VZCZCXYZ0000
RR RUEHWEB

DE RUEHNY #0353/01 1761516
ZNR UUUUU ZZH
R 241516Z JUN 08
FM AMEMBASSY OSLO
TO RUEHC/SECSTATE WASHDC 6873
INFO RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUEHCP/AMEMBASSY COPENHAGEN 2436
RUEHSM/AMEMBASSY STOCKHOLM 3284

UNCLAS OSLO 000353 
 
SENSITIVE 
SIPDIS 
 
COPENHAGEN FOR EST OFFICER 
DEPT FOR EB/ESC 
 
E.O. 12958: N/A 
TAGS: SENV ENRG TRGY PGOV NO
SUBJECT:  NORWAY AIMING TO BE A GLOBAL RENEWABLE ENERGY LEADER: 
          OPPORTUNITIES FOR THE U.S. 
 
SUMMARY 
------- 
 
¶1.  (SBU) Norway, the oil and gas giant of northern Europe, is 
working to become a leader in global renewable energy technology and 
cleaner fossil fuel production.  Norway's renewable energy field, 
though lagging behind other European nations, has found niches to 
fill in wind power production, solar power technology, and carbon 
capture and storage (CCS).  The Norwegian government, which set the 
ambitious target of being carbon neutral by 2050, is driving CCS for 
gas-fired plants though it may need to do more to push Norway to the 
top of the renewable class.  Currently, Norway's vast hydropower 
resources are the only cost effective form of renewable energy at 
home but growing public interest in climate change, forward-looking 
private energy firms, and increased state-sponsored development may 
make Norway one country to watch in the future of climate change 
technology combatants.   Common interests and complementarity offer 
excellent opportunities for U.S. companies and 
government-to-government cooperation.  End Summary. 
 
A LATECOMER TO THE RENEWABLE SCENE 
---------------------------------- 
 
¶2.  (U) Norway still lags behind other European nations in the 
development of "new" renewable energy in large part because of its 
historic and natural abundance of hydropower which currently 
provides the country with over 95% of its energy needs.  Since 
hydropower began to flourish after World War II, Norway has had 
little motivation to pursue other renewables because its existing 
hydro resources were vast, clean, and efficient.  The Norwegian 
hydro experience has made it a leading world expert in this 
technology which it exports to developing nations, but has also 
limited the need to develop other forms of renewable energy.  Norway 
also lacked the financial incentive to seek out new forms of energy 
because of its oil and gas wealth.  The country exports nearly all 
of its oil and gas production making it the world's fifth largest 
oil exporter and the third largest gas exporter. 
 
WIND: NORWAY'S HIDDEN POTENTIAL 
------------------------------- 
 
¶3.  (U) Long coastlines and powerful winds, especially in northern 
Norway, give the nation a huge potential for future wind power. 
Finnmark has been identified as an ideal location for wind parks and 
could double the average energy production of existing Norwegian 
turbines.  Though Norwegian wind technology can not yet compete with 
wind powers such as Denmark, industry experts indicate that Norway 
could become the largest source of wind power in Europe.  Over the 
next ten years, the Norwegian wind power industry will largely focus 
on developing shallow offshore turbines in water 15 to 20 meters 
deep.  Meanwhile, energy companies such as StatoilHydro, the 
Norwegian national energy champion, are developing deep offshore 
wind power, hoping to build on the existing technology and expertise 
used in offshore oil and gas platforms.  Many companies working on 
this technology are hoping that high carbon taxes and other 
government mechanisms to reduce emissions will make wind power 
economical. 
 
UTSIRA, A COMBINATION OF WIND AND HYDROGEN 
------------------------------------------ 
 
¶4.  (U) The small island of Utsira, situated off Norway's 
southwestern coast, runs entirely off of wind power and claims to be 
the world's first full-scale system for cleanly transforming surplus 
wind power into hydrogen.  StatoilHydro led the project and 
installed two 40 meter windmills which power the island community. 
Surplus wind-generated energy is passed through water and, using 
electrolysis, the hydrogen atoms are separated from the oxygen atoms 
that make up water molecules.  The hydrogen is then compressed and 
stored in a container that can hold enough hydrogen gas to cover the 
energy needs of the ten households for two windless days.  Though 
this project was incredibly expensive, StatoilHydro states that this 
is proof that communities can be self-sufficient based on renewable 
energy.  Companies like StatoilHydro foresee a future in which 
offshore oil and gas platforms are powered by wind turbines and thus 
cleaner. 
 
