Effects of changes in electricity prices on the power-intensive industries and other sectors in Norway towards 2030

In this study we simulate the effects of different future electricity prices on the performance of the power-intensive industries in terms of production, employment, investment and trade over the 2020-2030 period. We apply Statistics Norwayʾs SNOW model, a computable general equilibrium projection model of the Norwegian economy.

Our results show that both Non-ferrous metals and Iron and steel production react strongly to variations in future electricity prices. In our high price scenario, the Norwegian and European electricity prices are around 50 per cent higher than the reference electricity price in 2030. This leads to a reduction in accumulated output the next decade of 36-40 per cent in Non-ferrous metals and 32-33 per cent in Iron and steel compared to the reference electricity price situation. The main reason for the larger decline in the production of Non-ferrous metals than Iron and steel, is that this sector is more power-intensive.

In our low price scenario, both the Norwegian and the European electricity price decline so that the price is around 40 per cent lower in 2030 compared to the reference electricity price. Assuming no electricity efficiency gains in a low price environment, accumulated output over the next decade increase by 52 per cent and 36 per cent in Non-ferrous metals and Iron and steel, respectively, compared to the reference price scenario. Because Iron and steel is less power-intensive than Non-ferrous metals, they gain relatively less from lower electricity prices.

For both sectors the relative effects of the electricity prices on export, CO₂-emissions and employment follow to a large extent the same pattern over time as the impacts on output.