Last week, news was able to tell how those who receive the most electricity subsidies earn the most and save the least. And the more favorable the compensation became, the less people saved on electricity, news’s calculations showed. – There are probably many people who have used less electricity than they did before. But it is clear that they would have spent significantly less if they had to pay what it actually cost. So says Nils-Henrik von der Fehr, who is an economics professor at UiO and one of Norway’s foremost experts on the electricity market. All news’s findings are as expected, he says. – If you have good money, you don’t need to save either, even if it’s expensive. Nils-Henrik von der Fehr is economics professor at UiO. He Photo: Silje-Lisette Tennøy / news – What are the consequences of the electricity subsidy helping to keep electricity consumption up? – In general, it contributes to prices being higher than they would otherwise have been. This particularly affects those who do not have electricity support. And this applies especially to the business sector, which receives higher prices. One of the ways the government will solve the price crisis is for us to use less electricity. Pointing to other solutions Today, the state covers 90 per cent of the electricity price if it exceeds 70 øre per kilowatt hours. The support covers up to 5,000 kilowatt-hours a month. Everyone is paid the same amount in compensation. People had then paid the market price for the electricity. Everyone receives compensation according to income or where they live, and then they pay what the electricity actually costs. – Then you could both make sure that people felt and saw how expensive it was. At the same time, it did not make such a huge impact on the wallet. Several economists have proposed similar solutions, with the same reasoning as von der Fehr. In the Storting, several parties, such as Frp, KrF and Rødt, have advocated a maximum price for electricity. That will work against saving electricity, von der Fehr believes. – That is what you should try to avoid. At least if the purpose is to reduce power consumption. The electricity subsidy dilemma At the same time as the state has several tens of billions in electricity subsidies, Norges Bank has raised interest rates 13 times since 2021 so that we will spend less money. – If it hadn’t been for the electricity subsidy, the brakes we have on the economy would have clearly come faster, says Kjersti Haugland, who is chief economist at DNB. Some form of electricity support has been necessary, believes Kjersti Haugland, chief economist at DNB. Photo: William Jobling / news This contradiction has been a dilemma, says Haugland. – Now in 2023, this dilemma is not so big, because now the economy is slowing down. Thus, it is not so dangerous from the point of view of the inflationary pressure from within that the electricity subsidy is still there. – Could you save a few billion on the electricity subsidy, while at the same time getting the slowdown you wanted with a lower interest rate? – Unfortunately, it is not that simple. Because if Norges Bank had not raised interest rates as much as they have, the krone exchange rate would have been significantly weaker than today. This had led to higher price growth in the Norwegian economy. – Difficult to get out In recent days, electricity prices in the south of Norway have fluctuated between NOK 1 and 3 per kilowatt hours. Prices will probably go down from today’s levels, but we will not return to old levels, believes von der Fehr. – How long can we continue with this type of electricity support? – You can actually hold on as long as you want. Because the state has a lot of money. So it is more a question of what is appropriate and good resource policy, the professor replies. – Do you have any thoughts on how appropriate this resource policy is? – The way the electricity subsidy is arranged now, it does not achieve the goals of reducing consumption and increasing energy efficiency. The government has already extended the electricity subsidy until 2024. – It is not so easy to imagine the situation that will make it easy for a government to get out of this. Von der Fehr is a member of the Conservative Party. He emphasizes that he is speaking as an economist, not a politician.
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The electricity subsidy has increased consumption. I think there are better solutions. – news Norway – Overview of news from different parts of the country