WIND POWER FACING HURDLES 
------------------------- 
 
¶5.  (U) Wind power has provoked wide debate in Norway and faces 
bureaucratic and funding obstacles that may slow progress.  The 
governmental process to receive a permit for a wind park is slow, 
congested, and locations in northern Norway that would be ideal for 
wind parks are usually not highly prioritized.  Many companies have 
difficulty attracting investors because wind power is not yet 
 
profitable, and the government is not providing sufficient funding 
or subsidizing programs that would provide financial security and 
motivation.  Aside from not being commercially viable, wind power 
has drawn criticism from the Norwegian public for environmental and 
esthetic reasons.  Environmental groups wrry that wind parks will 
affect the nesting and reeding patterns of birds while local 
communities point to noise pollution and the negative impact 
turbines will have on the natural scenery.  These obstacles have led 
to greater focus on offshore installations. 
 
¶6.  (U) Offshore technology for floating turbines, however, is more 
complex and faces its own challenges.  Construction and maintenance 
on offshore wind power will be difficult and expensive because of 
high waves and unpredictable weather making some turbines 
inaccessible for most of the year.  Turbines will also need to be 
sturdier than existing technology.  For example, current Danish 
turbine models often break down under stronger Norwegian winds. 
Furthermore, there is also no existing energy grid for offshore wind 
parks.  Nonetheless, some Norwegian companies, such as StatoilHydro 
and Statkraft, the Norwegian state-owned electricity company, are 
pursuing this technology because they recognize the immense 
potential along the Norwegian shores. 
 
SOLAR: LOOKING TO EXPORT EXPERTISE 
---------------------------------- 
 
¶7.  (SBU) Despite having no domestic market for solar power, 
Norwegian firms are making advances in solar technology with an eye 
toward global markets.  Norway does not have a sufficient amount of 
sun to establish a domestic market; however its strong metal and 
silicon industry has provided the expertise and material needed for 
commercial development of solar cells and panels.  Norwegian 
companies, such as solar leader REC, also have an edge because they 
have access to cheap and clean hydro energy.  They have been 
successful in solar markets in Germany and Japan where governmental 
subsidies exist. REC executives also are expanding in Spain because 
of its generous subsidy structure.  India, Greece, Saudi Arabia, and 
Singapore are all interested in Norwegian solar power technology and 
industry experts also point to China and India, where many citizens 
are not connected to a grid, as potential consumers of single, 
standalone systems.  Industry giants such as REC are realistic, and 
recognize that state subsidies are crucial to their success, if not 
existence.  Thus, subsidies and tax breaks motivate REC's global 
expansion plans.  For example, corporate executives confirm that 
selecting Singapore as the spot for the company's massive, 
multi-billion dollar campus was largely based on tax breaks and 
government incentives. 
 
A FOCUS ON CARBON CAPTURE AND STORAGE (CCS) 
------------------------------------------- 
 
¶8.  (U) CCS is a pillar of Norway's climate change strategy and a 
way for Norway to make its enormous gas production more 
environmentally friendly.  This technology separates carbon emitted 
from gas- or coal-fired power plants and stores it in underground 
aquifers, though it can also be stored in containers.   Domestic 
pressure over the carbon emitted by Norway's gas-fired power plants 
and the center-left coalition government's stance against the 
construction of new plants led to the focus on CCS.  CCS in Norway 
is for gas-fired plants, not coal plants, and is extremely expensive 
and complex.  Thus, CCS for gas-fired plants in Norway is propped up 
by the government.  There are currently two gas-fired power plants 
where this technology is being tried and tested. 
 
¶9.  (U) The Ministry of Petroleum and Energy and StatoilHydro have 
been working since 2006 to establish a full scale CCS project at the 
gas-fired power plant Mongstad.  This capture and storage facility 
is planned to be operational by 2014.  A second full-scale CCS plant 
is planned at Krstx which will store 1 million tons of CO2 in 
geological formations under the seabed.  It will open no sooner than 
2011-2012.  Some energy experts argue that these two research 
projects alone will not be sufficient to make the technical advances 
needed for CCS technology in gas-fired plants to be economically 
viable.  That said, the objectives of this research are to gain CCS 
expertise, prove it can be done in gas-fired plants, and later 
export this technology to coal-fired plants as well. 
 
¶10.  (U) Some environmental groups have criticized Norway's CCS 
efforts arguing that funds should be put solely towards renewable 
energy so as not to continue the use of fossil fuels.  The 
government, however, is confident that CCS is the only way to reduce 
emissions from coal- and gas-fired plants which will continue to 
provide a substantial part of the world's energy needs for coming 
decades.  Safety concerns over possible leaks have also sparked 
questions of future liability.  Another concern is that CCS for 
gas-fired plants is too expensive to pursue.  Coal-fired CCS plants 
 
are more efficient than gas-fired ones because they have a higher 
amount of CO2 which creates a greater pressure and makes extracting 
the CO2 easier. 
 
