Norway's hydropower potential has been significantly sapped by its driest winter in decades, leading to critically low water levels in reservoirs, particularly in the southern regions. This situation poses a substantial threat to Europe's power market as Norway is a key exporter of hydropower, which relies on snowmelt to replenish its reservoirs.
The Vatndals dam, for instance, shows water levels far below normal, prompting local utilities like A Energi to limit outflows. This dry spell has led to hydroelectricity generation being constrained, with some reservoirs in Norway's NO2 price zone, which connects to the UK and Germany, being only 67% full, about 17 percentage points lower than the previous year and below the 20-year average.
Physical grid constraints and flow-based market calculations have further exacerbated the issue, causing power prices in central Norway to surge. This development creates problems for hydropower producers like Aneo, who are already grappling with tight supply conditions, and raises the risk of tightly supplied power markets across northwest Europe heading into winter. Norsk Hydro also highlighted broader supply risks, noting that disruptions in critical waterways like the Strait of Hormuz could impact raw material and export flows, further tightening markets.
