GREEN ELECTRICITY CERTIFICATES IN NORWAY

NSP 09-08-2016

Hydropower is still the mainstay of the Norwegian power supply system, with other renewable energy sources such as wind and solar providing an important supplement. In the public debate, we often hear that Norway must become greener and make a transition to greater use of renewable energy. In fact, Norway is already leading the way in this field, since almost all our electricity production is based on renewable sources. Our power resources have been crucial for value creation, welfare and growth in Norway for over a hundred years, and will continue to play a vital role in future.

But this will require continued development of renewable energy sources. The green electricity certificates is an instrument intended to boost the renewable electricity production in Norway.  So what is an Norwegian green electricity certificate scheme?

Electricity certificates

The joint Norwegian-Swedish electricity certificate scheme is intended to boost renewable electricity production in both countries. Norway and Sweden have a common goal of increasing electricity production based on renewable energy sources by 26.4 TWh by 2020, using the joint electricity certificate market.

The electricity certificate market is a market-based support scheme. In this system, producers of renewable electricity receive one certificate per MWh of electricity they produce for a period of 15 years. All renewable production facilities that started construction after 7 September 2009, and hydropower plants with an installed capacity of up to 1 MW that started construction after 1 January 2004, will receive electricity certificates. Facilities that are put into operation after 31 December 2020 will not receive electricity certificates. The electricity certificate scheme is technology-neutral, i.e. all forms of renewable electricity are entitled to electricity certificates, including hydropower, wind power and bioenergy.

Norway and Sweden are responsible for financing half of the support scheme each, regardless of where the investments take place. The authorities have therefore obliged all electricity suppliers and certain categories of end-users to purchase electricity certificates for a specific percentage of their electricity consumption (their quota). This was 3 per cent in 2012 and will gradually be increased to approximately 18 per cent in 2020, and then reduced again towards 2035. The scheme will be terminated in 2036. A demand for electricity certificates is created by the quota obligations imposed by the government, so that electricity certificates have a value. In other words, the market determines the price of electricity certificates and which projects are developed. Producers of renewable electricity gain an income from the sale of electricity certificates, in addition to revenues from the sale of electricity. The income from the electricity certificates is intended to make it more profitable to develop new electricity production based on renewable energy sources. The end-users contribute to this through their electricity bills. In Norway, the framework for the scheme is governed by the Act relating to electricity certificates.

The Electricity Certificate Act  

An electricity certificate is a confirmation issued by the Norwegian State that one megawatt hour of renewable energy has been produced pursuant to the Electricity Certificate Act. The electricity certificate system is intended to promote investments in renewable energy. Electricity customers finance the scheme through their electricity bills. The electricity certificate market is a statutory market in that the market would not have established itself naturally, but that the need and demand has been created through the Electricity Certificate Act.

The Electricity Certificate Act has been supplemented by the regulations relating to electricity certificates of December 2011 – and will be supplemented by new regulations in 2016.

The Electricity certificate market

The electricity certificate market is based on an international agreement with Sweden, and the joint market makes use of a cooperation mechanism under the Renewables Directive. The goal is for the joint electricity certificate market to increase electricity production based on renewable energy sources in Norway and Sweden by 26.4 TWh by 2020.

To establish the joint market, it was necessary to ensure that electricity certificate obligations in Sweden can be fulfilled using Norwegian electricity certificates and vice versa.

Producers

The owner of a production facility is entitled to electricity certificates if specific conditions in Chapter 1 of the Electricity Certificate Act have been fulfilled. The production facility must produce electricity based on renewable energy sources (this is a technology-neutral requirement), be approved by the NVE and satisfy requirements for metering and reporting. Both expansion of existing facilities and new facilities may satisfy the conditions for receiving electricity certificates. Production facilities which become operational after 31 December 2020 will not be entitled to electricity certificates. Those subject to the electricity certificate obligation are primarily suppliers of electric energy to end-users. But, in certain cases, end-users themselves may themselves be subject to an electricity certificate obligation.

Producers entitled to electrical certificates must apply for approval of the facility to the NVE, which administers the electrical certificate scheme in Norway. In addition, the producer, or a registrar authorised by the producer, must apply for an account in the electronic electricity certificate registry.

Electricity certificate registry

Statnett SF is responsible for the electricity certificate registry, and has established and operates the registry. Statnett SF is responsible for registration and cancellation of electricity certificates in the registry. The electricity certificates are issued after production has taken place on the basis of actual metering data. Electricity certificates are issued by Statnett SF registering the electricity certificate in the certificate account of the entity entitled to electricity certificates. The scheme will be terminated on 1 April 2036 through the cancellation of electricity certificates for the year 2035.

Trading of the certificates

The electricity certificate scheme is based on trading of the certificates, so that the entities entitled to electricity certificates can capitalise the value represented by the certificates. Those subject to an electricity certificate obligation will have access to the electricity certificates that are necessary in order to fulfill their electricity certificate obligation.

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