A word from the President and CEO

We are building the next generation main grid – in a balanced way

2012 was the year when the general public in earnest became aware that Statnett has started construction of the main grid of the future. We have obtained the first licences we need, we have the expertise and we are now fully focussed on progressing with our projects. At the same time, reliable operations and safety will always be our number-one priority.

The power grid – a balancing act

There are major power fluctuations in our power system. Following a dry period in 2010/2011 with low inflow into the water reservoirs, we experienced a wet period and a good power situation from the spring of 2011 and throughout 2012. We went from historically low reservoir levels and a strained power situation to a period with high reservoir levels, followed by a normal power situation. After a period of import records, 2012 was a year with high power exports throughout the year. In January 2013, both electricity production and consumption records were set on different days in Norway.

Statnett must handle these situations, without consumers noticing, from day to day and from hour to hour. In recent years, we have seen an increase in people’s awareness of the importance of a reliable supply of power. The tolerance limit is probably lower than, say, 15 years ago, and the consequences of an outage have increased significantly.

The current climate changes make our balancing act even more challenging. The only long-term response is to make sure we have a stronger power grid, a task that we have already embarked on.

Many ongoing projects

We have stepped up our activities to develop the main grid of the future, but have not yet reached the desired investment pace. Whereas we invested just over NOK 3 billion in 2012, our aim is to increase annual investments to almost NOK 10 billion in a few years. We are developing our organisation accordingly, while working closely with regional grid companies and the supplier industry to secure good solutions and make sure we have the necessary capacity.

During the course of 2012, we acquired new licences and were allocated new tasks. We have, for instance, received a licence from the Norwegian Water Resources and Energy Directorate (NVE) for Ofoten-Balsfjord-Hammerfest, and Statnett has made an investment decision in principle for the Ofoten-Balsfjord part. The activity level on the Ørskog-Sogndal line is high. We expect to complete Sima-Samnanger in 2013, the Skagerrak 4 subsea cable in 2014 and Ørskog-Sogndal in 2015. At the same time, upgrades are taking place in the south and east of Norway.

In the longer term, projects such as the Fosen project in central Norway will help Norway reach the goal of a renewable energy generation and consumption share of 67.5 percent in 2020. 2012 also represented a milestone in a climate perspective, with the first green certificates being issued.

Flexible European market

The strong fluctuations in the power system also demonstrate the importance of being part of a greater European market. When we experience the next dry year, it will result in  a deficit  in the Norwegian hydropower-based system. Consequently, we need access to power from other countries. The cables between Norway and Europe have functioned very well, both in terms of export and import of power. The cables play an important role in balancing the Nordic power system.

In the past year, we decided to proceed with two major international interconnectors, to Germany and the UK. The interconnectors are scheduled for completion in 2018 and 2020 respectively. We believe this is a balanced solution for everyone, be it a consumer in Oslo, a power plant in Indre Sogn, an aluminium plant in Høyanger or the wind turbines in Fosen. The upgrade of the domestic grid must take place in parallel with an upgrade of the power exchange capacity to other countries.

Internationally, the markets in north-western Europe became more closely connected following the launch of intraday trading on NorNed. Furthermore, Statnett is actively supporting further EU/EEA initiatives to promote a more efficient energy market.

Acceptance and support from society

Many parties are affected as we progress with our development projects. Consequently, Statnett has entered into an active and constructive dialogue with the affected parties, for instance in connection with Europe’s largest power line project Ofoten-Balsfjord-Hammerfest. During this project, Statnett maintains a constructive dialogue with all 13 municipalities and with reindeer husbandry interests. In connection with the grid plan for the Greater Oslo area we have also established an early dialogue with more than 90 organisations, even though the specific projects will not be implemented for some time yet.

An important milestone of 2012 was the Norwegian government’s grid report «Building Norway – about grid developments». It is our job to put the expectations to the power sector into words, both with regard to society’s need for a reliable supply of power, the opportunities for development of renewable power and to create new industrial activities. The grid report, which was endorsed by the Norwegian parliament, gave us a clear and specific mandate to continue our work. For instance, issues relating to a reinforced grid in northern Norway and the new international interconnectors are discussed and clarified in the grid report.

Moreover, the Ownership Report confirms that Statnett must be in a financial position which ensures that the enterprise is able to implement all socio-economically profitable projects.

Cost-efficient development

In the updated investment plan, which was presented in the autumn, the investment estimate has increased to NOK 50-70 billion for the coming decade. The high investment estimates are partly due to a broader investment scope and higher supplier costs, but also to greater uncertainty in a long-term perspective. In a situation with changing circumstances and where the supplier industry must be re-established after a decade of low activity, Statnett is developing the grid step by step and in a balanced way to ensure that the grid can be developed in a socio-economically viable manner at the lowest possible cost.

Statnett of the future

We are creating a new Statnett. More than half of Statnett’s 1000 employees have joined the company in the last four years. In the interaction between experience and renewal we have developed a can-do and will-do company. This is reflected in the opening of our new head office in Nydalen in March 2013, as well as the new building in Trondheim which was opened in 2012.

This entails that we have an open plan office and common areas. We are learning to communicate in a brand new way. Change is also evident in the organisation. As we are about to enter an intensive implementation phase, the Projects Division will change from a line organisation to a project organisation. The rest of the organisation will follow suit. We are talking about a change of culture as well as a change of mentality, to be able to complete the tasks and project we have committed to.

There are many challenges ahead, but we have what it takes to meet them. By maintaining an open dialogue, we must show that Statnett is a solid and attractive borrower. Through strong ICT expertise, we must ensure efficient and predicable communication between our plants, customers and production facilities. A new certification, PAS 55, will help maintain our assets in a systematic and cost-efficient manner. Clear HSE rules and, not least, a vibrant HSE culture, will help us to learn from past mistakes and prevent injuries and negative health effects.

The vision to build the next generation main grid is no longer just a vision. We have in earnest embarked on our task: to develop the grid of the future. However, we cannot do the job alone. We need sound long-term financial partners. We need solid and professional suppliers. And we need continued support from society.