The legal framework

The overall objectives of the legislation

Developing infrastructure for electricity production and transmission or for district heating plants and distribution networks can result in conflicts between user and environmental interests during planning, construction or operation. Conflicts may also arise in connection with water resources management. There may be impacts on biodiversity, landscapes and outdoor recreation, fishing, tourism, the cultural heritage, local communities, reindeer husbandry and so on. In the legislation, these are often referred to generically as “public interests”. Energy and river system projects may also affect private economic interests.

Norway’s legislation is intended to ensure that all the different interests are heard and considered, and that projects are subject to government control and conditions that safeguard different interests. Another important objective is to ensure effective management of our resources. Security of energy supply and a well-functioning power market are key considerations here.

Below you will find an overview of Norway’s legal framework for the energy sector and water resources management

Waterfall Rights Act

Before making use of water for electricity production, a developer must have ownership rights to the waterfall. A non-state developer must hold a licence under the Waterfall Rights Act in order to acquire such rights. The Act does not apply to small-scale power projects or run-of-river hydropower plants under the limit of 4000 natural horse powers. The overall purpose of the Waterfall Rights Act is to ensure that hydropower resources are managed in the country’s best interests through public ownership of hydropower resources at national, county and municipal levels.

Under the current rules, licences may only be issued to public bodies, i.e. state-owned enterprises, municipalities and county authorities, and to companies where such bodies hold at least two-thirds of the capital and the votes in the company. This means that private actors may own up to one-third of a company that holds a licence under the Waterfall Rights Act. Licences issued under the Act include conditions on licence fees and obligatory sales of power to the municipalities where waterfalls are situated.

Watercourse Regulation Act

To regulate flow in a river or transfer water between river systems for use in power generation above a certain threshold, a licence is required in accordance with the Watercourse Regulation Act. The Act also applies to run-of-river hydropower plants that generate more than 40 GWh per year. Licences set out the highest and lowest permitted water levels in reservoirs. Licences also include rules for reservoir drawdown, which may include provisions on the minimum permitted rate of flow and on the volumes of water that may be released at different times of year. In addition, licences may include conditions relating to licence fees and obligatory sales of power or conditions aiming to compensate or mitigate damage.

Water Resources Act

In addition to hydropower projects, many other types of developments may take place in river systems. The Water Resources Act applies to all of these, not just to hydropower developments. Examples include the abstraction of water for fish farms and the extraction of deposits (sand, gravel, etc.). Small-scale power projects smaller than 10 MW are also regulated by the Water Resources Act. Licences may include various conditions to ensure compensation for damage or to mitigate damage. Small-scale developments that are not expected to cause significant damage or nuisance to public interests do not require a licence under this Act.

Energy Act

The purpose of the 1990 Energy Act is to ensure that energy is generated, converted, transmitted, traded, distributed and used rationally and in the best interests of society. This includes taking into consideration any public and private interests that are affected. The Act provides a framework for competition in electricity generation and trading. The development and operation of the grid is a natural monopoly, and the Act provides the legal basis for regulating the grid companies. The Energy Act also regulates marketplaces for trade in electrical energy, cross-border interconnectors, district heating facilities, responsibility for system operation, electricity supply quality, energy planning and contingency planning for power supplies.

Developers must apply for licences under the Energy Act to construct wind and solar farms and high-voltage power lines. Distribution grid companies can obtain general local area licences. This means that they do not need to apply for a licence for each separate installation within an area.

 

Offshore Energy Act

The Offshore Energy Act provides the legal basis for offshore renewable energy production. The Norwegian state has the right to utilise offshore energy resources. The Act applies to Norway’s territorial sea outside the baselines and to the continental shelf, however individual provisions are also applicable to internal waters. A licence is required for electricity generation, conversion and transmission in areas covered by the Act. Licences can only be obtained after the central government authorities have decided to open specific areas for licence applications and held an auction for interested parties/bidders. An area can only be opened after the authorities have carried out a strategic environmental assessment. However, the authorities may exempt pilot projects and similar projects with a limited time frame from these requirements.

 

Electricity Certificate Act

The 2011 Electricity Certificate Act is intended to promote production of electricity from renewable energy sources up to 2020. It establishes a Norwegian market for electricity certificates, which was linked to the Swedish electricity certificate market from 1 January 2012. The electricity certificate market is a constructed market in the sense that the demand for certificates arises from a statutory obligation to purchase them. Sales of electricity certificates give power producers a supplementary income in addition to that derived from sales of electricity.

Other relevant legislation

 

In addition to legislation administered by the Ministry of Energy, a number of other acts and regulations are important for the management of energy and water resources. The EU Water Framework Directive (2000/60/EC) has been implemented in Norwegian law through the Water Management Regulations, which were adopted under the Pollution Control Act, the Planning and Building Act and the Water Resources Act. The regulations include provisions on river basin management plans, which are intended to maintain and improve the ecological status of rivers and lakes and coastal waters.

Energy production and transmission infrastructure can have impacts on biodiversity, and developments must be assessed according to the principles set out in the Nature Diversity Act. This Act applies to all sectors during the exercise of public authority when the decisions being made may have environmental impacts. The Act is intended to ensure that Norwegian nature is protected through conservation and sustainable use, and that the environment can continue to provide a basis for human activity. The Act includes provisions on priority species, selected habitat types and area-based protection, which must be considered when developing energy production and transmission infrastructure.

The Planning and Building Act applies to a large extent in parallel with the energy and water resources legislation, but there are some important exceptions. Many of the provisions of the Planning and Building Act do not apply to the transmission grid, but an environmental impact assessment (EIA) is required in the usual way. The EIA regulations include specific provisions on projects that require licences. The Technical Regulations for buildings, also adopted under the Planning and Building Act, set out energy requirements for buildings.

A power project developer that does not have the necessary rights to establish and operate installations in a river system may apply for the expropriation of these property rights in accordance with the Expropriation Act. Where appropriate, the provisions of the Cultural Heritage Act, the Pollution Control Act and the Reindeer Husbandry Act must also be taken into consideration during the licensing process for energy projects and other projects in river systems. The Reindeer Husbandry Act is intended to maintain reindeer husbandry as an important basis for Sami culture, in accordance with the Norwegian Constitution and the provisions of international law on indigenous peoples and minorities.

The Public Administration Act sets out general provisions for administrative procedures in the public sector, including how cases should be prepared and how to deal with appeals against individual decisions. These rules apply in addition to the specific rules set out in the legislation on energy and river systems.