By Haley Zaremba - Feb 05, 2025
The rapid expansion of renewable energy in Europe has destabilized the energy market and led to soaring prices in neighboring Norway.
Norway's government collapsed due to internal conflict over how to respond to the EU's energy policies and the resulting high energy prices for Norwegian citizens.
Norway is considering restricting energy exports to the EU, which would have a significant impact on Europe's energy security.
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Europe’s energy rules have caused chaos in Norwegian politics – and now the chaos in Norwegian politics is going to create chaos in European energy markets. The negative feedback loop comes at a critically bad time for Europe, as the continent’s energy security continues to falter three years after Russia’s invasion of Ukraine.
Over the past few years Europe has supercharged its renewable energy transition in order to boost energy independence and security. When Russia invaded Ukraine in February of 2022, Europe was enormously reliant on the Kremlin to keep the lights on and the economy running. As of 2020, Europe relied on Russian energy imports for a whopping 20% of the continent’s energy use. And even more starkly, more than half of the natural gas and a third of the oil consumed in Germany, Europe’s largest economy, came from Russia.
“The energy appeared cheap, but it exposed us to blackmail,” Ursula von der Leyen, president of the European Commission, which serves as the European Union’s executive branch, said at the World Economic Forum in January 2025.
In a frantic attempt to relieve Russian leverage on European politics and economics while also making major inroads toward meeting the European Union’s climate goals, EU countries have massively ramped up their renewable energy capacities, shattering records for solar and wind deployment. But it now seems that these markets may have grown too much, too quickly, and European energy markets are now reeling from the fallout.
Relying on variable energies for the bulk of a bloc’s energy mix is great for the climate, but can be dangerous for grid stability if mismanaged. Today, “the German electricity grid is today more weather dependent than ever,” reads a recent op-ed for Bloomberg. “Without sufficient baseload generation running 24/7 and dispatchable plants, which can be activated on demand, Berlin relies on imports from neighboring countries to fill the gap during long stretches of winter when it’s dark and windless.”
This, in turn, has wreaked havoc on neighboring Norway’s energy markets. As more and more of Norway’s energy flows to German grids, Norwegian energy prices are climbing ever higher for locals. Norway has cheap and abundant energy thanks to prodigious hydropower resources, and locals are none too happy about sacrificing their cheap energy prices to keep German lights on.
“Nordic countries increasingly feel they are paying the cost of a failed German energy policy — one they weren’t consulted on,” Javier Blas wrote for Bloomberg.
This discontent has led to serious fracturing in the Norwegian government. Norway, which is not part of the EU, has recently seen its coalition government collapse under the weight of deciding how to respond to EU energy measures. Norway’s Eurosceptic Centre Party has pulled out of the coalition government entirely, leaving Norway’s prime minister Jonas Gahr Støre to lead a minority government.
“The price contagion through the last two cables gives us high and unstable prices, and the EU prevents us from implementing effective measures to control electricity exports out of Norway,” said the Centre Party’s leader and finance minister Trygve Slagsvold Vedum in a statement calling for Norway to “take back national control” of electricity prices.
The Norwegian government is now considering a control mechanism to limit exports. If Norway decides to limit or completely curtail its energy flows to the European Union, it would be catastrophic for the bloc. Norway was the continent’s third biggest energy exporter last year.
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“If we lift our gaze and look forward to what is happening around the North Sea, there is a strong emphasis on renewable power from all countries,” says Norway’s Prime Minister Jonas Gahr Store. “But then every country has to sit down and consider what is their share of such a possibility and there is no one who is going to do something that is not in their interests.”
It is inevitable that major energy shifts will result in clashes and uncertainties like those playing out in Europe. This is not necessarily a bad thing. It’s part of a learning process for an unprecedented and ultimately necessary transition. Watching how European leaders resolve the tensions, reconfigure regulations, and move forward with their energy transition ambitions will offer key learnings and insights to the rest of the world as we continue to foray into the decarbonization era.
