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ENERGY

Danish businesses and households share burden of high energy bills

Businesses and households alike face soaring energy bills in Denmark in 2021.

Lower-than-expected wind levels are among factors causing a combination of low supply and high demand for energy.
Lower-than-expected wind levels are among factors causing a combination of low supply and high demand for energy. Photo: Thomas Lekfeldt/Ritzau Scanpix

New calculations from interest organisation Dansk Industri Energi show that industry is expected to pay 18 billion kroner for energy this year.

That is double the 9.5-billion kroner bill incurred in 2019, the last year to be unaffected by the Covid-19 pandemic.

“It’s certain that this is being felt by businesses out there,” said sector director with Dansk Industri Energi, Troels Ranis.

A number of factors are behind escalating energy prices, which are impacting businesses and households alike.

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These include global economic growth following the end of the first wave of coronavirus lockdowns.

That has resulted in increased industrial activity and thereby high demand for energy.

This high demand has coincided with less wind and lower rainfall in Norway producing less sustainable energy; and a relatively constant supply of gas from Russia.

“The basic principle of economics is being manifested. A large demand and low supply gives high prices,” Ranis said.

High energy costs incurred by businesses are likely to be passed to customers, the sector director predicted.

“Prices go up. That’s the short of it. And that’s how it has to be when energy prices increase because this makes it more expensive to produce,” he said.

“And that is passed on to the price of products,” he added.

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ENERGY

Could the Norwegian government introduce a cap on energy prices? 

Due to soaring prices, the Norwegian government is mulling over several solutions, including a potential price cap for electricity and limiting energy exports abroad. 

Could the Norwegian government introduce a cap on energy prices? 

High energy exports in the last 12 months, low filling levels in Norwegian reservoirs and an uncertain energy situation around Europe have led to soaring electricity prices in southern Norway. 

Last year the government introduced a scheme whereby it covers 80 percent of consumers’ energy bills where the price rose above 70 øre/kWh. The portion of the bill under 70 øre is paid in full by households. The portion the government covers will increase to 90 percent in October. 

Critics have argued that the current scheme still leaves households struggling with their bills. As a result, Norway’s government has said it is mulling its options to curb energy bills.

Norway primarily depends on hydroelectric dams to help it meet its energy needs. Still, reservoirs in southern Norway have been at the lowest level for ten years, public broadcaster NRK reports. 

Low reservoir filling over the past year has conceded with record exports with higher prices on the continent, making sending power abroad an enticing proposition.

Recently, exports have fallen significantly, and the government is considering introducing a limit to reduce the possibility of energy rationing being introduced this winter. 

“Restrictions on the export of electricity to Europe may be one of the measures that is needed,” Elisabeth Sæther, state secretary at the Ministry of Oil and Energy, told NRK. 

Earlier this week, Prime Minister Jonas Gahr Støre ruled out completely shutting off exports to the continent. 

“It is a dangerous thought and will not serve us well. It could give us more expensive power and lack of power in given situations. We will hardly be able to import power when we need it without contributing to other countries when they need it. There is a reciprocity in this,” he told the newspaper Aftenposten earlier in the week. 

Sæther also told NRK that the government was weighing up putting a maximum price on energy but warned that it could have unforeseen consequences. 

“We are afraid that a maximum price means that more water is drawn into the reservoirs, which we need for the winter. It is a serious situation. We must prevent ourselves from getting into a situation where we lack enough power this winter,” she told the broadcaster. 

At the end of May, the state-owned Statnett announced that the supply situation in Norway might be under strain – in some scenarios – all the way up to and through the winter, especially if Southern Norway experiences drier than usual weather in the second part of the year. 

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