Learning From Norway’s Electric Vehicle Success Story
Norwegians bought so many Tesla’s that Elon Musk came to Norway to thank the country for supporting electric vehicles. The fact Norway has the most EVs per capita of any country is not an accident. Since the 1990s, EV owners in Norway have been supported by policies such as reduced taxes, access to bus lanes and reduced toll charges. Today, almost 90% of new car sales are electric and they will be the most common type of passenger vehicle on Norwegian roads by 2032.
Norway serves as an example to the EU, UK and other countries which have legislated to ban combustion engine cars. DNV’s report on Norway’s energy transition demonstrates that whilst there is much to admire about its progressive EV policies, electrifying road transport does bring challenges.
Lessons from policy
Norway’s impressive uptake of EVs has only been possible thanks to supportive government policy. But policy is always vulnerable to politics. With EV sales surging, many of the key policy mechanisms were withdrawn. EVs were once exempt from sales tax, but it was argued that this was beneficial to only a narrow strata of car buyers and had become bad value for money for taxpayers. Likewise, EV drivers once enjoyed the use of bus lanes in Oslo, but this privilege was removed. It is now not entirely clear if Norway will reach its goal of zero combustion engine car sales by 2025, although it will be pretty close.
Countries trying to increase the uptake of EVs are having similar discussions, but they are starting the discussion at a stage where EV sales and EV share are far lower. In 2022, the discount on sales tax for EVs in the UK was removed to make the system “fairer”, and the goal of banning combustion engine cars was moved back to 2035. Now the new Labour government has reinstated the 2030 target and car companies are lobbying to reintroduce the tax break. But whilst the EV market was relatively mature in Norway when these policies were changed, less than 20% of new car sales are electric in the UK.
Urban versus rural split
It is possible to drive the length of the Opera Tunnel – which runs for six kilometers under Oslo city center – and see only electric vehicles. The story is very different if you were to drive between isolated communities elsewhere in the country. Around 40% of cars are electric in Oslo whilst in Finnmark, in the very north of the country, that number is just 8%.
Tax breaks are an important push factor, but usability has extra significance away from big towns. “Range anxiety” concerns will be addressed in the coming decade as we at DNV forecast the number of fast chargers to double across Norway in the next decade. The increasing range of batteries should also ease anxieties about being stranded on a windswept evening in Nordland.
Meeting the electrification challenge
Introducing EVs does not simply involve swapping one set of vehicles for another. It is part of a deeper electrification trend that requires comprehensive policy support and planning. Norway’s experience is telling.
Demand for electricity from vehicles is rocketing in Norway. As a consequence of of ... [+]DNV
Even though Norway has the enviable starting point of strong public finances and small population, deep energy expertise and the second most electrified energy system in the world, it is not fully prepared to meet the rising power demand. Demand for electricity will grow by 60% by 2040 and although this has been sign-posted for some time, sufficient generation has not been added. Therefore, Norway will have a net electricity deficit in the coming years, an unusual situation for a country used to being a net power exporter.
Norway’s electricity production is dominated by hydropower, but diversification is required to meet the new demand. Wind buildout, which is the most viable solution, has stalled in recent years.
Building wind takes time, and public opposition to onshore wind and high costs of offshore wind, further slow down the construction. We expect Norway to return to a power surplus in the mid-2030s.
Maybe the most valuable lesson from Norway’s experience is the need for broad, system wide thinking when legislating for the energy transition. Cheap electricity has been a pillar for Norwegian industry, but with demand rising because of the electrification of road transport and other sectors, the cost of electricity will rise. Whilst there is much to admire about how Norway has rolled out EVs, the lack of additional power capacity has knock on effects for elsewhere in the power system.
