Fledgling certificates market threatened -- RECS trading in Europe

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The Dutch green power market looks to be holding steady despite a proposed EUR 0.029/kWh levy on green power sales to domestic customers. The government reforms of the successful green power market in the Netherlands could, however, have a major impact on the pan-European Renewable Energy Certificate System (RECS).

By end 2002, some 1.4 million Dutch customers -- 20% of households -- had switched to green power to avoid a EUR 0.06/kWh eco tax on grey power, according to market monitor, Greenprices. Growth in green power customers continued despite news that the new centre-right coalition government was to introduce a levy on domestic green power sales. Indeed, green power subscriptions even climbed after news of the proposed levy broke in June: in the first half of 2002, 300,000 customers switched to green while in the second half of the year 400,000 followed suit.

Power companies, however, have promised not to increase green power prices over 2003, which will delay the impact of the levy. A Greenprices survey shows price -- and not the origin of the energy -- to be the primary factor determining power choice.

Among those watching the market anxiously is Peter Niermeijer, secretary of RECS, an industry sponsored renewables energy certificate trading system which has just completed a two-year test phase. The volume of green power traded annually grew to 13.5 TWh over 173 companies in 14 European countries, prompting RECS to conclude that that concept is "robust, secure, realisable and practical."

Some 12.5 TWh of the total volume of the trade, however, was just between Scandinavia and the Netherlands. This was a direct result of soaring Dutch demand for green power and legislation allowing Dutch green power retailers to pay a EUR 0.02/kWh subsidy to foreign producers for electricity sold on the Dutch market. The abolition of that incentive and anticipated depressed consumer demand for green power in the Netherlands could seriously affect the main plank of pan-European certificate trade, believes Niermeijer.

Whether the new regulations in the Netherlands will put an end to Dutch power companies' foreign shopping sprees is uncertain. Some analysts believe that it will still be cheaper to buy green biomass abroad than to meet domestic demand from domestic resources, such as new wind plant.

Mathieu Kortenoever of independent wind turbine owners association PAWEX, however, is optimistic that the green power market will survive the new levy and that imports will be reduced sufficiently to significantly stimulate local production, including wind. He points out, however: "There is an enormous supply of green certificates which have already been brought into the Netherlands and which will have to be used up."

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