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Cutting costs in the power industry

sigurd sveen | finansavisen | 7 october 2016

PA energy expert Lars Erik Maurud, is quoted in an article in Finansavisen discussing how the power industry in Norway can save billions of NOK.

PA has been analysing the Norwegian power market for over 25 years. In recent years, our analysis has raised concerns about the skyrocketing cost power companies have borne, while electricity prices drop. Lars Erik Maurud believes that the industry should take inspiration from the oil industry.

Lars Erik explains some of the key differences between the industries. He comments: “At the beginning of the year I was at an oil conference in Sandefjord where I expected to meet an industry completely on its knees. Instead, it was full of people who looked ahead and were thinking that with an oil price of 30 per barrel they had to do things differently. This type of mindset is missing in the electricity industry”, says Lars Erik Maurud.

The 25 largest energy companies in Norway have a total annual operating and maintenance costs of 4.5 billion NOK. Lars Erik thinks that if power companies take the right steps , they can make considerable savings.

Lars Erik suggests that power companies should find new ways of working together to benefit from economies of scale.  Today, Norwegian power companies have around 40 distribution centers. In the past ten to 15 had been enough: “I think the way power company Eidsiva acts as a third party operator on behalf of multiple owners is a brilliant example and a model more power companies should follow.”

In addition, he argues that several power companies could reduce their project activity and accept increased risk in plants. “Power companies spend a lot on overhauling equipment – too much in my opinion. There is a tendency for costs to run away when companies decide to shut down a plant for maintenance work. With the current low prices should they hold back, and just do what is strictly necessary,” concludes Lars Erik.

       

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