Europe’s Electricity-Sharing Model Hitting Slack Water, Analysts Warn

Norway has blamed renewable-dependent nations for driving up electricity prices and triggering a ‘nationalist reaction,’ experts said.

Wind turbines are pictured during the installation of RWE's Kaskasi Offshore Wind Farm off the coast of the German island of Helgoland on March 23, 2023. Christian Charisius/AFP via Getty Images

European nations’ model of tapping into one another’s electricity supplies, as many aim for ambitious net zero goals, is starting to unravel, according to some energy analysts.

A lack of wind in renewable-reliant Germany in January caused wholesale electricity prices in Norway to spike, sparking a political crisis that resulted in the collapse of the Norwegian government.

Norway’s grid is interconnected with several European countries via subsea cables, enabling the exchange of power between markets and allowing it to export its hydropower and import electricity when needed.

Nations that export electricity risk having their own domestic prices pushed up when demand rises in interconnected countries. Europe’s growing reliance on renewables, according to some energy analysts, means higher price fluctuations in a transnational market now buffeted by the supplies of wind and sunshine.

Electricity sharing can have mutual benefits but cannot be used as a permanent crutch for domestic policy failings, Andy Mayer, chief operating officer and energy analyst at the Institute of Economic Affairs, told The Epoch Times via email.

“Energy security, logically, benefits from trade, which in energy terms means interconnectors, wires, and pipes,” Mayer said. “Your bad year becomes my commercial opportunity and vice versa. We each insure each other.

“That logic breaks down, however, if countries are reckless in relation to their own security and instead become dependent on their responsible neighbors. It’s a mirror argument to the debate in NATO on member spending and overdependence on the U.S.”

He noted the German response to the Fukushima nuclear disaster as another example of such energy dependence.

“They shut down nuclear power stations, while becoming increasingly dependent on French nuclear power,” he said.

“When large parts of that aging fleet went offline, they were stuck burning sulfurous Polish coal to avoid blackouts, while French taxpayers were left with a 10 billion euro [$10.9 billion] bill for bailing out [Électricité de France], after the government imposed price controls.”

Électricité de France is a multinational electricity provider owned by the French government.

Since 2021, whenever demand is high and wind generation is low in the UK, Norway has allowed up to 1,400 megawatts of electricity to flow over via the North Sea Link subsea cable. In 2021, Norway also began supplying electricity to Germany through a NordLink submarine power cable with the same capacity. The cables facilitate not only Norwegian power exports, but also the exchange of wind and solar energy.

That arrangement began to look shaky in December 2024, when German electricity imports pushed up European electricity prices to their highest levels since 2009, prompting Norwegian Minister of Petroleum and Energy Terje Aasland to say at the time that the government was rethinking its export agreements.

‘Price Contagion’

A few weeks later, Norway’s euroskeptic Centre Party pulled out of the ruling coalition over plans to adopt EU renewable energy rules, collapsing the Norwegian government. The party’s leader, Trygve Slagsvold Vedum, blamed undersea power lines to Germany and the UK for high prices in the country.

In a Norwegian statement posted on the Centre Party’s website on Jan. 30, Vedum said Norway must “reclaim national control” of electricity prices.

He blamed previous governments for building “foreign power cables” linked to Germany and the UK, and said they increased Norway’s electricity export capacity by more than 40 percent.

“These decisions are a key reason why people in Norway are now experiencing high and unstable prices,” he said.

“The price contagion through these two new cables has resulted in high and unstable [electricity] prices, and the EU prevents us from implementing effective measures to control electricity exports out of Norway.

“Several EU countries have weakened their energy systems in recent years by relying too heavily on power production that only works when the wind blows or the sun shines.”

Norway's former Finance Minister Trygve Slagsvold Vedum presents NATO Secretary General Jens Stoltenberg as Norway's new central bank chief at a news conference in Oslo, Norway, dated Feb. 4, 2022. Terje Bendiksby/NTB via Reuters

Countries such as Germany and the UK, which have aggressively pursued weather-dependent renewable energy, now find themselves more dependent than ever on imported electricity.

Mayer said domestic fears—which in Norway’s case are amplified by regional pricing—stimulate “a nationalist response.”

