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2023

Global Onshore Wind Market Report

Key Regional Markets

Norway

Onshore Wind Capacity

15.3 GW

GDP (Current Prices) USD (2022)

579.27bn

GDP Growth Forecast (constant prices) (2023-2027)

1.87%

Currency

Norwegian Krone

Country Credit Rating (S&P)
AAA
Renewable Energy capacity (2022)

39.7GW

Onshore Wind Share in Renewables (2022)

13%

Renewable Energy Target

Ambitious targets to eliminate 90%-95% of GHG by 2050 and 50%-55% by 2030 from the levels of 1990

Norway is a leading European country in the transition towards becoming an emission-free nation. They have achieved an impressive 98.2% share of renewables in their total power mix (IRENA, 2023). Norway has set targets of reducing greenhouse gas (GHG) emissions by 90%-95% by 2050 and 50%-55% by 2030 from the levels of 1990 (IEA, 2022). The country’s renewable energy base is mostly composed of hydropower, followed by onshore wind, and other renewable technologies have a minimal share. Despite this, Norway is one of the most significant locations for wind power generation in Europe, thanks to its abundant wind power resources and advanced turbine technology, which leads to lower development costs (Thommessen, 2022). Therefore, it is essential to increase onshore wind development persistently, with strong policy support, to meet the rising energy demands and achieve the ambitious climate objectives.

Pros

  • High wind power potential hedges the risk of power generation variability and poses downward pressure on wholesale power prices

  • The Norwegian government’s decision to revoke wind farm bans acted as a significant driver for the industry

Cons

  • Regulatory uncertainty caused by the Resource Rent Tax and Production Tax

  • Increased public opposition to wind projects makes solar PV and offshore wind technology an attractive option

Renewable Energy Mix

Source: IRENA Renewable Capacity Statistics July 2023

Norway has made significant strides in achieving a carbon-neutral energy base, with hydropower accounting for 86% of the renewable energy mix in 2022. Onshore wind power is the second-largest contributor, making up 13% of the overall installed base of approximately 40GW in 2022 (IRENA, 2023). This is a notable increase from its 2% share in 2013 and is the result of climate change plans and strict targets. Although the sector has the potential to expand to twice its current capacity, the development of land-based wind power is hindered by policies that prioritize public welfare and offshore wind deployment. Despite these challenges, the sector’s growth is expected to continue due to licensing procedure amendments that involve public participation.

Installed Capacity: Status and Trend

Trend in Installed Onshore Wind Capacity

Source: Preqin Global Report 2023: Private Equity

In the last decade, capacity addition for onshore wind in Norway has been uneven. There was a stagnant period during the first half of the decade, but from 2017, capacity addition started to pick up. Unfortunately, it dropped back to the earlier level in 2022 due to some projects stagnating because of controversial protests related to the Saami community (Time, 2023). Additionally, in 2022, the announcement of the Production Tax and the resource rent tax on onshore wind power signalled a negative outlook that paused new project approvals (Government Norway, 2023). However, recognizing the importance of onshore wind farms in the country’s power sector, Norway’s government is working to streamline licensing and involve local communities to ease opposition.

Demand Drivers

Despite being a major producer of oil and gas, Norway is strongly committed to achieving its decarbonization goals and reducing its reliance on traditional energy sources. According to Norway’s grid operator’s predictions, there will be a 60% increase in energy consumption demand from the current 140TWh, necessitating increased capacity from onshore wind (Reuters, 2023). Therefore, Norway has agreed to the targets set by the European Union’s REPowerEU and Fit-for-55 initiatives. One of these targets is Norway’s 2030 goal of achieving 12GW of wind power (Wind Europe, 2023). The Fit-for-55 scheme also includes the renewal of existing carbon emission plans. Despite the focus on offshore wind development, onshore wind’s cost competitiveness and price differentials amongst available technologies make it an attractive option for resource development. This would benefit consumers by lowering bills. Regulators have already announced that they will begin approving projects for land-based wind power with the municipality’s consent to alleviate restrictions.

