Peter Ørebech


The purpose of this article is to scrutinize legal barriers to state aid instruments in transforming fuel-based electricity into renewable energy, the subsidy prerequisites by which the national state may champion fuel free power production. Subsidy is illustrated by the 2004 Official Norwegian Report's (NOU) disapproval of the Norwegian Reversion Institute (NRI), as a result of a waiver clause to the benefit of municipal power plants. A licensing period of sixty years is final. Relicensing is not possible; only private leasing may occur.

As outlined, my basic criticism is that the NOU confuses interstate distortion of competition as it is regulated in Article 61 of the European Economic Area Agreement (EEA) with company-specific discrimination, which is the focus of Articles 53 and 54. The 2004 report's view is that public companies (national, state, or municipal) are the beneficiaries of NRI exemption and thus bolstered in relation to privately-owned power plants. This is ill-focused because Article 61 prompts Norwegian producers into benefits resulting from national state aid. As the 2004 perspective is subsidization due to exemption for public companies only, my position is that the NRI represents no subsidy at all; to the contrary, it is detrimental to the Norwegian industry. While foreign plants do not suffer from the NRI, Norwegian private producers do, which frustrates their ability to compete.

The NRI does not result in financial disadvantages to foreign electricity producers caused by dumping, which manipulates the market. The 2004 NOU focus is additional production costs due to reversion, which results in selling below cost to intimidate competition. Why? Because the producer's focus is to draw from the market what the market is willing to pay. Profit margins are extensive with no negative return, and production costs burden investors. The main objective of investing in electricity companies' shares, futures, derivates, etc. is not related to the price of electricity, but to the calculation of short term speculative trading gains.

Another criticism of the NOU is its ignorance of the fact that the initial private owners of hydroelectric power plants paid less than public entrepreneurs—due to the reversion clause—at the time of the initial development. Accountability is also the favorable tax regime to the release of private investments. According to Norwegian tax law the depreciation period is shorter for privately owned plants. Further, nationalization at the sixtieth year countervails initial subsidies. Member states to the EEA may always, by reversion, efficiently put an end to subsidy accusations.