Investment contributions in the regional distribution grid and transmission grid

According to the Norwegian Act on Energy with accompanying regulations, customers who have requested connection or increased capacity in the regional distribution grid and transmission grid, have so far not been required to pay investment contributions. The only exception has been for customer specific facilities. According to the new amendments adopted by NVE, grid companies shall determine and claim investment contributions in the regional distribution grid and transmission grid. As many  producers and consumers plan to make investment decisions in the near future, it will be of great significance to clarify which projects will be subject to the new regulation. 

The amendments brought by NVE will come into force on 1 January 2019. In relation to the new regulations, NVE published a consultation document including the proposed amendments. Here, Section 16-12 stated the criteria to be taken into account when determining which cases should be handled by the existing regulations before 1 January 2019 and which cases should be handled by the proposed regulations. For a case to be handled in
accordance with the existing regulations, any grid customer had to fulfill either the following criteria:

  1. customer has requested the grid company for either connection, increased capacity or better quality
  2. the customer and the grid company have been granted the necessary concessions, and
  3. the grid company and the customer have entered into binding economic contract with each other or third parties.

For projects transiting between planning and construction, it was challenging to assess whether the transitional criteria were fulfilled. Feedback from the consultation round were especially related to the criterion concerning whether "binding economic contracts" were entered into. Moreover, several concerned parties voiced criticism to the fact that the deadline for fulfilling the criteria was set to 26 March 2018 – the day before the consultation document was published.

In the amended regulations, a transition arrangement is still in place, but the criteria were amended as a result of the consultation round. The NVE has omitted the original criterion about grid customers having to have entered into binding economic contracts. Further, the NVE proposed somewhat different criteria for producers- and consumers. According to the NVE, the amendments in the transitional provision will make it easier for grid customers to clarify and predict their position.

The transition criteria in Section 16-12

If the grid customer is a producer, the grid companies cannot claim investment contributions if

  • a) the producer has been granted the necessary concession within 1 July 2018, and
  • b) the producer is connected to the electricity grid, given increased capacity or better quality, within 1 July 2022.

The criterion in letter a) implies that projects which have not been granted the necessary concession within 1 July  2018, will be subject to the new rules on investment contributions. However, projects which are not obligated to acquire a concession only have to fulfill letter b).

Consumers are not subject to the same obligation to acquire a concession as producers. The criteria for consumers are therefore that a) the consumer has requested the grid company for either connection, increased capacity or better quality, within 1 July 2018.. This implies that the  consumer must have approached the grid company with an enquiry containing information about expected capacity, impact and location. The enquiry should preferably be in writing.

The criterion in letter b), in which applies to both producers and consumers, provides the deadline for when customers at the latest must be connected to the electricity grid or been given increased capacity or better quality, to be subject to the transitional provision. Customers which do not fulfill letter b) within 1 July 2022, must pay an investment contribution equivalent to the customer's share of the investment triggered by the client.

Producers and consumers cannot know for certain if the connection to the grid connection will be complete within 1 July 2022. For the individual customer to be able to consider the risks of going through with the project, the grid company is required to inform the customer about the amount to be paid in investment contribution if letter b) is not fulfilled. The grid company may not claim any investment contribution if the estimated costs are not presented to the customer in advance. This applies even if it later turns out that the grid connection will not be completed within 1 July 2022.

Exceptions from criterion in letter b)

The amended regulations include an exemption which shall prevent delays within the grid company or the energy authorities from inflicting consequences on the customer if this is the reason why the grid connection is not completed within July 1st, 2022. The exception applies firstly if the grid company has not fulfilled its connection obligation according to Section 3-4 of the Energy Act about planning and applying for license without undue delay. A prerequisite is however that the customer has brought the case before the NVE within 1 July  2022. The exception also applies if the case procedure of the NVE or the OED regarding the grid company's necessary facility license for the grid connection has been exceptionally slow. The exclusionary provision applies to both producers and consumers. 

Measures

The amendments in the Regulations concerning investment contributions will have consequences of great economic and practical importance for both grid companies and clients. The passed amendments to the regulations is in our opinion far more predictable than what was proposed in the consultation document, but there is still considerable uncertainty linked to how the regulations will be handled in practice. We recommend our clients to initiate an internal process to clarify what consequences the amendments may have for their projects. It will be especially important for producers and consumers involved in projects in the transitional phase between planning and construction, to assess whether their projects fulfill the criteria for being handled according to the existing regulations.

A report summing up the proposed amendments in the regulations concerning investment contributions was published by NVE, and is available here as a whole (in Norwegian)

We are happy to advise with regards to the consequences of the amendments and in assessing what measures should be implemented.