Danish certificates without value
A system for guaranteeing the origin of green power in Denmark has been quietly introduced without fanfare or official announcement. Green certificates can now be issued to wind power producers -- for a price and on request -- by either of the country's two power system operators, Eltra in the west and Elkraft in the east. The certificates, however, have no market value and no purpose other than to demonstrate that Denmark has complied with the EU's renewable energy directive. As a first step towards cross-border trade of green power, the directive requires all member countries to establish a system for ensuring that the electricity on offer comes from an accredited source.
A wind turbine owner can order a certificate for a month, six months, or a whole year of wind power production. "In this way the EU directive is met," says Niels Dupont of DV-Energi, a trader of wind electricity from 700 wind turbines in Denmark that no longer receive subsidised power purchase prices. "So far that is the only thing that happens."
Dupont adds that in theory the certificates could be sold along with the wind power. "But there is no market and no interest in certificates. And since they cost DKK 720 each [EUR 100] it would cost half a million crowns for 700 turbines. So when the certificates can't be used for anything, we haven't bought any up to now."
From Eltra, economist Morten Weeth says guarantee of origin certificates have been available for purchase since January 15. A certificate for a month costs DKK 360 and for a half or for a whole year's production DKK 720. Eltra has yet to sell one certificate.
"That's because they can't be used for anything," he admits. "They would come into their own, however, if cross-border trade got going and a guarantee of origin was a condition of a sale. Imports of green power into Holland require such a guarantee. It could create the market needed for guarantee of origin certificates to be used for something other than hanging on the wall as evidence of how the power was made." Weeth adds that the physical design of the certificate is also a problem, but Eltra is working on a solution together with Denmark's energy agency.
In neighbouring country Sweden, trade in green certificates has been happening since the beginning of May last year, when a mandate on consumers was introduced -- with the exception of specified large industry -- requiring them to buy green certificates representing 7.35% of their electricity use in 2003. That percentage rises to 8.1% this year.
Certificate prices in Sweden increased relatively fast to over EUR 0.021/kWh, considerably over the penalty payable for not buying the required volume of certificates, which in 2004 is EUR 0.006/kWh. Last month, certificates were being traded for between EUR 0.024/kWh and EUR 0.030/kWh.
The Swedish system is close to the model for purchase and sale of renewable energy certificates that Denmark's politicians had originally planned should start in on January 1, 2000, but was postponed indefinitely until the introduction of an EU framework for a fully functioning pan-European market for free trade of renewable energy and the introduction of trade in CO2 credits.