Norway Imposes New Tax on Wind and Hydropower Plants, Potentially Causing Bankruptcy, Analysts Warn

While the European Union plans to spend hundreds of billions of euros in the coming years to support green energy sources such as wind farms, solar panels and heat pumps, Norway, as part of the fight against inflation and deficit budgets, has imposed a new tax of 40% on ecological wind and hydropower plants. That could discourage other investors and lead some wind farms to bankruptcy, analysts say.

The Norwegian government has imposed higher taxes on the owners of wind and hydropower plants due to insufficient funds in the state coffers. Norway’s costs for pensions, health services and care for the elderly significantly exceed the country’s income. According to the government’s proposal, the proposed taxes for wind power producers and hydroelectric power plant operators should bring in more than NOK 30 billion per year (60 billion crowns) to the state treasury.

According to Bloomberg, the proposal envisages a 40% tax on income from wind parks. This, according to experts, could bring some operating projects to ruin and also discourage investors from future construction. At the same time, Norway needs to add forty terawatts of green energy by the end of the decade to avoid energy shortages as Norwegian industry transitions from gas to electricity.

“This cannot be achieved without large-scale onshore wind development,” BlackRock’s head of infrastructure, Fredrik Norell, said in a March 14 letter to authorities. The tax “calls into question the economics of wind energy in Norway and seriously damages investor confidence in Norway as a stable business environment,” Norell said, adding that the new tax will deter investors.

The government’s proposal comes at a time when governments in other countries are preparing massive investments in new green projects. Neighboring Sweden’s onshore wind capacity is forecast to increase by 54% to twenty gigawatts by 2030, Finland’s onshore wind capacity will triple to fifteen gigawatts, while the UK’s onshore turbine capacity will almost double to 25 gigawatts by the end of the decade.

“Everybody else welcomes onshore wind with open arms, except Norway,” investment manager Jenny-Li Holmstrom told Bloomberg. At the same time, Norway has been paying for Europe’s green battery for a long time, because the country has had an energy mix built on extensive hydropower sources and dozens of wind parks for decades.

It is wind farms that often become the subject of controversy. There have been complaints that the facilities are disrupting the picturesque Norwegian landscape and scaring reindeer that are herded by the indigenous Sámi. In 2021, the Supreme Court ruled that two wind farms built on grasslands violated their human rights. Following the government’s lack of action, protesters – including Greta Thunberg – blocked government buildings earlier this year and demanded the turbines be demolished.

This uproar, along with the tax proposal, has investors weighing their options. Norwegian wind farm developers Cloudberry and Aneo, like other international companies, are now targeting markets outside of Norway.

“The entire renewables sector in Norway is clear that this cannot be the end result,” Cloudberry CEO Anders Lenborg said on March 8. “I don’t see how this should be part of the solution to getting enough renewable energy,” he said. Lenborg. An alternative could be offshore wind farms, which are not yet subject to the same taxes as their counterparts on land and do not arouse such opposition from local residents.

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