OTHER RENEWABLES ENTERING THE MIX 
--------------------------------- 
 
¶11. (U) Norwegian energy companies are also focusing on a variety of 
lesser known renewable energy projects including biofuel, osmotic 
power, tidal power, hydrogen power, electric cars, and new nuclear 
technology.  Norway's large pulp and paper industry have led to the 
development of biomass and biofuel.  This type of energy is being 
tried in heating, automobiles, ferries, and ships.  One Norwegian 
non-governmental organization, Zero, is working to convert an entire 
ferry to run on biofuels within the next year.  Zero has also worked 
to establish a second generation biofuel plant at Rovderudmyra near 
Lillehammer which will be the first plant in the world to produce 
synthetic biodiesel from landfill gas alone.  The plant will be 
finished in 2010-2011 and is projected to produce about 500,000 
liters of synthetic diesel annually. The Norwegian Research Council 
provided a grant of over one million dollars to this effort. 
 
¶12. (U) Electric cars, though few in Norway, are also getting 
attention.  The government provides lower tax rates for these cars 
and special provisions to allow them to drive in the bus lane. 
There are plans to install electric car fuelling stations along the 
route from Oslo to Bergen to promote this technology.  Think, one of 
the world's largest electric car producers, is based in Norway. 
Think uses innovative production techniques, developing electrically 
powered vehicles able to drive 180 km on a single charge.   The 
company receives financial backing and technological support from 
American companies, such as General Electric. 
 
¶13. (U) Statkraft is also working on new renewable energy 
alternatives, and for the past decade has been researching osmotic 
power, which is the energy produced when saltwater meets freshwater. 
 Statkraft is planning to construct the world's first prototype 
osmotic power plant and the company's projections show that the 
technology could produce 1,600 terra watts of electricity 
worldwide-13 times the amount of hydropower produced in Norway 
annually. 
 
¶14. (U) On the nuclear end of the spectrum, Norwegian researchers 
from the University of Bergen are studying the use of thorium as a 
safer and more efficient alternative nuclear fuel to uranium. 
Norway has an estimated 180,000 tons of thorium. 
 
NO MAJOR POLITICAL SPLITS OVER RENEWABLES 
----------------------------------------- 
 
¶15. (SBU) Norway's energy policy is driven by a general political 
consensus among all but one of the major parties.  Norway recognizes 
the importance of its oil and gas wealth as well as its expertise 
and success with hydropower.  It has a strong political interest in 
climate change.  As a result, there is a strong desire to develop 
clean solutions to balance carbon emissions from its oil and gas 
industry.  Thus, the September 2009 parliamentary election is 
unlikely to spark any major change in Norway's growing renewable 
energy focus.  Indeed, two parties, the Social Left (SV) and Venstre 
are likely to push the environment as an important issue in their 
campaigns.  Since these two small parties are likely to be needed as 
coalition parties in a left or right wing government, their interest 
may force the other parties to be even more supportive of the 
renewables than they otherwise might be. 
 
¶16. (SBU) Within the current Red-Green coalition government, in 
power since 2005, SV is opposed to the construction of new 
hydropower plants for fear that they will destroy natural ecosystems 
and negatively impact the environment.  As a result, the government 
has taken the stance that no new major hydro plants will be built, 
only small-scale hydro systems have been allowed recently.  This was 
a concession to SV by Prime Minister Jens Stoltenberg's Labor Party 
in return for being able to explore the potential of the Snoevhit 
oil and gas field in the Barents Sea, something SV opposed.  SV was 
also against the construction of new gas-fired plants unless they 
had CCS technology and are a driving force behind the government's 
push for CCS.  While SV would like to see Norway diversify its 
energy production away from oil and gas, the other coalition members 
(Labor Party and Center Party) see Norway's petroleum prominence as 
a long-term guarantee of the welfare state.  They, along with 
opposition parties, nonetheless place importance on the need to 
reduce emissions and find ways to clean up petroleum production. 
 
¶17. (SBU) Thus, renewable energy is generally not a contentious 
issue, with most major parties in and outside of the coalition 
agreeing that renewables need to be a part of Norway's energy 
 
strategy.  The Progress Party, the only party to openly debate the 
threat of climate change and oppose Norwegian participation in the 
Kyoto Protocol, stands little chance of slowing Norway's renewable 
energy efforts against such strong popular support even if it 
manages to make it into the government in 2009.  Progress, in fact, 
would also favor pushing new technologies although emphasizing the 
private sector vs. governmental. 
 
