The legal framework governing hydropower in Norway

Norwegian hydropower offers numerous benefits. Hydropower is, first and foremost, a stable renewable energy source, since the water can be stored in reservoirs and used when needed. Norway has about half of Europe’s reservoir capacity, and more than 75 percent of Norwegian production capacity is storable. The scope for using storage hydropower in combination with other energy sources, such as sun and wind, improves flexibility in the power system.

Thommessen has assisted hydropower providers, large and small, for several decades, and we have extensive experience with all forms of legal issues in relation to hydropower. Thommessen has, inter alia, assisted on the establishment of Norway’s third largest hydropower provider; Lyse Kraft DA, and on the consolidation of the hydropower activities of Eidsiva and Hafslund E-CO, respectively.

The hydropower licensing process

Hydropower plant development will in the vast majority of cases require a licence under the hydropower development legislation.

As a general rule, the development of hydropower plants requires a licence under the watercourse legislation: the Watercourse Regulation Act, the Water Resources Act and/or the Waterfall Rights Act. Previously, licences for larger hydropower developments had to be decided by the King in Council. From September 2025, the Norwegian Water Resources and Energy Directorate (NVE) has been delegated authority to make all first-instance decisions under the watercourse acts, with a few exceptions (e.g., where the law requires the consent of the Parliament).

Under the Watercourse Regulation Act, NVE now has the authority to grant licences for watercourse regulation and transfer, and for hydropower plants exceeding 40 GWh. Further, NVE has been given authority, inter alia, to refuse licence applications, to adopt decisions in revision matters, to decide on the decommissioning of hydropower plants, and to amend or revoke granted licences. The Ministry of Energy therefore serves only as the appellate body for NVE’s decisions under the Watercourse Regulation Acts.

NVE has also been granted authority to issue acquisition licences under the Waterfall Rights Act, as well as additional powers including imposing licence conditions, amending licence conditions and adopting decisions in revision matters. The Ministry of Energy has nevertheless retained the authority to decide on (i) transfers of shares in a limited liability company, (ii) transfers of 90% share in a company, and (iii) acquisitions of ownership interests in other companies (Sections 23, 24 and 26). As with the Watercourse Regulation Acts, the Ministry also serves as the appellate authority for decisions adopted by NVE under the Waterfall Rights Act.

NVE is also the competent watercourse authority under the Water Resources Act. This means that NVE now has authority to process licence applications from 1 MW up to 40 GWh (the latter being dealt with by NVE under the Watercourse Regulation Acts). Previously, NVE’s competence extended only to measures of up to 10 MW. The competence has now been substantially expanded. The Ministry of Energy will likewise remain the appellate authority under the Water Resources Act for decisions adopted by the NVE.

There are certain differences between the application processing of major and minor development applications under the hydropower legislation. Minor plant applications processed under the Water Resources Act are subject to simpler procedural rules than are major projects, thereby contributing to faster processing of such projects. The NVE has prepared a set of guidance notes on the various application processes.

In addition to a licence under the hydropower development legislation and a facility licence under the Energy Act for any electro-mechanical equipment, the owner of a hydropower plant may also, depending on the circumstances, need to obtain permits under other legislation, as well as clarify compliance with relevant municipal plans.

For large hydropower, the Waterfall Rights Act (formerly the Industrial Licensing Act) requires public ownership, including that 2/3 of the votes and capital must belong to a public owner. In addition, a licence under the Waterfall Rights Act is required to acquire waterfall rights exceeding the licensing thresholds in the Act. Transactions and reorganisations may trigger a licence requirement or a need for obtaining government consent for the assignment of licences or for the transfer of shares or other ownership interests in companies or partnerships which hold rights that are subject to licence.

Licence terms and conditions and the revision process

Hydropower licences include terms and conditions intended to alleviate and avert damage to, inter alia, the environment, nature and society. These conditions are a combination of standardised and more tailored conditions, and may pertain to various project phases (including, inter alia, the construction phase and the operating phase). Conditions relating to water release and minimum water flow are specific to hydropower licences. Specific water management provisions will be adopted for major developments.

Moreover, major hydropower plants will be subject to terms regulating concession power and concession fees. These conditions require the owner of the hydropower plant to concede a portion of the power produced to the municipality (or municipalities) affected by the development (concession power) and to pay a specified fee (concession fee) to central government and to the municipality (or municipalities) affected by the hydropower plant.

Both the hydropower development legislation and the licences allow for revision of the licence terms and conditions after a certain period of time, and the Watercourse Regulation Act now includes a separate provision authorising the revision of all licences from 19 June 2022. The purpose of revision of the licence terms and conditions is, inter alia, to improve environmental conditions in the affected watercourses. However, the scope for revision only allows the authorities to revise the licence terms and conditions, and not the licence as such.

The public body seeking a revision of terms will often argue that the introduction of new, amended and/or burdensome terms and conditions is justified, including, inter alia, (new) minimum water flow requirements and amended manoeuvring provisions. Such terms and conditions may have production volume implications. Moreover, there may be costs associated with any implementation and follow-up of the said terms and conditions. Such demands must normally be balanced against other considerations, such as consideration for maintaining renewables production capacity, flood prevention and security of supply. Private law matters are not subject to revision, and the same will normally apply to any economic conditions.

Upgrading and expansion projects

The large-scale development of Norwegian hydropower production primarily took place from the 1950s to the 1980s, with the focus more recently having shifted, in part, to the need and scope for both upgrading and reinvestment of the hydropower plant. Upgrading initiatives are projects and interventions that do not necessitate the exploitation of more water or additional hydraulic head. Expansion projects, in contrast, involve refurbishing the power plant to exploit additional water or increasing hydraulic head. Such expansion projects must be assessed for licensing requirements and may be subject to a licensing process. The advantage of upgrading and expansion projects is the potential for increasing hydropower production with a limited impact on the external environment. The NVE’s estimates suggest that mapped projects offer a total upgrading and expansion project potential of about 6-8 TWh. Such projects are often, against this background, highlighted as an alternative to further hydropower development.

Please do not hesitate to get in touch with us for more information on the legal framework governing hydropower in Norway.