnewEUadoublingofthepowerconsumption,whichissimilartolegislation,pointtowardoilandgasbecominglessourforecast,fromthepetroleumsectorby2030.ThisattractivetoEUmarketssoonerthanpreviouslymightdivertgridcompanies’capacitiesfromotheranticipated.Legislativeeffortstomeetcleanenergymuch-needednetworkreinforcements.goals,weanitselfoffRussiansupplies,andreduceimportdependencies,arelikelytospeeduptheEU’sIncontrasttotheperspectiveofdwindlingdemandforphase-downandeventualphase-outofoilandgas,inNorwegianoilandgas,theremightbedemandforturncreatinguncertaintyaroundfuturedemandanddecarbonizedNorwegiangasintheformofbluethereforeNorwegianexports.DNV’smainETOforecastshydrogenproducedfromnaturalgasusingsteaminternationalandEuropeanoildemandtobe,respectively,reformingandcarboncaptureandstorage(CCS).38%and62%lowerthan2022levelsin2050.EUNorway’sEquinorandGermanpowercompanyRWEdemandfornaturalgasisprojectedtofall66%by2050.signedamemorandumofunderstanding(MOU)toThisdemanddecreaseissimilarlyreflectedinourETOjointlydeveloplarge-scaleenergyvaluechains.TheaimforNorway,whichseesoilproductionfall12%by2030istoreplacecoal-firedpowerplantsinGermanywithand88%by2050,andgasproductiondecline6%byhydrogen-readygas-firedpowerplants,andtobuild2030and42%by2050.productioncapacitiesforlow-carbonhydrogeninNorway.ThisMOUalsoincludesexportoflow-carbonLopsidedinvestmentstiltinfavouroffossilfuelshydrogenviapipelinefromNorwaytoGermany,andNorwegianinvestmentinoilandnaturalgasextractionthejointdevelopmentofoffshorewindfarms.Thisisexpectedtoincrease23%in2022/23followingopportunityisreflectedinourETOnumbers:morethanaveragegrowthratesfluctuatingaround3%year-on-yearthreemilliontonnesofhydrogenispipedfromNorwayoverthelastfiveyears.Inabsoluteterms,oilandgastotheEUin2050.extractionandpipelineinvestmentconstitutes70%oftotalindustryinvestmentinNorwayandiseighttimesDiscussingfutureNorwegianoilandgasproductionishigherthantheinvestmentinelectricityproductionandchallengingduetoconflictingtrends,suchasthelikelytransmissionanddistributionnetworksin2023.Invest-dwindlingoflong-termfossil-fueldemand,potentialmentinenergygeneration,ontheotherhand,hasbeenfutureopportunitiesrelatedtoCCS,andlong-termdecreasingyear-on-yearsince2020(seeStatisticseffectsandopportunitycostsoftoday’sinvestmentNorway,2023forallrelevantinvestmentdata).decisionsforadjacentenergyandindustrysectors.TheClimateCommitteewasclearontheneedforplanningThoughpredominantlycapital-intensive,theNorwegianwithaneyetoresourcescarcityandfossil-fuelrisks,onoilandgasindustryengagesacrucialpartofthelabourthelatterrecommendingthepreparationof“astrategyforce,whichisconsequentlyunavailableforelectrifyingforthefinalphaseofNorwegianpetroleumactivities…”industrialenergyuseandthebuild-outoftherenewableand“notgrantinganyfurtherlicensesfordevelopmentpower,transmission,anddistributionsectors.andoperation(PDO)orinstallationandoperation(PIO)untilsuchastrategyhasbeencompleted”(Klimautvalget2050,2023).54NorwegiantransitioninanEUcontextCHAPTER6Electricitysector—toolittleofeverything,tooslowreturntopre-2022/23levelsinthemediumterm,dueto(i)Norway’selectricityisalmostcompletelyproducedfromincreasingCO2prices,(ii)increasinginterconnectivitywithrenewableenergysources,especiallyhydropower.YetcontinentalEurope,and(iii)thegrowthinintermittentonthebackofdecarbonizationrequirementsandfurtherpowergeneration,furtherboostedbymoreambitiousEUelectrificationofenergydemandthroughnewelectricity-renewablestargetscombinedwithlimitednationalintensiveindustries,thereisaneedformassiveexpansion.capacitybuild-out.Onlyafter2035couldthewholesaleHowever,thedevelopmentofrenewableenergysourceselectricitypricereachpre-crisislevels,drivenbylowerinNorwayisstagnatingduetoseveraldomesticissues,renewablescosts,newpowergeneration,andfurtherwhicharealsolikelytoaffectNorway’sabilitytoexportpowersectordecarbonizationontheEuropeancontinent.electricityintotheEUinthemediumterm.Atthesametime,NorwegianpowerpriceswillcontinuetobeInFebruary2023,theEnergyCommissionpresenteditsaffectedbydevelopmentsintheEU.report(NOU2023:3)Moreofeverything—fasteronthelong-termdevelopmentoftheNorwegianpowersystem.IncreasingrenewableelectricitycapacityisaSimilartoStatnett(Statnett,2022)andtoconclusionsinthisETNorwayreport,theEnergyCommissionwarnsthatkeyenablerinboththeEUandNorwayforNorwaycouldfaceapowerdeficitasearlyas2028asanetexportof~15TWhin2020becomesanetimportof5combattinghighelectricityprices.TWhby2030,accordingtotheETO.1Thisshiftisdrivenbygrowingpowerdemand,mainlyfromenergy-intensiveUpuntilrecentyears,Norwayhadanelectricitysurplusindustries,theoilandgassector,andfromroadtransportwithabundantstoredhydropowerguaranteeingrelativelyelectrification.Statnett(Statnett,2023)hasreviseditslowpowerpricesandlowpowerpricevolatilitycompareddeficitprojectionsfrom2022andexpectsthepowertootherEuropeancountries.However,bothpricelevelssurplustocontinueuntil2028,pushedbackfrom2027andvolatilityhaveincreasedoverthelastcoupleofyearsinduetoslowergrowthinpowerdemand.However,thelinewithEuropeanelectricityprices.Thebuild-outofconsensusstillseemstobethatthepowerbalancewillinterconnectionswithEuropeancountriesandthedeterioratesignificantlyinthecomingyears.AweakerincreaseinintermittentpowergenerationinNorwayandpowerbalancemeansthatNorwayhasfewerhoursoftheNordicsbothcontributetohigherandmorevolatilepowerexportduringtheyearandmorehoursofimportingpricesinNorway.Inaddition,thewarinUkraineandthepower,resultinginfurtherconvergenceofNorwegiancorrespondingsurgeincommoditypricesaggravatedpowerpricestowardshighercontinentalprices.thesetrendsoverthepasttwoyears,drivenmainlybycostliergas-firedgeneration.TheEU’smoreambitiousIncreasingrenewableelectricitycapacityisakeyenablerdecarbonizationgoalandtheupdatedEUETSwilllikelyinboththeEUandNorwayforcombattinghighelectricityresultinanupwardpricetrendintheEUandinNorwayprices,matchingincreasingpowerdemand,andachievingcomparedwiththepre-crisispricepath.TheEUETSclimategoals.TheNorwegianexpertcommitteeonCarbonPermitspricewentfromaround20EUR/tCO2electricitypricesrecentlyconcludedthatalastingbefore2021tojustabove100EUR/tCO2inthespringofNorwegianpowersurplusisthemostimportantmeasure2023.Currentpricelevelsareat80EUR/tCO2andaretoensurelowandcompetitivepriceslongtermexpectedtoincreasetoaround150EUR/tCO2by2030(Strømprisutvalget,2023).However,almostnonew(DNV,2023a).NorwegianelectricitypricesareunlikelytopowergenerationisbeingdevelopedinNorway.Akeyquestionisthereforewhetherdevelopmentofnewpowergenerationissufficientlyfasttoachievepoliticallyagreedtargetsandthenecessarytransitionspeed.1.WhileStatnettestimatesa2TWhdeficitin2027,NVEbelievesthatthebalancewillbarelybepositivewith2TWh.NVEandStatnettagreethatthepowerbalancewilldeterioratesignificantlyinthecomingyears.55DNVEnergyTransitionNorway2023NVEnumbersshowthat,since2020,almostnonewgasactivitiescoulddivertmorescarceresourcesfromlicencesforrenewableenergycapacities,includinggridreinforcementsneededformorerenewableenergyhydropowerandwindpower,havebeengranted;henceandrisingelectricitydemand.almostnonewpowergenerationisunderdevelopment(FornybarNorge,2023).SeveralchallengesforrenewableAstandstillinthepowersectorcoulddampennewelectricityinNorwayneedresolvingtoensuresufficientenergy-intensivedemandandultimatelyaffectindustrialdevelopmentoffutureenergycapacity.developmentandjobs.The2022surgeofelectricitypricesinNorwayledtoamorepermanentdipinelectricityConflictresolutionisamajorchallengeforfurtherdemandthaninitiallyexpected,andtothepostponementonshorewinddevelopment.AftertheshareofonshoreofseveralelectrificationprojectsinthepetroleumwindinNorway’selectricitysystemgrewtenfoldinthesector(Statnett,2022;Statnett,2023).Futureindustriallastdecade,localoppositionincreasedbasedonthedevelopmentinNorwaycanbenegativelyimpactedbyperceivedimpactonlandscapesandecology.Popularhighelectricitypricesandastagnatingpowersector.supportforonshorewindfarmshashalvedbetween2018Recognizingthatmorerenewablepowerisneededtoand2021,accordingtoCICERO'sPopulationSurveysonmatchincreasingdemand,bringdownelectricityprices,Climate(CICERO,2022).2ConflictsofinterestbetweenanddeliveronNorway’sclimategoals,theEnergyrenewableenergydevelopers,municipalities,reindeerCommissioncallsfor“moreofeverything,faster”.Givenhusbandry,tourism,andnaturepreservationinterestsarethechallengesoutlined,Norway’sexpansionofrenewabledifficulttoalign.electricitycapacityoverthepastfewyearshas,inourview,beentoolittle,tooslow.Offshorewindisexpectedtogeneratelessconflictofinterest,butitisnotyetcommerciallyviableinNorway.PickupthepacetoleverageopportunitiesTheexpansionofoffshorewindwillbedependentontheEnergysectorelectrificationhasbeenprogressingavailablemechanismssupportingitsexpansion.Inoursteadily,especiallyinroadtransportandmanufacturing.forecastwehaveincludedinitialsupportforthefirstRoadtransportemissionshavedecreasedsince2022build-outs.Supportisdecliningtowards2040,withtheandareexpectedtodeclinesteadilyuntil2050.Theloweringcostofwindtechnology.InadditiontotheseETOforNorwayalsoexpectstheNorwegianpowersourcesofincome,weexpecttheretobemechanismstodeficittovanishafter2033andpowerpricestodecreaseredistributeprofitsfromhigh-marginenergyexports,significantlythereafter,providedthatinvestmentinnewsuchashydropowerandgreenhydrogenexports,torenewablescapacitypicksupinthesecondhalfofthefurtherenhancethefinancialviabilityofoffshorewind2020sandthe2030s.Inaddition,Norwegianinvestmentsdevelopment.inCCSarepullingweightinaninternationalsetting.TheNorthernLightsprojectisseenasaCCSreferenceAsinmostEuropeancountries,thenecessarybuild-outprojectopentoCO2importsfromEUcountries.Large-ofthetransmissionanddistributiongridsischallengingscalerenewableenergyandCCSdevelopmentarekeyinNorway.Gridcompanieshaveareactivestrategy,prerequisitesforNorwaytoseizetheopportunitytomakinginvestmentsbasedonrequestsandtherebyexportmuch-neededlow-carbonhydrogen,ammonia,impactingconcessionleadtimes.Moreover,municipalities,ande-fuelsintotheEU.interestgroups,andthepublichavetherighttoraiseconcernsregardinganyenergyorgriddevelopment,AstheEUisacceleratingtowardsitsgoalofclimatewiththeirviewsbeingaccountedforinthelicensingneutralityin2050,moreneedstobedoneinNorwaytodecision.WithNorwegiangridoperatorsalreadyfacingkeepup,realizeitsownambitiousclimategoals,andtoskillsandequipmentshortages,electrificationofoilandseizeopportunitiesarisingfromtheEUenergytransition.2.Theproportionwhoanswered"yes"tothestatementthat"Norwayshouldincreasewindpowerproductiononland"fellfrom65%to33%from2018to2021.In2022,theproportionroseslightlyto39%positiveanswers,against35%negativeanswers.56NorwegiantransitioninanEUcontextCHAPTER6WindmillsatFosen57DNVEnergyTra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