Norgespris after half a year

I wrote earlier about Norgespris, the state-subsidized electricity tariff in Norway. After half a year of implementation, the consequences are even more extreme than I anticipated. An article in Teknisk Ukeblad reports that the expected cost accounted for in the revised government budget for 2026 is over 20 billion NOK, instead of 7 as originally estimated. This subsidy could be used to finance investments that would lower the prices permanently, like reinforcing the power grid.

Very cold weather in January and February , combined with low reservoir levels has lead to high electricity prices. But since private consumers are insulated from these prices, they are adopting fewer energy-saving measures, such as installing heat pumps, and they are using more energy during peak hours.

Ironically, the international electricity cables are helping to contain prices, by allowing imports from Germany and Denmark. These are the same cables that only a few months ago were much hated because they allowed exports to Germany and Denmark and thus contributed to high prices in Norway.

Although the ill effects of Norgespris were predictable and predicted, it seems that most commenters on the article, are happy with the scheme. Many apparently think that low electricity prices are something of a right. It may be reasonable to give some support to consumers when prices are very high, but the way Norgespris has been implemented creates bad incentives. Private consumers are insulated from prices. Only companies have to pay the full price. High prices will make Norwegian companies less competitive and will discourage others to invest in Norway.

Consumers lack a direct incentive to demand that production and transport capacity be added to the system. Most people will not care. This can be dangerous if it lets NIMBYism flourish and stop projects.