The UK has committed itself to decarbonizing the power grid by 2030. Despite that the ruling Labour government recently reignited ambitions to approve more nuclear power across England and Wales, such facilities cannot be built quickly, so the UK has to rely largely on renewable power.

The UK has also banned fracking, and the Labour government has stated that it will not issue any new oil and gas licenses.

In terms of the risk to the UK, Mayer said it depends on how long it takes the government to accept that its 2030 decarbonization plans “will not work,” especially after the recent pullback by Denmark’s Orsted, the world’s biggest offshore wind developer, and nuclear plans that “can’t happen fast enough, even with welcome deregulation.”

Orsted stated on Feb. 5 that it is cutting its 2030 investment program by 25 percent, as the industry grapples with rising costs and supply chain issues.

“In the next 10 years, we have no reasonable, affordable alternative to ongoing reliance on gas-fired power for baseload and backup, and restricting access to our own sources of supply is deeply unwise,” Mayer said.

He said gas supplies could be next.

“If Norway then closes the [underwater gas pipeline to the UK] for any reason, [liquefied natural gas] alternatives will be both insufficient and extremely expensive,” he said. “Pipe dreams can quickly turn into cost-of-living nightmares.”

Hydropower

In Norway, 90 percent of all power generation comes from hydropower, according to Norwegian state-owned hydropower company Statkraft. It is Europe’s largest renewable storage facility, with close to 50 percent of Europe’s reservoir capacity.

However, Norwegian hydropower does not offer a simple, clean solution to Europe’s electricity-sharing conundrums.

Kathryn Porter, energy consultant at Watt-Logic, told The Epoch Times that the famous Nordic hydro system lacks pumping capacity.

“Once the water runs out, it’s gone,” she said.

Porter explained that cross-border trading operates on short-term price differentials, which do not account for the scarcity value of water until it is nearly depleted.

“All of a sudden, prices will spike, but by then it’s too late, the water is already running out,” she said.

Some say Norway can just import electricity to offset water use. However, according to Porter, Norway rarely imports electricity. When it does, it is typically at night, when demand is lower.

“Once the water is gone, they have to wait for rain or snowmelt to replenish it—which is entirely beyond their control,” she said. According to her, if Norway needed to import electricity at that point, prices would be extremely high.

She noted that back in 2012, there was strong opposition from Norwegian industry to interconnectors with Germany and the UK. However, the government and Statkraft overruled these concerns and proceeded with the projects.

According to Porter, the two interconnectors were operational by 2021, coinciding with an extremely dry year. In 2022, water levels dropped to 20-year lows, and electricity prices in NO2, a Norwegian pricing zone, increased tenfold. The government had to step in, covering up to 90 percent of consumers’ electricity bills.

Germany

Germany, which has a binding aim of reducing greenhouse gas emissions by 55 percent by 2030, has spent billions of euros for only a small reduction in emissions, Porter said.

She noted that Germany, unlike Norway, relies on neighboring grids as a substitute for investing in electricity generation and transmission infrastructure.

This means that it uses the electricity networks of neighboring countries to help transfer power from one region to another.

In 2017, European regulators required Germany and Austria to split their shared electricity market because of previous complaints from Central Europe over grid congestion, an unintended consequence of Germany’s shift to renewables.

The term “loop flow” refers to electricity from intermittent German wind power generation in the north of the country spilling into neighboring networks on the way to southern Germany or Austria.

European grid operators from the Czech Republic, Hungary, Poland, and Slovakia complained in 2014 that loop flows used up grid capacity and destabilized networks.

“Not only have [Germans] failed to invest in dispatchable generation, but they also haven’t expanded their transmission network,“ Porter said. “They have plenty of wind power in the north, yet most industrial demand is in the south, so they have tried to use neighboring grids to transmit that power.”

Porter said renewable energy is expensive because it requires “massive subsidies” and “an entire separate set of generators for backup.”

“You basically have the same generation twice, and you have a much higher grid cost with renewables because they have low energy density,” she said. “That means more wires are needed to connect them than for conventional generation.”

Porter said balancing intermittent energy output adds further expenses.

“Grid costs are further increased because you have to balance the real-time intermittency of weather-based renewables, because every cloud and gust of wind impacts output, so it makes generation highly variable in real time,” she said.

Reuters contributed to this report.