New market based on quotas and trade

A green certificate system imposing a renewable energy quota on Flemish electricity suppliers should be in place for January 2001. Under draft proposals drawn up by the government's Department of Natural Resources and Energy (ANRE), a minimum annual quota of renewables -- expressed as a percentage of total kWh supplied -- is to be set for all electricity distributors in Flanders. The quota obligation will be backed by trade in green certificates and fines for distributors who fail to meet their targets, confirms a spokesperson for the Flemish regional government.

The draft legislation closely follows that proposed in Denmark and used in the Netherlands. Green power is split into two components -- the commodity itself and its green value, represented by a green label or certificate. A market for the labels is created through the imposition of fixed quotas for renewables in a country's electricity supply.

The green certificates in Flanders, each representing 1000 kWh of electricity generated from renewables, will be issued to distributors by the government and will be tradable between the utilities, allowing companies with a renewables deficit to buy certificates from those with a surplus. Distributors failing to meet their targets at the annual audit will be fined at a rate of EUR 50 per certificate in the first year of operation, rising to EUR 125 in subsequent years as green investment gathers pace.

The quotas will be raised each year and be fixed at a rate which exceeds the existing supply with a view to securing a 3% renewables share in electricity supply by 2004 against a current share of 1.06%. Accordingly the label trade will initially be restricted to Flanders, but it has been developed, in consultation with the Danish and the Dutch, with an eye to eventual participation in an international market says ANRE's Philippe Putman. The definition of renewables is relatively broad, but the certificates will specify the source in order to facilitate eventual cross-border trade.

Three percent target

The proposals were formulated some eighteen months ago in response to the Kyoto agreement and the EU draft Directive on an internal market for renewables, explains Putman, but the recent ascendancy of the Greens in Belgian politics has given the policy additional impetus, he says. "The original renewables target was 3% by 2010 but the Greens brought that forward to 2004 as a condition of their helping form the government."

The plan is scheduled for ratification by the Belgian parliament in December, but must first be approved by the Flemish regional authorities and the government's highest advisory body, the Raad van State. Although it follows the Dutch model in attempting to stimulate renewables development by imposing quotas on utilities, the Flemish proposals differ from the Dutch Green Label system largely in the role assigned to the power distribution companies. Where the Dutch system is run by the Dutch utilities under a voluntary agreement with the Dutch government, Flemish power companies will be allowed a consultative role only. Moreover, the Dutch system relies on customers demanding green power from the utilities, and being willing to pay a premium for it. In Flanders, the quota obligation is placed far closer to the end-user.

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