The Government will introduce a resource rent tax on onshore wind power from 2024

“Norway has a long and treasured tradition of ensuring that the value added by our common natural resources also benefits society. This tradition has served the country well. The Government therefore believes that the introduction of a resource rent tax on wind power is the right thing to do", says Prime Minister Jonas Gahr Støre (Labour Party).

“Norway has some of the best wind resources in Europe. The Government has clearly stated in the Hurdal Platform that local communities and the society as a whole should receive a fair share of the value added by utilising our common resources. With the current price and cost outlook, Norwegian wind resources will be valuable in the years to come. Time is now ripe for the introduction of a resource rent tax on wind power, while at the same time ensuring higher and stable revenues for host municipalities", says Minister of Finance Trygve Slagsvold Vedum (Centre Party).

The Government believes that it is appropriate in terms of future renewable energy investments to introduce a resource rent tax now, with generous transitional arrangements for existing wind farms. This will provide the industry with a predictable policy framework and facilitate the development of profitable wind power in the years to come. Investments that are profitable before the resource rent tax will also be profitable with the resource rent tax, while the society as a whole receives a larger share of the value added.

Norway has taxed hydropower through the licencing schemes since 1911, and the resource rent tax was introduced in 1997. The special tax on petroleum was introduced in 1975 and has contributed to the accumulation of capital in the Government Pension Fund. Moreover, the Government has introduced a resource rent tax for the aquaculture industry from this year.

At least half of the revenues will accrue to municipalities

The Government is proposing an effective tax rate of 35 per cent, with the tax being structured as a cash flow tax with an immediate deduction of investment costs. The resource rent tax will take effect from 1 January 2024.

As a general rule, power production income shall be valued at the spot market price. For agreements concluded before 28 September 2022, the contract price shall be applied. A temporary exemption is also introduced for standard fixed-price agreements, as well as for power purchase agreements for new projects concluded during the period 2024-2030.

At least half of the revenues will accrue to municipalities. This is achieved through the production tax, supplemented by an additional appropriation in years of high resource rent.

“After a thorough consultation process, we have arrived at a well-structured resource rent tax. The Government has listened to the feedback, and we propose a lower tax rate and more generous transitional arrangements for wind farms that have already been developed. The Government is also committed to ensuring that host municipalities will retain a reasonable share of the resource rent when they facilitate wind power“, says the Minister of Finance.

Municipalities and local communities will retain more of the revenues

With the proposal the host municipalities is better off than today. The higher production tax will be supplemented by an additional appropriation in years of high resource rent to ensure that municipalities receive half of the gross revenues. Host municipalities may also opt for levying property tax on wind farms.

The Government also believes that wind power production should benefit interests that are negatively affected by wind power developments. The Government aims for an amount equivalent to NOK 0.002 per kWh of wind power production to be set aside for local purposes such as nature, reindeer husbandry and any other purposes directly affected by the land use. This arrangement needs to be examined in more detail. It needs to be considered, inter alia, which specific purposes should qualify and how the funds should be allocated. The Government will revert with a proposal and detailed provisions in connection with the Revised National Budget for 2024.

Resource rent tax revenues

The introduction of the resource rent tax will enable society as a whole to receive a share of the resource rent generated through the development of profitable onshore wind power. One advantage of the resource rent tax is that it will be automatically adjusted to the profits of the particular wind farm. In years of high power prices and high resource rent, tax revenues will be high. In years of low resource rent, however, tax revenues will be low. The tax revenues will therefore vary from year to year.

Gross revenues from the proposed resource rent tax are projected to be about NOK 300 million accrued in 2024. Net revenues, after the deduction of production tax, are projected to be about NOK 150 million accrued in 2024. These revenues will be booked in 2025. The projections are uncertain.

Key features of the Government's proposal

Structure of the resource rent tax:

• The tax is structured as a cash flow tax, with an immediate deduction of investment costs.
• The effective tax rate will be 35 per cent, i.e. lower than the consultation proposal of 40 per cent.
• For investments made before 1 January 2024, a deduction is granted through depreciation of the input value, in addition to a compensation (deferment interest) for depreciations taking place over time. The input value is calculated in accordance with ordinary declining-balance depreciation rules for all existing wind farms.
• The value of the annual production of a wind farm shall, as a general rule, be based on spot market prices. However, an exemption from the general rule will be introduced for power purchase agreements concluded before 28 September 2022. A temporary exemption is also proposed for standard fixed-price agreements (corresponding to the exemption for hydropower), as well as for long-term physical power purchase agreements for new projects concluded during the period 2024-2030.
• Negative resource rent income will be carried forward with an interest supplement, and the tax value of any negative resource rent income will be paid to the taxpayer upon discontinuation of operations.

Apportionment of revenues between central and local government:

• The proposed production tax rate is NOK 0.023 per kWh, with revenues projected at around NOK 390 million accrued in 2024. The revenues will be returned to host municipalities and provides stable revenues. The production tax can be deducted on a direct NOK-by-NOK basis from any resource rent tax levied. No natural resource tax is proposed.
• An additional appropriation will be made to municipalities in years of high resource rent.

Read more:

• Executive summary in English - Proposition to the Storting 2 LS - Resource rent tax on onshore wind power (PDF)

Table: Overview of individual proposal elements on which the final proposal deviates from the consultation proposal

	Consultation proposal	Final proposal
	Structure of the resource rent tax
Rate (effective)	40 per cent	35 per cent
Price determination	The general rule is valuation at spot market price. Exemption for: Power purchase agreements concluded before 28 September 2022 Standard fixed-price agreements (as for hydropower)	As the consultation proposal, with the addition of: Exemption for long-term physical power purchase agreements between independent parties for projects established during the period 2024-2030
Deduction of historical investments	Declining-balance depreciation of remaining tax value (also for operating assets subject to accelerated depreciation rules)	Declining-balance depreciation of input value. Input value calculated in accordance with ordinary declining-balance depreciation rules for all existing wind farms In addition, compensation (deferment interest) is provided due to depreciations taking place over time
	Revenue apportionment
Production tax	NOK 0.02 per kWh	NOK 0.023 per kWh
Natural resource tax	NOK 0.013 per kWh	Not introduced
Additional appropriation in years of high resource rent (to ensure at least 50 per cent of resource rent tax revenues to municipalities)	Yes	Yes