Norwegian municipalities that host hydropower plants receive income from taxes and other mechanisms, including so-called concession power. These arrangements have historically been important enablers for local acceptance for hydropower investments, providing compensation for local environmental costs and giving host municipalities a share of the profits.
However, the existing mechanisms have been developed under different historical circumstances. The need for transforming the energy system with higher peak demand and more renewables with low flexibility creates a need for expanding capacity in hydropower plants and investments in pumped storage. The local income from such investments is uncertain and may be insufficient to gain local acceptance for the projects. This in turn creates a risk of economic losses due to insufficient investments in increased hydropower flexibility.
In a recent report for the Norwegian National Association for Hydropower Municipalities (LVK in Norwegian), THEMA analyses different options for changes to the current mechanisms or introducing new measures. The aim has been to identify options that balance the interests of host municipalities and hydropower producers to ensure that economically efficient investments in capacity expansions and pumped storage are carried out.
