Norgespris: The state-subsidized electricity tariff in Norway
Norgespris is a state-subsidized electricity tariff for Norwegian households that will be available to consumers on October 1st. The price is NOK 0.50 per KWh up to 5000 KWh per month. After that, users pay the price in their contract with their electricity provider, usually the market spot price. The spot price is determined by auction according to the demand forecast one day ahead. This means that prices during the day can vary a lot, from less than NOK 0.10 per KWh to over NOK 1.00.
Spot prices for the 25th of September in southern Norway.
The electricity market is liberalized in Norway, which means that consumers are free to choose their electricity provider. Electricity providers offer different types of contracts. A common one is the spot price plus some markup. Some providers offer fixed prices over longer periods, sometimes varying based on the time of day.
Due to very high prices a couple of years ago, the government implemented a subsidy scheme that caps the electricity price at NOK 0.90 for the first 5000 KWh. This subsidy is not compatible with Norgespris. Consumers have to choose, between Norgespris and the subsidy. If they choose Norgespris, it is binding until December 31st, 2026.
Norway is divided into five electricity price regions. There is insufficient transport capacity between regions to establish a single market for the whole country. The five regions are South, East, West, Central and North. Region North usually has prices well below NOK 0.50 per KWh. The hourly price in South and East has been in the NOK 0.70 to 0.90 range and even higher on most days. Prices in the West region are quite high as well. In Central Norway, the price hovers around NOK 0.50, and it is difficult for consumers to assess whether Norgespris is a good deal. If they choose Norgespris and it turns out that electricity prices are low, they cannot reverse the decision before January 1st, 2027. I live in the East region, and I expect to save about NOK 5,000 per year with Norgespris.
Households in Norway use fewer than 2,000 KWh per month on average, with marked seasonal variations. Winter consumption is two to three times larger than summer consumption. This is because many houses using electric heating with panels. In our single-family house, for example, we only exceeded 5,000 KWh in 2024 during January.
Consumers pay two invoices for their electricity. One goes to their electricity provider, from whom they can choose freely among available option (with a fixed price of NOK 0.50 per KWh if they choose Norgespris), and another one goes to the distribution company. Distribution companies are regional monopolies that own and manage the electrical grid. The second invoice has several components: a fixed charge, an energy charge that depends on total consumption, a maximum power demand charge, system costs, and several taxes. The maximum power demand charge is designed to encourage consumers to spread electricity usage throughout the day.
Consequences of Norgespris
As I write this, Norgespris has not been implemented yet, but there are some predictable effects.
Norgespris eliminates the incentive to use electricity when it is cheaper. I know that I am not going to bother waiting until the evening to charge my car. The only limitation is not to use all the power at the same time, to avoid the power demand surcharge in the distribution invoice, but as long as consumption is spread throughout the day, it does not matter whether the hourly price is low or high. If everyone does the same, which is very likely, the grid will be more congested than it is now, and the risk of blackouts will be higher.
Intraday price variations are going to be even more extreme. The price is higher when demand is higher. This encourages people to use electricity at other times. With Norgespris, it does not matter, so people are going to concentrate their consumption even more. Since prices are determined by hourly demand, the demand for some hours is going to be even greater, making prices even higher. There is some possibility that the lowest price will be even lower, and some industrial consumers will benefit from them, but I do not think the effect will be significant.
Over 90% of electricity produced in Norway is from hydropower. More variable electricity demand will make water flow in Norwegian rivers more variable, as power plants change their power settings to meet demand. This has a negative effect on fluvial ecosystems.
Norgespris makes investments in energy saving less attractive. One example is heat pumps. Heat pumps are more efficient than electric heating with panels, but require an initial upfront investment. The payoff time with Norgespris is longer and may discourage people from upgrading.
Norgespris is a regressive subsidy. The wealthy use more electricity than people with low incomes. People who really struggle to pay their bills will receive a small subsidy, while rich people who can afford to pay more will get a bigger subsidy. A family that keeps its average monthly use under 1000 KWh is positioned to save NOK 3,000 to 4,000 per year. A family that routinely uses 5000 KWh per month—not inconceivable with a large house and two electric cars—may save up to NOK 24,000 or more (approximately USD 2,400 ).
Norgespris will create government expenditures. Some estimates suggest it may cost up to NOK 7 billion, or roughly USD 700 million. The total government budget for 2025 is NOK 2,971 billion. With a similar budget for 2026, Norgespris will amount to 0.2% of government expenditures. It may not seem like too much, but there is an opportunity cost. I can think of better uses for USD 700 million than giving it to the wealthy.
The electricity debate in Norway
Electricity has become a political matter in Norway, and prices dominate the debate. There is very little discussion about Norway’s role in a European context or a vision for the future that takes climate change into account. How to secure low electricity prices in the short term seems to be the only thing that matters. This has led to opposition to building more undersea cables to connect Norway with the rest of Europe, and initiatives like Norgespris.
The current government is pushing ahead with massive subsidies for offshore wind—the first round of licensing taking place assumes subsidies in the NOK 1.5 billion range—despite of every study that has been done indicating that offshore wind in Norway will need subsidies to be profitable for the foreseeable future. Offshore wind in Norway is more technically challenging that in more suitable places, like Denmark. It looks to me like another vote-buying scheme that props up a local industry, rather than a real plan for the future.
What makes sense for Norway is to increase the transport capacity with the rest of the continent and build additional pumped storage. Most electricity in Norway is produced in regulated reservoir systems. It is easy to retrofit hydroelectric plants connected to those reservoirs with pumps or reversible turbines. Currently, only a few exist, and the potential for expansion is huge. Norway could be the battery of Europe and make renewables in the rest of the continent more attractive, thus reducing the carbon footprint of electricity production.
Some people also forget that relying on hydropower means that a dry year could reduce production capacity and send prices even higher. In addition to natural year-to-year variation, Norway is experiencing climate change as well. Drought years are coming sooner or later. Good connection capacity with the continent could reduce the impact.
The internal transport grid in Norway is insufficient to move excess capacity in the north to the south, where demand is much higher. Removing bottlenecks would make investment in new capacity the north more profitable. The current situation is unfortunate, with existing producers in the north struggling because of low electricity prices due to overcapacity, while southern prices are as high as they have ever been. There are vast areas open for wind power development in the north that are not profitable at current prices. Politicians seem more interested in keeping northern residents happy with low electricity prices than in promoting new development in the north. This is penny-wise and pound-foolish.
Norway already attracts energy-intensive industries, such as data centers, but it could be even more attractive if better connectivity and more production capacity made prices lower overall, and not only in the north.
In conclusion, I think that politicians are trying to treat the symptoms—high prices—instead of the causes of the electricity problem in Norway. As they do so, first with price support, and now with Norgespris, they are tying themselves in knots. They are normalizing market interference instead of creating the conditions for the market to provide more capacity and lower prices. Their solutions are not sustainable in the long term.