By Haley Zaremba for Oilprice.com
The rapid expansion of renewable energy in Europe has destabilized the energy market and led to soaring prices in neighboring Norway.
Norway's government collapsed due to internal conflict over how to respond to the EU's energy policies and the resulting high energy prices for Norwegian citizens.
Norway is considering restricting energy exports to the EU, which would have a significant impact on Europe's energy security.
Europe’s energy rules have caused chaos in Norwegian politics – and now the chaos in Norwegian politics is going to create chaos in European energy markets. The negative feedback loop comes at a critically bad time for Europe, as the continent’s energy security continues to falter three years after Russia’s invasion of Ukraine.
Over the past few years Europe has supercharged its renewable energy transition in order to boost energy independence and security. When Russia invaded Ukraine in February of 2022, Europe was enormously reliant on the Kremlin to keep the lights on and the economy running. As of 2020, Europe relied on Russian energy imports for a whopping 20% of the continent’s energy use. And even more starkly, more than half of the natural gas and a third of the oil consumed in Germany, Europe’s largest economy, came from Russia.
“The energy appeared cheap, but it exposed us to blackmail,” Ursula von der Leyen, president of the European Commission, which serves as the European Union’s executive branch, said at the World Economic Forum in January 2025.
In a frantic attempt to relieve Russian leverage on European politics and economics while also making major inroads toward meeting the European Union’s climate goals, EU countries have massively ramped up their renewable energy capacities, shattering records for solar and wind deployment. But it now seems that these markets may have grown too much, too quickly, and European energy markets are now reeling from the fallout.
Relying on variable energies for the bulk of a bloc’s energy mix is great for the climate, but can be dangerous for grid stability if mismanaged. Today, “the German electricity grid is today more weather dependent than ever,” reads a recent op-ed for Bloomberg. “Without sufficient baseload generation running 24/7 and dispatchable plants, which can be activated on demand, Berlin relies on imports from neighboring countries to fill the gap during long stretches of winter when it’s dark and windless.”
This, in turn, has wreaked havoc on neighboring Norway’s energy markets. As more and more of Norway’s energy flows to German grids, Norwegian energy prices are climbing ever higher for locals. Norway has cheap and abundant energy thanks to prodigious hydropower resources, and locals are none too happy about sacrificing their cheap energy prices to keep German lights on.
“Nordic countries increasingly feel they are paying the cost of a failed German energy policy — one they weren’t consulted on,” Javier Blas wrote for Bloomberg.
This discontent has led to serious fracturing in the Norwegian government. Norway, which is not part of the EU, has recently seen its coalition government collapse under the weight of deciding how to respond to EU energy measures. Norway’s Eurosceptic Centre Party has pulled out of the coalition government entirely, leaving Norway’s prime minister Jonas Gahr Støre to lead a minority government.
“The price contagion through the last two cables gives us high and unstable prices, and the EU prevents us from implementing effective measures to control electricity exports out of Norway,” said the Centre Party’s leader and finance minister Trygve Slagsvold Vedum in a statement calling for Norway to “take back national control” of electricity prices.
The Norwegian government is now considering a control mechanism to limit exports. If Norway decides to limit or completely curtail its energy flows to the European Union, it would be catastrophic for the bloc. Norway was the continent’s third biggest energy exporter last year.
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“If we lift our gaze and look forward to what is happening around the North Sea, there is a strong emphasis on renewable power from all countries,” says Norway’s Prime Minister Jonas Gahr Store. “But then every country has to sit down and consider what is their share of such a possibility and there is no one who is going to do something that is not in their interests.”
It is inevitable that major energy shifts will result in clashes and uncertainties like those playing out in Europe. This is not necessarily a bad thing. It’s part of a learning process for an unprecedented and ultimately necessary transition. Watching how European leaders resolve the tensions, reconfigure regulations, and move forward with their energy transition ambitions will offer key learnings and insights to the rest of the world as we continue to foray into the decarbonization era.
By Haley Zaremba for Oilprice.com
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