NORWEGIAN PUBLIC GROWING MORE CLIMATE CONSCIOUS 
--------------------------------------------- -- 
 
¶18. (U) Norwegian government officials and energy experts have 
noticed a shift in the Norwegian public in the past few years 
towards a more emission-conscious approach to energy policy.  This 
change has been attributed to the spotlight on the Nobel Peace Prize 
being given to both the UN's Intergovernmental Panel on Climate 
Change and Al Gore for their efforts on the threat of climate 
change, growing international awareness, Norwegian CO2 taxes, and a 
growing feeling of responsibility for Norway's large emissions 
originating from the petroleum industry.  While Norway prides itself 
with one of the cleanest oil and gas production systems in the 
world, Norwegians see a paradox in their efforts to reduce global 
emissions while being some of the world's largest emitters.  The 
public is growing more open to using oil wealth to combat climate 
change and supports holding the oil companies more accountable.  The 
Norwegian population has served as a driving force behind domestic 
commercial interest in going green. 
 
U.S. MARKET PROMISING FOR NORWEGIAN RENEWABLE TECHNOLOGY 
--------------------------------------------- ----------- 
 
¶19. (U) Many Norwegian energy firms are looking to the U.S. as a 
very promising market for their cutting-edge technologies, 
especially in the fields of solar power and CCS.  REC Solar is 
active in the U.S. and is confident that the American market will be 
very profitable.  According to REC, the U.S. is an ideal market 
because of ample amounts of sun, existing high electricity prices, 
and unbalanced power grids.  Solar energy can be consumed where it 
is produced which would help equalize existing imbalances in 
American electricity grids.  REC currently has solar manufacturing 
plants in Montana and Utah, and there are plans for a polysilicon 
plant to be built in Moses Lake, Washington. 
 
¶20. (U) Another Norwegian energy company, Sargas, which focuses on 
CCS technology for coal-fired power plants, sees the U.S. market as 
the most promising for its services because it thinks more companies 
there want to go green.  Sargas is looking to establish an office on 
the American east coast within the next year and is exploring future 
cooperation with coal plants in Pennsylvania and with the North 
American Power Corporation in Wyoming. Sargas sees great 
opportunities to export its technology to the many American 
coal-fired plants. 
 
NORWAY'S AMBITIOUS CLIMATE CHANGE STRATEGY HELPS ITS RENEWABLE 
COMPANIES 
--------------------------------------------- --- ------------- 
 
¶21. (U) Norway, emitting about 55 million tons of carbon a year, has 
developed the most ambitious emission reduction targets in the world 
and hopes to become the example of how to succeed under the Kyoto 
Protocol and beyond.  Through a combination of both domestic 
emission cuts and offsets, Norway plans to be carbon neutral by 
2030, 20 years earlier than its original 2050 target set last year, 
overfill its Kyoto obligations by 10 percent during the 2008-2012 
period, and cut a further 10 million tons of emission per year by 
¶2020.  Norway's 2020 target will be met with almost two thirds of 
the cuts being made in Norway while its Kyoto Protocol objective of 
an additional 10 percent cut will be met entirely with reductions 
outside of Norway.  The development of an international carbon 
regime and the success of the Clean Development Mechanism (CDM) 
under the Kyoto Protocol are cornerstones of Norway's climate change 
strategy.  Under the CDM, Norway can invest in projects that reduce 
emissions in developing countries as an alternative to more 
expensive domestic emission reduction.  Despite Norway's ambitious 
goals, critics argue that there is "a lot of talk with little 
action" and that the January 2008 White Paper on climate change, 
despite setting stricter targets, did not provide enough specific 
solutions. 
 
¶21. (SBU) Private firms within Norway are banking on the development 
of an international carbon regime to provide the necessary 
incentives to stimulate a market in clean energy technology.  If 
they come to pass, Norway sees the opportunity for great success in 
areas where Norwegian firms have a unique competence, such as 
hydropower, solar power, and eventually CCS.  The GON is promoting 
international efforts that will further support their businesses. 
 
For example, the Norwegian Agency for Development Cooperation, a 
directorate under the Norwegian Ministry of Foreign Affairs, is 
working in China on cleaner coal production programs using new 
filter techniques.  Norwegian business will also be connected to the 
EU Emissions Trading Scheme EU-ETS this year.  The Government 
expects to supply significantly fewer allowances to the trading 
system than the total of expected emissions from the Norwegian 
companies that will be linked to the EU-ETS. Thus, the Norwegian 
allocations will contribute to scarcity of allowances in the system 
thereby helping their business. 
 
COMMENT 
------- 
 
¶22. (SBU) The Embassy has been working closely with the Ministry of 
Environment and private sector organizers to showcase American 
renewable expertise to promote possible joint research efforts and 
joint business ventures.  We believe there are some natural 
Norwegian strengths in fields such as Carbon Capture and Storage and 
wind technology that make such cooperation valuable to both parties. 
 Furthermore, our efforts to explain the advanced state of U.S. 
renewable research and technology have had a beneficial public 
diplomacy impact, causing more Norwegians to acknowledge U.S. 
environmental efforts and leadership. 
 
WHITNEY