Completion of reserve generation plants in Central Norway
(4/9/2008)
Statnett’s Board of Directors has decided to go through with the building of the two reserve generation power plants in Central Norway, despite the considerable cost overruns and delays. The two gas-fired plants, at Tjeldbergodden in Aure and Nyhamna in Aukra, are now estimated to cost NOK 2.3 billion in total. When the decision was made to invest in the plants in 2006, the total cost estimate was about NOK 1.5 billion. The investment in reserve generation was considered necessary in order to manage a potentially very tight electricity situation in Norway in general and in Central Norway in particular.
The rise in costs is owing to the project having proven to be considerably more complex than expected, a very tight schedule, and prices in the construction industry being in general very strained. Statnett is dependent on a gas pipeline being constructed under the Ormen Lange licence from the gas terminal to the reserve generation plants. This is proving to be a more demanding process than anticipated, since the work has to be done while the gas terminal is fully operational. As a consequence, the Nyhamna plant is considerably delayed and is not expected to be completed until February 2009. The other plant, at Tjeldbergodden, has been completed and is ready for a test run.
“There has long been a tendency for demand for electricity to outstrip supply in Central Norway, making reserve generation capacity absolutely essential. That is why we need to complete the work on both plants, despite the major and regrettable increase in costs. We have to regard this type of investment as an insurance premium. The project will now be reorganised and strengthened, and an external audit team will be brought in to review all aspects of the project,” says Odd Håkon Hoelsæter, President and CEO of Statnett.
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The Report to the Storting No. 18 (2003-04) On security of supply for electricity was produced in the wake of the demanding hydropower situation in the winter of 2002/03. The report contained an analysis of the need for extra power generation reserves in dry years, and concluded that energy options in consumption and reserve generation plants were the best ways of tackling the problem, alongside existing means. This was the background for Statnett’s decision in December 2006 to invest in two reserve generation plants. The Central Norway location was dictated by the power situation in the region, and Nyhamna and Tjeldbergodden were chosen because of the supply of gas from Ormen Lange. Both plants have a planned capacity of 150MW and will only be used in the event of very tight power situations.
