Norway Is Unhappy with Germany for Mismanaging Their Energy Policy

A surge in electricity prices has ignited political turmoil in Norway, as the nation grapples with its role as a major energy exporter while addressing domestic energy affordability. With electricity prices in southern Norway reaching their highest levels since 2009, political factions are demanding reforms to energy export agreements with European countries.

Norwegian Energy Minister Terje Aasland described the situation as “absolutely dire,” highlighting the public’s growing discontent. The Norwegian Labour Party, currently in power, is proposing to revisit export agreements with Denmark and possibly suspend certain connections when contracts come up for renewal in 2026. The debate is expected to dominate the country’s upcoming elections.

Criticism of Energy Export Policies

The sharp rise in energy prices, fueled by a lack of wind production in Germany and the North Sea, has led to electricity costs in southern Norway soaring to nearly 13.16 Norwegian Kroner (€1.18) per kilowatt-hour—almost 20 times the previous week’s rate. Critics argue that Norway’s priority should be domestic affordability before exporting its abundant hydropower to stabilize European markets.

The Zentrumspartei, a coalition partner, has long advocated ending the energy link with Denmark and renegotiating agreements with Germany and the UK. They blame these international agreements for inflating local prices. Public dissatisfaction has sparked fears of a shift in political power, with the right-wing Progress Party leading in the polls. This party also supports cutting energy ties with Denmark and revising agreements to reduce the “price contagion” affecting Norwegian households.

European Implications of Norwegian Policies

Norway’s hydropower resources are a cornerstone of Europe’s energy strategy, particularly as many EU countries transition away from Russian gas. European leaders have emphasized the importance of integrated energy markets, warning that Norway’s actions could strain diplomatic relations. An EU ambassador in Oslo labeled the potential suspension of energy exports as a “critical moment for EU-Norway relations.”

While Norwegian consumers benefit from a government scheme that covers 90% of electricity costs above a fixed threshold, this subsidy has not quelled public outrage. The Progress Party has called for the state to absorb 100% of costs above the threshold, citing the billions of Kroner generated annually from state-owned hydropower plants.

Germany’s Energy Woes Amplify the Debate

Germany, a key recipient of Norwegian electricity, has faced its own energy challenges. A recent “dunkelflaute”—a period with minimal wind and solar production—caused electricity prices to spike. On December 12, a megawatt-hour of electricity on Germany’s day-ahead market reached €936, almost 10 times the average price from earlier months.

The Bundesnetzagentur, Germany’s federal energy regulator, assured the public that blackouts were not a risk, despite high prices. However, allegations of market manipulation have prompted investigations into whether power companies withheld capacity to inflate prices. The regulator has yet to release details but has confirmed active monitoring of the situation.

Calls for Reform in the Energy Market

The recent volatility has reignited debates over Germany’s energy pricing system, particularly the “merit order” mechanism, which determines prices based on the costliest necessary production source. Critics argue that this system is vulnerable to exploitation, as withholding cheaper capacity forces reliance on more expensive options, driving up overall prices.

Energy experts, including Hanns Koenig of Aurora Energy Research, have questioned whether Germany’s power shortages were as severe as reported. Data suggests that coal and gas plants operated below capacity, adding to suspicions of intentional market manipulation. Major energy firms, including RWE, have denied these claims, citing technical limitations.

Consumer Impact and Adaptation

For most German households, the immediate impact of rising wholesale electricity prices has been limited due to long-term contracts. However, consumers with dynamic tariffs have faced direct exposure to price surges. Energy providers like Tibber have warned customers to minimize consumption during peak hours. Dynamic pricing models, while offering cost-saving opportunities, remain risky in volatile markets.

Meanwhile, Swedish consumers have experienced similar disparities, with prices in southern Sweden spiking up to 190 times higher than in the north. Poor internal energy transmission infrastructure exacerbates these regional imbalances in both Norway and Sweden.

Balancing Domestic and International Demands

Norway’s energy policies are now at the intersection of domestic priorities and international commitments. While political leaders debate the best path forward, the outcome will likely have far-reaching consequences for Europe’s energy landscape. Norway’s decisions could either strengthen its role as a reliable energy partner or prompt broader discussions on the balance between national interests and collective energy security.