The lifting of the 2019 ban on new onshore wind farms has significantly boosted the onshore wind sector recently. In April 2022, the Norwegian government announced plans to revoke the prohibition and resume licensing for sites that have the approval of locals to increase regional involvement (Reuters, 2022). The government intends to nullify protests by accommodating reindeer herding with onshore wind power to ensure local buy-in for project development. The primary objective behind lifting the ban and promoting coexistence is to bridge the demand-supply gap, reduce reliance on conventional sources, and mitigate planning risks for developers and investors. As of 2022, around 2.2GW of onshore wind projects are in the permitting pipeline stage and approving them in line with community standards could potentially increase the total installed base of onshore wind power (Wind Europe, 2023).

Market Opportunity

Norway is well-positioned for wind power due to its advantageous geography and resource-rich positioning. However, accommodating windy weather conditions poses a risk to the generation variability of power producers. In January 2022, wind speeds in the southern Norwegian mountains reached 40.8m/s, causing the output to reach approximately 21GW. This triggered wholesale power prices to decline by 2x from the existing EUR96.29/MWh, making wind power more competitive than other technologies (Reuters, 2022). This creates opportunities for both onshore wind project developers and grid managers, as effective grid management is crucial for high wind power.

The Norwegian grid operator, Statnett, projects that annual onshore wind generation will increase by 10TWh from current levels by 2030. To handle this excess capacity, the company plans to install a 420kV grid nationwide with a projected investment of NOK100 billion by 2030 (IEA, 2022). Increased investment in grid expansion, along with strong networks and interconnectivity with Nordic countries, can enhance the financial viability of wind projects and attract more investors.

Over the years, corporate buyers and energy investors have shown much interest in Norway’s renewable energy segment through Power Purchase Agreements (PPA). One recent development in December 2022 is the construction of a 300MW onshore wind farm by aluminium smelter Hydro, with project developer Zephyr and power company Eviny, in the western region with an investment of NOK3-NOK4 billion (EnergyWatch, 2022) (Reuters, 2022). Additionally, StatKraft announced in 2023 that it will invest about a billion Krones in the Norwegian onshore wind industry to construct an onshore wind farm in Norway’s southwestern county of Rogaland (EnergyWatch, 2023). Hafslund and Eidsiva, two Norwegian companies, have also announced their plans to develop onshore wind projects in Eastern Norway with the support of 28 municipalities (Renews, 2023).

Although merchant projects are still in their early stages, the competitive onshore wind power prices have helped project developers obtain financing support, making a case for more merchant exposure. Norway’s robust grid connectivity and infrastructure make it an attractive proposition for project developers, increasing the potential for expanding merchant power and corporate PPA markets.

Outlook

Source: BNEF Global Wind Market Outlook

The expansion of the onshore wind industry in Norway is hindered by legislative hurdles, local adversaries, and untapped potential. According to estimates by BNEF, capacity additions are expected to range between 100MW and 200MW, with no new additions expected in 2026. However, this situation is likely to change given the postponement of the resource rent tax and renewal of licensing to wind farms in 2021 (Government Norway, 2023).

To meet the growing energy demand and European standards of decarbonization, the Norwegian government has postponed the resource rent tax to motivate wind power developers. Additionally, in 2022, it streamlined licensing procedures for developers’ acceptance of wind power (IEA, 2023). However, to attract local authorities and municipalities, it introduced a Production Tax in 2022, which affected developers’ interest in wind power, leading to lower capacity additions in 2022 (Government Norway, 2023). Moreover, concerns following the Saami community’s protest can result in the closing of two wind farms in Norway, hampering the installed base.

Furthermore, the increasing interest in offshore and floating wind technologies is shifting policy focus, resources, and funding to these areas, thereby obstructing onshore wind development. Thus, despite having a significant capability, the expansion of Norway’s onshore wind industry is expected to be impeded in the coming years.

Over the next decade, the Norwegian land-based wind industry will likely observe steady progression as demand for power consumption surges and the pressure of carbon neutrality rises. Although certain headwinds, such as stiff competition from offshore technology and land restrictions, stymie the expansionary phase, declining wind power costs will likely ebb their impact through continued demand from corporates and utilities.

Key Regional Markets
Global Onshore Wind Report
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