Data centre licensing could curb power prices and make capital more expensive
The Government's proposed licensing scheme for data centres could slow the rise in power prices. But a Norwegian special arrangement could make it harder to raise capital for power and carbon capture.
By Torhild Rossum, Legal Counsel, and Kenneth Juul, Chief Commercial Officer and co-founder, Carbon Centric
On 9 November, the Government announced that it will assess, and aims to introduce, a new licensing scheme for the establishment and operation of data centres. On the same day, Statnett announced a temporary halt to new reservations of grid capacity for data centres. The halt is expected to be lifted no later than 1 August 2027.
The Government will prioritise data centres that contribute to socially beneficial use, and will also assess models for state ownership in projects of particular public benefit. At the same time, the Government will enter into dialogue with the data centre industry on how the industry itself, on a commercial basis, can help build out the power generation needed. Offshore wind and gas power with carbon capture and storage (CCS) are mentioned as examples.
Carbon Centric currently captures CO₂ at a waste-to-energy plant in Rakkestad, where the CO₂ is put to use (CCU), and is planning several further capture projects (CCS). What has now been announced also affects the carbon capture industry. We have a vested interest in the matter: we need power at predictable prices, and we will benefit from more CO₂ infrastructure.
Our view is that the objective is right, but the instrument is risky. Power should be prioritised, but through common, predictable frameworks in the Nordics and the EU, not through a Norwegian special arrangement. Here are two upsides and two downsides as we see them.
The first upside: access to power
Carbon capture and other measures for the green transition require a great deal of power, and our projects must stand in the grid connection queue like everyone else. Little new power generation has been built in Norway in recent years, and both spot prices and prices for long-term contracts have risen markedly. The offers we ourselves receive from our power supplier show that a fixed-price agreement for businesses today costs around 50 per cent more than two years ago.
NVE has pointed out that continued growth in data centres could lead to a weaker power balance and more expensive electricity. A licensing scheme could, depending on how strict the conditions become, dampen the growth in expected consumption and thereby also the growth in prices. That is positive for us and for everyone else who needs power.
The second upside: shared infrastructure for handling CO₂
The signal that gas power with CCS may be permitted, which the Minister of Energy also mentioned as an option outside the grid (off-grid), could trigger the development of infrastructure for transporting and storing CO₂ that other companies can also connect to. Many industrial facilities in Norway have small emissions and are geographically dispersed, and cost-sharing on CO₂ infrastructure could therefore be what unlocks more CCS projects. Our point is the infrastructure, not the gas power in itself.
The first downside: uncertain progress for larger power-intensive projects
Introducing a licensing scheme will take time: the Government aims to present the main principles in autumn 2027. In the meantime, Statnett has halted new reservations of grid capacity for data centres, expected to last until 1 August 2027 at the latest. Statnett states that the halt in practice only affects data centres, but that available capacity will not be allocated to other customers if this would be to the detriment of data centres ahead in the queue. Projects standing behind a data centre in the queue may therefore be left waiting, and that could slow the green transition.
The second downside: lack of predictability
In Norway, we like to describe ourselves as a stable and predictable country to invest in. Nevertheless, the framework conditions for power-intensive industry change often and quickly. This time, a halt in grid reservations and the announcement of a new licensing scheme came on one and the same day. Each change may have sensible intentions, but our experience is that the sum of them leads investors and buyers to perceive the Norwegian market as exposed to political risk. That makes it harder to attract the capital we need.
Licensing is admittedly a well-established governance tool in Norwegian public administration, including for hydropower, petroleum, fisheries, mining and real property. But capital for data centres and power-intensive industry is not tied to a location in the same way as a waterfall or an oil field, and can go to other countries. According to the ministers, Norway is the first country in Europe to consider a similar scheme for data centres, and the Minister of Digitalisation has himself acknowledged that it raises difficult questions under EEA law.
The way forward
The objective is right: power is a scarce resource and should go where it creates the greatest value. We nevertheless urge the Norwegian authorities not to introduce national special arrangements, but to work for common, predictable frameworks together with the Nordics and the EU. Predictability is what brings investment in power and carbon capture to Norway.