Statnett: Building a power line isn’t always a straight line

This case is about the dilemma faced by Elisabeth Vardheim, a C-level executive at Statnett, Norway’s transmission grid operator. As a result of its participation in the Paris Agreement, Norway decided to greatly accelerate the national energy transition. An increased reliance on electricity, however, brings with it a pressing need for more high voltage power lines. As executive vice president for construction at Statnett, Vardheim must choose between two ways of increasing Oslo’s electricity transmission capacity: string power lines on 40-meter-high towers or bury them underground. However, although the upgrade is indispensable, neither solution seems to have any chance of being approved. Vardheim has to contend with powerful stakeholders. There is the local population, which opposes overhead power lines due to their impact on the landscape – the “not in my back yard” effect. There is also the regulator, who must act in accordance with regulations that favor the most cost-effective solutions to keep electricity prices low for all Norwegians. The case is not just about choosing between two solutions. Obtaining the construction license also means having a good understanding of the forces involved, the licensing process and the applicable regulations. The student is taken on a journey that includes stakeholder management analysis, the decision-criteria perspective and real option valuation. Students are subsequently divided in two groups, each attempting to win the other over to their chosen option. This usually creates a stalemate and a lack of consensus which is then solved by an “Aha!” moment thanks to the use of an embedded option, an approach that will solve the case and lead to the attainment of the construction license.

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