FRANKFURT/OSLO, Dec 4 (Reuters) - Norwegian and German companies said they plan to spend 1.5 billion to 2 billion euros ($2-$2.6 billion) on a subsea power cable - the fourth link between Germany and the Nordic region, which would increase capacity by almost half.
A final investment decision on the 1,400 megawatt (MW) cable to Germany is expected to be taken in 2014, with the aim of bringing the cable into operation at the end of 2018, the companies said on Tuesday.
Norwegian transmission system operator Statnett and German system operator TenneT have reached an initial agreement on the project, with German state-controlled bank KfW providing financing.
'The North Sea cable will improve national energy security in cold and dry winters and help stabilise energy prices over the course of the year,' Statnett Chief Executive Auke Lont said in a statement.
Norway, which generates more than 90 percent of its electricity from hydro power, can provide a backup to Germany, which is increasingly relying on volatile wind and solar power.
Norway can also benefit from the link by importing more electricity from the continent during potential shortages as a result of dry years and cold spells, but analysts say Nordic prices would generally rise as a result of the new cable.
'Prices might rise in the Nordics as a result, because Germany has higher prices, but the effect could be marginal as the Nordic countries are adding more renewables,' a Nordic power trader said.
Existing cables between Germany and the region include a 600 MW link to Sweden and two to Denmark with a total combined capacity of 2,365 MW.
The new project will take the form of a 50:50 joint venture between Norway and Germany.
Statnett initially announced plans for the cable in June as well as a link from Norway to Britain. Norway plans to build another 1,400 MW power cable to Britain by 2020, which at 700 km would be the world's longest subsea power cable.
Norway's power generators are keen to build more interconnectors because renewable power capacity additions are expected to create an electricity surplus in the coming years, eroding power generation margins.
Norwegian state-owned utility Statkraft has said the Nordic region generates a power surplus of 20 to 50 terawatt-hours (TWh) in 2020.
Norway and Sweden plan to add a total of 26.4 TWh in annual production from wind, hydro and biomass by then, while Finland plans to boost nuclear generation. ($1 = 0.7650 euros)
(Reporting by Ludwig Burger and Victoria Bryan; Additional reporting by Nerijus Adomaitis; Editing by Henning Gloystein and Jane Baird) Keywords: ENERGY NORWAY/GERMANY/POWER
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