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Denmark

Denmark

Working paper contents

The article provides details of the European Commission's working paper for establishing a single market for renewable energy. In four main sections, the paper details the principles of a competitive protected market for renewables, including trading mechanisms, green power certification, streamlining administrative and planning procedures, and grid connection and grid reinforcement issues.

Thirty-five pages long and, for an EU document, written in a fairly comprehensible English, the European Commission's working paper for establishing a single market for renewable energy has four main sections, including one outlining the "possible contents of a Community proposal." Whether this is a proposal for a Directive or not is unclear, but it details the principles of a competitive protected market for renewables, including trading mechanisms, green power certification, streamlining administrative and planning procedures, and grid connection and grid reinforcement issues.

The document describes renewable energy's current situation in view of the creation of the Internal Energy Market and the need for a single market for renewables. It justifies such support, saying that renewables can help meet many of the EU's overall aims, including increasing employment and meeting the Kyoto goals. The document details the various support mechanisms available: capital investment subsidies; R&D support; voluntary green pricing; fiscal incentives; guaranteed prices with purchase obligations; and competition based support systems (tendering and green certificates). Competitive systems receive by far the most attention in the working paper, which also contains an overview of the price development of renewables in Europe under the different support systems. The document presents a series of strong -- and often conclusive -- arguments for why political action is needed now if the development of renewables is to be safeguarded.

In practice

Explaining how a competitive system based on green certificates works, the document states: "Green certificates are issued to producers of renewable electricity according the amount of electricity (kWh) produced (autogenerator) or sold into the grid (commercial generators)." At the same time a purchasing obligation is placed on all consumers to buy "green certificates representing x% of [their] total electricity consumption." Renewables producers then sell their electricity on the open market, receiving payment at the going market rate, and in addition receive payment for their green certificates. "In this manner a secondary market develops, inevitably via a trading mechanism, and usually via a commodity exchange whereby RES producers compete with one another for the sale of green certificates, and thus RES electricity." If the obligation is placed on suppliers, instead of consumers, "The suppliers would then have the choice to generate the RES electricity themselves or buy it in the form of certificates from producers with surplus production." The end result, however, is the same: the consumer (or polluter) pays.

Certificate mi

xIt also describes the working of a tendering system, where a government issues a series of tenders for a specific volume of renewable energy, awarding contracts to the lowest bidders. The tendering authority sells the power at market price and the difference between this and the contracted price for the renewables power is financed through a levy on all domestic electricity consumption. Both competitive systems, tendering or green certificates, can be tailored for the needs of each renewable: tender "bands" can be made for the various technologies; and certificates can be technology-specific, each with a different price, states the document. "Customers or distributors might be required to purchase a specified mix of certificates."

The working paper follows the adoption of an earlier report to the Council and parliament on harmonisation requirements for renewables, as laid out in the Internal Energy Market Directive. This was prepared as a result of the 1998 White Paper on renewables, which called for a target of 12% of renewables in Europe's electricity supply by 2010.

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