Common market plans hit icy patch -- Scandinavian green certificates

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Norwegian Energy Minister Odd Roger Enoksen admitted last month that his country has not come far enough in plans for a green energy certificates system to get a common market with Sweden up and running by the start of next year. Even though the Norwegian government will "shortly" have a timeline for Norway's joining a common system with its eastern neighbour, assures Enoksen's spokesperson Sissel Edvardsen, the Swedes have concluded that it might be some years before Norway is ready.

"They have the ambition, but perhaps not the understanding between different political parties we have here," says Cecilia Eklund, spokesperson for Mona Sahlin, Sweden's sustainability minister. Green certificates represent the added value of renewable energy generation and are bought by electricity retailers to demonstrate they have met legal requirements for the proportion of green power in their electricity portfolios. Market forces set the price of each trade.


Sweden earlier postponed implementation of the common certificates' market, from January 2006 to January 2007, in retrospect perhaps was a strategic mistake. For while Norway's Center-Labour-Socialist coalition government, assembled after September's general election, initially said it supported the common system, the extra time allowed for some cracks in the facade.

"One shouldn't over-exaggerate the problems, but the government has been sending unclear signals," says Arne Jakobsen, managing partner with GreenStream Networks in Oslo. "I think the Norwegian government is keen to launch the scheme, but there is debate related to inclusion of small-scale hydropower in the system."

Center Party Secretary Anita Utseth is more direct in Norwegian newspaper Nationen. "It's not for sure we'll get to a common market," she says. Small hydro producers are entitled to a piece of the certificates pie, according to Utseth. The Socialist Left Party initially opposed including small hydro in the scheme, but now says facilities under 1 MW should be included.

The Swedish government, however, is expected to propose next month that while the timeline of its green certificates system be extended from 2010 to 2030, certificates for hydro under 1.5 MW be phased out after 2010.

Norway's internal dissent might come as a relief to some Swedes. Eleven months from the proposed date for a common system for the two countries, the existing certificates market has never looked shakier, with a glut of circulating certificates and falling prices.

A Swedish fear, voiced by energy lawyer Björn Öberg, is that as long as Norway can produce new hydro and wind cheaper and more efficiently than Sweden, Swedish consumers' subsidy of renewables through higher electric bills "simply follows the investment path -- straight to Norway" without new development at home.

That fear is not unfounded. Since Sweden's system was launched in May 2003, the requirement for renewables of 7.4% rose to 10.4% in 2005 and this year stands at 12.6%. But the main new renewable production to date has been conversion of combined heat and power facilities from fossil to biofuel -- much of it made from the Swedish forest industry's cheap wood waste. As for wind development, "Not a single wind turbine has been erected due to the green certificates system," says Matthias Rapp of Swedish Wind Investors and Developers.

In addition to the certificates system initially being too short-sighted, Sweden's quotas were from the start set much too conservatively, Rapp says. He believes they must be adjusted sharply upward for the period 2007-2009. "We've got to change the shape of the curve and make it more steep to help to take away a six million certificate surplus," he says. Rapp would also like to extend the period for wind facilities' to receive green certificates from the current cut-off after 15 years to as long as a facility is online.

For and against

While Rapp is a true believer that the green certificates system is only going through growing pains as the government figures out how to find the right level of green power required, Olof Karlsson of the Swedish renewable energy organisation, SERO, thinks it would be better off dead. "The Norwegians certainly can't buy up the surplus," Karlsson says. "It will be until at least 2010 before we get balance between supply and demand. Overall, we liken the system to a giant house of cards and predict it will collapse at any moment."

Karlsson says the price of certificates will continue to fall from the current level of about SEK 180/MWh (EUR 19/MWh) to around SEK 50 (EUR 5.4/MWh). SERO suggests the government give up on green certificates as a way to add a premium to the purchase price of electricity from renewables and replace them with a fixed price for green power production.

Certificates can work

But Rapp disagrees, saying that given the right regulatory framework, green certificates can "work more effectively than fixed price." Rapp is also optimistic Swedes will have no problem building 10 TW of wind to support the government's new goal of 15 TWh of renewables by 2016. "We've got a list of every project that could be ready to go by the deadline -- it won't be much more than 10 TWh, but the 10 TWh goal will not be a problem."

GreenStream's Jakobsen maintains that if Norway's ruling coalition government can agree internally, it is still possible for the country to meet the January 2007 date for a common system. "It's still possible. Look, Norway was ready in '06 ... the electricity market is already a Nordic market, so there's just no reason not to put [green certificates] in place."

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