Exploring Norway's Victory in Electric Vehicle Adoption
Norwegians purchased a substantial number of Teslas, leading Elon Musk to visit Norway. This country, with the highest number of electric vehicles (EVs) per capita among all nations, didn't reach this status by chance. Since the 1990s, EV owners in Norway have benefited from favorable policies such as reduced taxes, access to bus lanes, and lower toll charges. Today, 90% of new car sales are electric, making EVs the most common passenger vehicles on Norwegian roads by 2032.
Norway serves as a model for the EU, UK, and other nations that have banned the sale of combustion engine cars. DNV's report on Norway's energy transition highlights the advantages of its electric vehicle policies, but also acknowledges the challenges that come with electrifying road transport.
Insights from Policy
Norway's rapid adoption of EVs is largely due to supportive government policies. However, these policies can be influenced by politics. As EV sales rose, key policy incentives, such as sales tax exemptions, were withdrawn, due to concerns about their perceived benefits. Similarly, EV drivers once had the privilege of using bus lanes in Oslo, which was later revoked. Although Norway may not fully achieve its goal of phasing out combustion engine cars by 2025, it's projected to come close.
Countries aiming to increase EV adoption are now grappling with similar debates, but at a significantly lower starting point. In 2022, the UK removed the sales tax discount for EVs, citing fairness, and pushed back the ban on combustion engine cars to 2035. However, the new Labour government has reinstated the 2030 target, leading car manufacturers to lobby for the reintroduction of tax breaks. Even with the more mature EV market in Norway, less than 20% of new car sales are electric in the UK.
Urban vs Rural Divide
Driving through Oslo's Opera Tunnel reveals a sea of electric vehicles, while the picture is drastically different in rural areas. In Oslo, 40% of vehicles are electric, while in Finnmark, the northernmost Norwegian region, that figure drops to 8%. Fiscal incentives play a crucial role in promoting EV adoption, but addressability becomes more significant in smaller towns.
Concerns about "range anxiety" - the fear of running out of charge - should be alleviated in the coming decade, as the number of fast chargers in Norway is expected to double. Moreover, improvements in battery technology should help reduce anxiety about being stranded in remote areas.
Meeting Electrification's Challenges
Introducing EVs is not just a matter of replacing one type of vehicle with another. It's part of a broader electrification trend that requires extensive policy support and planning. Norway's experience underscores this need for comprehensive strategic thinking.
Despite Norway's strong fiscal standing, small population, deep energy expertise, and second-most electrified energy system globally, it isn't fully prepared to meet the rising power demand. By 2040, electricity demand will increase by 60%, and although this has been anticipated for years, insufficient capacity has been added. As a result, Norway will face a power deficit in the coming years, an unusual situation for a nation accustomed to being a net power exporter.
Norway's electricity generation is mainly hydropower-based, but diversification is necessary to meet the new demand. The expansion of wind energy, the most viable solution, has stalled in recent years due to public opposition and high construction costs. However, Norway is projected to return to a power surplus by the mid-2030s.
Perhaps the most important lesson from Norway's experience is the need for broader, systemic thinking when legislating for the energy transition. Cheap electricity has been a cornerstone for Norwegian industry, but as electrification accelerates elsewhere, electricity costs are expected to rise, leading to potential ramifications for the broader energy system.
Elon Musk visited Norway due to the country's substantial purchasing of Tesla electric vehicles (EVs). Overcoming challenges, Norway has the highest number of EVs per capita, benefiting from policies like reduced taxes, bus lane access, and lower toll charges since the 1990s. Offshore wind power could aid in meeting Norway's rising electricity demand, addressing the need for diversification in energy sources beyond hydropower.
