Norway wind farm tax to ruin investor confidence – developer
Credit: Gert Ove Mollestad, Oslo | 11 Oct 2022 | montelnews.com ~~
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Norway’s proposed introduction of a ground rent tax on wind farms next year will destroy the country’s reputation as an attractive place for renewables investments, green developer Cloudberry told Montel on Tuesday.
“The proposal will have terrible [sic] consequences,” said the company’s COO Andreas Thon Aasheim.
His comments came after the government proposed introducing a 40% ground rent tax for onshore wind farms next year, which comes in addition to a temporary 22% windfall profit tax on wind and hydropower production every hour prices exceed NOK 700/MWh (EUR 67/MWh).
“De facto nationalisation”
The new ground rent tax represented a “de facto nationalisation” of 40% of wind power plants that investors had built on the expectation of a stable regulatory framework, said Aasheim, adding companies built wind farms with a 30-year investment horizon.
It would be particularly difficult for companies that had sold future generation through long-term power purchase agreements (PPAs), he added.
“In the long term, investors will drop Norway if this proposal is implemented. It will also have consequences far beyond onshore wind power because these are the same investors that we want to invest in offshore wind and in other infrastructure,” said Aasheim.
The windfall tax was less of an issue as no investments had been made based on an assumption of the high prices currently seen, he added.
Spanish parallel?
Investors were drawing a parallel to what happened in Spain in 2013, when the government retroactively cut the support system for renewables.
“Many of these investors are not yet back in the Spanish renewables sector or in Spain at all. Now they say the same about Norway. The feedback is, ‘What on earth are you doing?’,” said Aasheim, who previously worked at the Norwegian Wind Energy Association.
The proposed tax would also make renewables investments more expensive in the long term because investors would add a higher risk premium.
Aasheim also said the government’s estimate that the new ground rent would bring in NOK 2.5bn (EUR 239m) was “far too high”.
“Most wind farms are locked to fixed-price agreements and in addition many are located in central and northern Norway, where the prices are much lower,” he said.
Approval required
The ground rent proposal forms part of Norway’s national budget for 2023 which still must be approved by parliament. The minority centre-left coalition requires the support of the Socialist Left party, which has not yet said whether it favoured the tax.
The country has applied a ground rent tax on hydropower for decades, based on an idea that power companies should pay back society for exploiting a natural resource.
The government said in its budget proposal that the costs of onshore wind had now fallen to levels that made it natural to expand the tax to this sector.
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