Norway could see more wind power projects scrapped due to low profitability, its energy minister said on Thursday after state-owned Statkraft cancelled a flagship development.
In a major blow to the country’s plans to increase its renewable energy output, Statkraft said it had decided not to invest in a planned 1,000-megawatt (MW) capacity wind power park in central Norway due to low power prices.
The project, worth 11 billion Norwegian crowns ($1.4 billion), could have more than doubled wind power capacity in the Scandinavian country, which already generates more than 95 percent of its electricity from hydropower.
“It seems pretty clear now that many more of the wind power projects that have obtained permission will not be built. They are simply not profitable enough,” Norway’s Oil and Energy Minister Tord Lien told Reuters.
Both Lien and Industry Minister Monica Maeland said they were surprised by Statkraft’s decision after the government agreed to inject 5 billion crowns ($648 million) and keep dividends with the company to support new investments.
It also agreed to change depreciation rules for wind power to make projects more profitable.
“We’ve been in regular contact with the company and have been told that the project was on time. I’ve now asked for an explanation from the board regarding the background for their decision,” Maeland said in a statement.
Norwegian energy regulator NVE has approved wind power projects with a total capacity of 7,310 MW.
Average power prices in the Nordic countries fell to a seven-year low of 29.61 euros per megawatt-hour (MWh) in 2014.
Statkraft said power prices were too low and existing subsidies were not sufficient to justify investments in an oversupplied market, even with the more favourable tax regime.
“Updated analyses therefore show that the projects in central Norway will not be profitable,” the company said.
Norway and Sweden launched the world’s first cross-border renewable support scheme in 2012 to boost power output from green energy by 26.4 terawatt-hours (TWh) per year by 2020. Statkraft’s project would have contributed 3.3 TWh of that.
Parliament approved in December a plan to boost Statkraft’s equity by 10 billion crowns, including deferred dividends, partly on the promise that the central Norway wind farm would be built.
“It’s a big project that we had hoped would be built. So yes, I’m a bit disappointed,” Lien said.
Shares in Danish wind turbine producer Vestas, which had been chosen as a preferred supplier for the planned wind park, was down 2.4 percent at 1030 GMT. ($1 = 7.7185 Norwegian crowns) (Writing by Nerijus Adomaitis; Editing by Terje Solsvik and Susan Fenton)