May 23 (Bloomberg) -- A potential increase in Norwegian power demand to supply North Sea oil fields won’t halt the region’s path toward an unprecedented glut of electricity.
A proposal by opposition parties to supply four oil fields from the national grid may add four terawatt-hours, or 3 percent of Norway’s demand by 2020, according to Olav Botnen, a senior analyst at Markedskraft ASA in Arendal, Norway. Still, the region is headed for a surplus of as much as 10 percent of annual demand by 2020, he said.
Supplying four oil fields from the mainland grid would help reduce greenhouse gases in Scandinavia’s richest nation and find an outlet for some of the surplus power. The Nordic nations plan to cut energy use by 20 percent by 2020 to meet European targets set six years ago.
“We should not overestimate the effect from increased offshore power demand until 2020, which stands for 1 percent of the Nordic consumption in our assumptions,” Botnen said May 21 by phone from Arendal, Norway. “It is a very expensive way to cut emissions,” compared with replacing coal power generation with gas or renewables or energy efficiency measures, he said.
An alliance of Norwegian opposition parties holding a majority in parliament said on May 16 they will ask the Conservative-led government to add plans to supply John Sverdrup and three other oil fields in the North Sea with power from land.
Energy demand in the Nordic region rose 17 percent since 1990 levels, and was just over 1,167 terawatt-hours in 2010, equal to about 8 percent of energy consumption in the European Union, according to data from the International Energy Agency.
EU nations are according to European law obliged to implement by June 5 various measures that would help the bloc meet its 20 percent energy efficiency target for 2020.
The most important effect on the Nordic power balance will be on the production side “where we expect a fierce oversupply,” Botnen said.
Sweden and Norway started a joint subsidy system for renewable energy two years ago. The program was designed to boost the annual output from mainly wind power by 26.4 terawatt-hours in the eight years through 2020, or about the same amount the Ringhals nuclear plant generated last year.
Markedskraft’s latest forecast shows Nordic power consumption rising 0.3 percent per year to 2020, Botnen said.
Nordic power for delivery in 2020 fell 20 percent in the past year to 31.33 euros per megawatt-hour ($42.67), on Nasdaq OMX Group Inc.’s commodities market in Oslo.
With current plans we will have to “reckon with prices where the market is today” or even lower if the forecast for the supply side is to be taken seriously, said John Brottemsmo, a senior market analyst at Bergen Energi AS, said May 21 by phone from Bergen, Norway.
Underlying demand will stay flat at 400 terawatt-hours until 2020, according to Bergen. One uncertainty in the forecast is the speed of the industrial recovery, with Swedish consumption from factories still below levels seen prior to the financial crisis in 2008, he said.
Sweden’s industrial demand was 50.5 terawatt-hours last year, according to preliminary data from Statistics Sweden. That compares with compared with 55 terawatt-hours in 2008.
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