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The Office of the Auditor General’s investigation into the operation and administration of Enova SF

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Summary

Background and goals of the investigation
On the basis of environmental and supply security considerations, the authorities have chosen to focus on energy restructuring. By energy restructuring is meant the reorganisation of energy production to include a greater proportion of renewable energy sources, and measures that help to improve energy utilisation. The state-owned enterprise Enova SF (Enova) is one of the Norwegian state’s most important energy restructuring instruments. The Ministry of Petroleum and Energy attends to the State’s ownership interests and is also Enova’s client in relation to its administration of the Energy Fund. Enova was established in 2001, and responsibility for the energy restructuring efforts was transferred to the enterprise on 1 January 2002. The object of Enova is to promote an environmentally friendly reorganisation of energy consumption and production. This objective is primarily followed up through the administration of the funds in the state-owned Energy Fund.
The goal of the investigation was to evaluate whether Enova promotes environmentally friendly reorganisation of energy production and consumption in an efficient manner.

Method
The investigation is based on document analysis, a questionnaire survey targeting recipients of grants from Enova, lists of questions distributed to selected municipalities and key partners, focus groups consisting of interest groups and environmental organisations, and a review of a sample of grant cases. Meetings were also held with Enova and with the Ministry of Petroleum and Energy. Verification was also carried out of realised energy results as of 2008. External consultants have done most of the work involved in obtaining and analysing this information.

Results
The investigation shows that the energy results achieved by Enova are below the targets stipulated for the enterprise. The finally reported energy results for the period 2001-2008 totalled approx. 4.1 TWh, while it is assumed that Enova’s use of policy instruments will trigger projects that will result in new environmentally friendly energy production and energy savings corresponding to 18 TWh/year by the end of 2011. Moreover, a comparison of finally reported energy results with realised energy results shows that realised energy results are consistently lower than the finally reported results. Many projects that have been allocated grants have subsequently been cancelled for various reasons. The investigation shows that the proportion of cancellations increases with the period of time that has elapsed since the project was granted funding. The cancellations of projects resulted in a reduction of 2.8 TWh compared with the original energy result contracted for in the period 2001–2008, which was 14.4 TWh, resulting in a contractual energy result for Enova at the end of 2008 of 11.6 TWh.

The Storting has stipulated a separate target for renewable heat production of 4 TWh/year by 2010. The investigation shows that the contractual result at the end of 2008 was approx. 3.3 TWh, while the finally reported result totalled a mere 0.9 TWh.

Enova largely reports contractual energy results in its annual result and activity reports. The grounds for this are that the Ministry wants to be able to see how the Energy Fund is used and how much energy restructuring costs each year. Enova has included finally reported results since 2005, but the realised energy results are not shown in the reporting. The Ministry of Petroleum and Energy does not follow up whether Enova actually realises the expected results. The investigation also shows weaknesses in the quality and validity of the reported energy results.

The investigation shows that each individual case is normally processed by a single executive officer until it is ready for a decision, and that the expertise of the executive officer partly replaces the use of existing written procedures. A satisfactory system for quality assurance and adequate control that ensures that the case processing is uniform, transparent and reliable has not been established.

Pursuant to the principles for good ownership control, the Ministry of Petroleum and Energy shall follow up that the enterprise’s framework conditions are adapted to its objective and situation. While Enova is intended to be a small, market-oriented and non-bureaucratic institution, it is also tasked with achieving ambitious targets and meeting requirements for satisfactory case processing and internal control. In the Office of the Auditor General’s opinion, the Ministry of Petroleum and Energy’s follow-up of the enterprise has not taken sufficient account of these challenges.

Ministry/ministries:

Riksrevisjonen, Storgata 16, P.O. Box 8130 Dep, 0032 Oslo, Norway

Phone: +47 22 24 10 00

Org.nr: 974 760 843