Norway may pay energy-hungry firms to cut power consumption in winter

OSLO, Aug 28 (Reuters) - Norway’s transmission system operator Statnett may have to pay large electricity users to cut their energy consumption this winter if rainfall remains abnormally low, it said on Tuesday.

Virtually all power generated in Norway comes from hydroelectrics. After a hot, dry summer, reserves in its hydropower reservoirs are 16 terawatt hours below average, or about 12 percent of the country’s annual consumption for 2017.

Stable electricity supply is crucial for many of Norway’s power-intensive companies, such as fertiliser maker Yara , aluminium producer Norsk Hydro, and data centres, which could ultimately be affected.

“The various tools Statnett can use include, among other things, so-called energy options for consumption, which means that larger power consumers enter into agreements to reduce consumption against payment when needed,” Statnett said.

This arrangement could only be used in a highly strained power situation and requires government approval, it added.

Norsk Hydro, the country’s largest power user, can reduce consumption for up to an hour without affecting output, but longer constraints could result in reduced aluminium production, Hydro spokesman Oeyvind Breivik said.

“Reducing power for over an hour can mean production instability. We wouldn’t like to take out large chunks of the power supply unless it is necessary,” said Breivik, though he said metals delivery to customers would be unaffected.

A spokeswoman for Yara said that while cutting power consumption would affect its Norwegian production, the firm would be able to maintain volumes for customers through its plants outside the country.

Microsoft, which plans to build two data centres in Norway as part of an agreement to supply cloud services to Equinor, was not available for comment.

“We realize that many are worried about the high power prices,” Statnett said. “If there is little rainfall in the period ahead, prices may also be high throughout the autumn and winter.”

Imports from Denmark and Germany could also help mitigate the situation, it said. (Editing by Terje Solsvik and Jan Harvey)