Norway irks investors with plan to slap 40% tax on wind power

BLOOMBERG

As the US and EU throw billions at building out the industry needed for the transition to a low-carbon economy, Norway is spooking investors by slapping taxes on wind farms.
Norway’s Labour-Centre government is boosting taxes as the cost of pensions, health services and care for the elderly outpace mainland revenues. Salmon farmers, wind turbine owners and hydropower producers are being asked to pay up for using the country’s fjords and mountains in a sweeping overhaul that has also targeted the wealthy.
Aquaculture companies were left unimpressed by the final proposal for their industry, even after outcry from companies saw it dialled back. That has left wind power firms on tenterhooks over their fate, and so far they don’t like what they see.
A proposed 40% tax on revenues from onshore wind parks has the potential to bankrupt projects and drive investors away, according to a KPMG report. That would be disastrous at a time when the country needs to add 40 terrawatts of green power production by the end of the decade to avoid an energy shortfall as factories and smelters move from gas to electricity.
The overhaul comes at a time when governments elsewhere are rolling out the carpet to attract green projects. Neighbouring Sweden is forecast to grow onshore wind by 54% to 20 gigawatts by 2030, Finland sees a tripling in onshore capacity to 15 gigawatts, while in the UK land-based turbine capacity will almost double to 25 gigawatts by the end of the decade, according to BloombergNEF.
Known as Europe’s green battery, Norway’s industrial development was built on vast hydropower resources in its snow-capped mountains long before it discovered oil in the North Sea in 1969. Those dams kept electricity prices low, even as power consumption rose.
Successive Norwegian governments sought to cover this uptick in demand by incentivising onshore wind investments, calling for a tripling of land-based turbines by 2020. That attracted international investors including BlackRock, Aquila Capital Holding GmbH and Luxcara, which today own over half of Norway’s 64 onshore wind parks, according to KPMG.
Those companies represent risk adverse investors who were drawn to the country’s “stable political, social and legal environment,” Luxcara said in a letter to the government.
It didn’t take long, however, for the turbines to stoke controversy. There were complaints that the installations marred Norway’s scenic landscape and spooked the reindeer herded by the Indigenous Sami. In 2021, the supreme court ruled that two wind parks built on grazing land breached their human rights. After lack of action by the government, protesters — including Greta Thunberg — blockaded government buildings earlier this year, demanding that the turbines be torn down.
Meanwhile, Norway’s push to decarbonise is only growing more urgent as it targets cutting carbon emissions by at least 55% from 1990 levels by the end of the decade. As onshore wind became less popular, the current government is pushing hard for placing turbines out at sea, where it aims to complete 30GWs of capacity by 2040.
Offshore wind farms, which so far don’t face the same taxes as their onshore counterparts, don’t arouse similar opposition from local residents. They also offer an alternative for country’s oil and gas companies as they transition to more renewable operations, making the most of their experience working in the North Sea.
That sector has formed the backbone of the tax system in Norway, with oil and gas companies facing a total marginal tax rate of 78%, explaining why the government is so willing to put more tariffs on profiting from the use of natural resources.
But like other European countries, Norwegian consumers struggled with high energy prices, inflation and other knock-on effects related to Russia’s invasion of Ukraine.