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Position paper - CenSES 1/2015
Expansion in power consumption from electricity
intensive industries requires large scale investments. This
can happen if the industry has the ability to innovate
(improve quality of products and increase production
efficiency) and can produce with low costs. Norway
has strong competence in chemical and metallurgical
processes. Investments in the Norwegian power
intensive industry have been based on development
of new processes or improvement of existing ones.
Hydro expected that their process for magnesium
would become a major growth industry in the 1980s.
Elkem’s development of polysilicon was the basis for
investments in new processes for the solar industry
in the 2000s. Hydro’s investments in Karmøy revolve
around testing more energy efficient aluminium
production. However, innovation ability is not enough
for industry to remain in Norway. Magnesium was
started in Canada, but has not been the profitable major
industry Hydro had hoped for, and the silicon industry
flagged when competition from China became too
strong.
The decision to invest in Norway vs. invest in other
markets is closely linked to prices of the main input
factors. In power intensive industries power prices have
become the single most important competitive factor
due to increasing automation. The lack of investments
in the industry in Norway 2000-2011 may be explained
by increasing power prices. Today, electricity prices are
historically low and are expected to remain low. This
opens a window of opportunity for expansion of the
industry. A basic assumption for future investments in
power intensive industries is that power prices remain
at a low level. In a liberal power market this implies
high supply compared to demand. In our scenario,
where industrial consumption is expected to increase
by more than 15TWh, investment in production of
power has to increase for prices to remain low. That in
turn presupposes that the regulatory framework for the
power sector is such that investors will want to expand
in electricity intensive industries as well as in new power
supplies - in spite of low electricity prices.