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In a bold move following the dissolution of its coalition with the Centre Party (Senterpartiet), Norway’s Labour Party (Arbeiderpartiet) has unveiled a new energy policy aimed at stabilizing electricity costs for consumers. Prime Minister Jonas Gahr Støre and Minister of Energy Terje Aasland announced the plan on the first day of the Labour Party’s solo governance, setting a fixed energy price of 40 øre/kWh from October 1.
Key measures of the new energy policy
The government’s proposal includes several significant steps:
- Fixed price: Households and holiday home owners will have the option to enter fixed-price contracts at 40 øre/kWh (0,036 euros/kWh), applicable across all Norwegian price zones. This rate will be adjusted annually based on market trends.
- VAT reduction: The value-added tax (VAT) on electricity transmission fees will be reduced from 25% to 15% starting July 1, with a plan to eliminate it entirely in the next parliamentary term.
- No new foreign cables: State-owned operator Statnett will not plan any new subsea electricity interconnectors before 2029.
- Rejection of EU regulations: Norway will not adopt the remaining directives of the EU’s fourth energy package, including regulations that would expand the power of the Agency for the Cooperation of Energy Regulators (ACER).
- Nordic cooperation: The government aims to strengthen collaboration with Nordic countries to ensure stable and affordable electricity prices.
Aasland emphasized that the fixed-price system would be reviewed annually, meaning that if market prices rise, so will the fixed rate. Additionally, the government will maintain the existing electricity subsidy scheme, covering 90% of costs when spot prices exceed 75 øre per kilowatt-hour (excluding VAT).
“People will have a choice between two different systems, and they can decide which option suits them best. It should be easy for households to understand,” Støre stated.
Controversy over foreign interconnectors
One of the most debated aspects of the plan is the government’s decision to stop plans for new subsea power cables until 2029. This particularly affects discussions on renewing the Skagerak 1 and 2 cables to Denmark, which are set to expire in 2026.
“There have been no renewal applications so far, but if they come, we will handle them properly,” Støre responded when questioned by Reuters.
Political and economic reactions
The proposal has sparked reactions from various political parties and economic analysts. The Socialist Left Party (Sosialistisk Venstreparti, SV) welcomed the initiative, claiming it aligns with their long-standing policy.
“This is exactly what we proposed two years ago. Offering a fixed price nationwide is SV’s policy, and we are pleased that the government now supports it,” said SV Deputy Leader Torgeir Knag Fylkesnes.
The Progress Party (Fremskrittspartiet, FrP) also expressed cautious optimism but criticized the Labour Party for not implementing these measures earlier.
“It is surprising that the Labour Party had to remove the Centre Party from government before introducing these measures. We have been calling for this for years,” said Marius Arion Nilsen, a member of the Energy and Environment Committee in Parliament.
Economic implications
Economists have largely viewed the fixed-price proposal positively, arguing that it could help stabilize inflation. Chief economist Jan Ludvig Andreassen of Eika Bank emphasized the long-term benefits.
“A fixed-price contract on electricity is a major step in the right direction. Inflation will become more stable, making it easier for businesses and workers to plan wage negotiations,” Andreassen said.
He also noted that the move could ease public concerns over energy interconnectors. “I think people will be more relaxed about power cables if they know these won’t affect their prices. This will help everyone feel more secure,” he added.
A strategic political move?
While the Centre Party has not yet formally exited government, the Labour Party’s solo press conference effectively marked its first policy announcement as a single-party government. Political analysts suggest this move is a strategic effort to regain voter confidence ahead of the upcoming parliamentary election.
The European Union also weighed in on the broader energy debate. European Commission President Ursula von der Leyen recently announced measures to stabilize energy prices across the bloc, including incentives for long-term electricity contracts and guarantees for industrial consumers.
As Norway navigates this new energy strategy, all eyes will be on the upcoming months to see whether the policy gains traction among consumers and businesses, or if opposition parties manage to shift the debate once again.
