Norway's electricity supply to Europe is at risk due to low hydroelectric levels.

Low water levels in Norway's main southern reservoirs are increasing the risk of tight power supplies across northwest Europe this winter as hydro exports decrease.

Reservoirs in Norway's NO2 price zone, connected to the UK and Germany, are 67% full, about 17 percentage points lower than last year, according to the Norwegian Water Resources and Energy Directorate. Water levels are also below the 20-year average in neighboring zones. Despite recent rain, inflows have been weak, limiting the ability to replenish stocks before peak winter demand.

Power exports and their impact on domestic energy prices have become a contentious political issue in Norway. After establishing new cables to the UK and Germany in 2021, Norway became a daily net exporter last year—a first for any European country. Sales to the UK and other markets have led to price spikes, especially in southern Norway.

This debate intensified in February, resulting in the collapse of the ruling coalition. The re-elected Labor party introduced a "Norway price" to shield consumers from high energy costs. As of this month, consumers can choose between floating or fixed rates until 2026, with many in southern Norway likely opting for the latter to mitigate volatility.

While this measure eases political pressure domestically, it does not limit exports, something the Norwegian government has considered before. Although Norway is not an EU member, it participates in the single energy market, which prohibits prolonged curtailment of flows to neighboring countries.

Prime Minister Jonas Gahr Store emphasized in February the need for "national control," asserting that "Norwegian democracy should decide on Norway's power resources."

Elisabeth Saether, state secretary in Norway's energy department, stated that restrictions on foreign connections can be imposed when there is a "real risk" of energy shortages, but noted that the current situation does not warrant such measures.

Britain's grid operator anticipates sufficient electricity margins this winter, though tight conditions may arise in December and January, especially if low wind coincides with diminished Nordic flows. Typically, power flows from lower-priced to higher-priced markets; thus, if Norway faces tighter conditions, it may start importing more from the UK, which is unusual.

The spread between Nordic and UK quarter-ahead power contracts is at its lowest level for this time of year since 2019, decreasing the incentive to move power from Norway to the UK this winter.

The North Sea Link can transfer up to 1,400 megawatts of electricity, enough to supply around 1.4 million UK homes.

Historically, citizens in the Nordic region have enjoyed some of the lowest power prices globally, thanks to stable supplies from over 1,000 hydroelectric plants nationwide. However, with more interconnected markets, volatile prices on the continent have pushed Nordic rates higher.

Alessandro Armenia, an energy analyst at Kpler Ltd., mentioned that the "bullish factor" of hydro scarcity may be "underappreciated" by power traders.

Nevertheless, as additional renewable energy sources come online across Europe, Norwegian exports are expected to decline over time. Tor Reier Lilleholt, head of analysis at Volue, estimates that exports to the UK from Norway will drop from 10 terawatt-hours last year to 2 terawatt-hours by 2030.

"The cables will still be used, but the power flow will be more balanced," he said. In the short term, "if we experience a very dry fall and cold winter resulting in high prices, that will still have an impact, particularly on Norwegian businesses."

Additionally, reservoirs in France are also reported to be below the levels of previous years.