The Norwegian government has proposed lowering the threshold for resource rent taxation, in practice including small-scale hydropower plants not presently covered by the tax. According to our analysis, done for the Norwegian Small Power Association and Renewables Norway, the policy could transfer approximately EUR 1.6 billion from municipalities, investors, and landowners to the central government.
Contrary to the policy’s stated aim of improving resource utilization, the proposal may actually discourage new investments in small-scale hydropower. A key issue is that waterfall lease payments are not tax-deductible under the resource rent tax system. This creates investment barriers that could leave approximately 1.7 TWh of economically viable small hydropower potential undeveloped.
For existing plants, the impacts are substantial. Equity values in small hydropower plants could be reduced by 60-70 percent, increasing bankruptcy risk for leveraged operators. Municipal ownership values are projected to halve, as losses on municipal stakes in small-scale hydropower exceed gains from increased resource tax revenues. Landowners face an estimated EUR 440 million loss in values.
You can read each individual analysis in the links below (in Norwegian).
