The electricity certificate market
The electricity certificate scheme started up in 2012. Norway and Sweden had a common goal of increasing electricity production based on renewable energy sources by 28.4 TWh by 2020. This goal was reached in 2019.
The electricity certificate scheme will be terminated in Norway in 2035. Power producers receive one electricity certificate for every MWh they produce, for a maximum of 15 years. The deadline for commissioning new production facilities covered by the electricity certificate scheme expired in December 2021. This means that no more production facilities will be approved for the electricity certificate scheme.
The electricity certificate market
Source: Norwegian Water Resources and Energy Directorate
This is how the electricity certificate market works
- The power producers receive one electricity certificate for every MWh they produce, over a maximum of 15 years.
- The electricity certificates are sold in a market where supply and demand determine the price. In this way, the producer gets and extra income in addition to the power price.
- The demand for electricity certificates arises from the fact that power suppliers and certain electricity customers are required by law to purchase electricity certificates corresponding to a certain proportion of calculation-relevant electricity consumption.
- The electricity customer pays for the development of renewable power production because the electricity certificate costs are included in the electricity bill.
- Every year, the electricity certificate holder must cancel electricity certificates in order to fulfill his electricity certificate obligation.
The electricity certificate scheme 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 up to 15 years. The electricity certificate scheme is technology-neutral, meaning that all forms of renewable electricity production qualify for electricity certificates, including hydropower, wind power and bioenergy.
The purpose of the Electricity Certificate Act is to promote increased production of electricity from renewable sources.
An electricity certificate is confirmation issued by the state that one megawatt hour (MWh) of electricity has been generated from renewable sources in accordance with the legislation. The owners of production plants are entitled to receive electricity certificates for their production provided that they generate electricity from renewable sources (a technology-neutral requirement), are approved by the Norwegian Water Resources and Energy Directorate, and comply with metering and reporting requirements. Both an increase in production as a result of the expansion of existing production plants and production from new plants may qualify for electricity certificates.
Renewable production facilities that started construction after 7 September 2009, and hydropower plants where construction started after 1 January 2004, are qualified to receive electricity certificates. Facilities that permanently increase their production as a result of construction begun after 7 September 2009 are also entitled to electricity certificates for the increase in production. Norwegian facilities must be in operation by 31 December 2021 to be entitled to receive electricity certificates.
Electricity suppliers and some categories of end users have an obligation to purchase electricity certificates corresponding to a proportion of their consumption (quota obligation). Producers that are qualified to receive electricity certificates must apply to the Norwegian Water Resources and Energy Directorate, which is the administrative and supervisory authority, for approval of their facilities. In addition, the company or an account manager authorised by the company must apply to have an account opened in the electronic registry.
Statnett maintains the Norwegian registry, and is responsible for issuing and cancelling electricity certificates. Certificates are issued retrospectively on the basis of actual metered production. Statnett registers certificates in the appropriate electronic account. The scheme will be terminated on 1 April 2036, when electricity certificates for 2035 are cancelled.
Further rules for the electricity certificate scheme in Norway are set out in the Regulations relating to electricity certificates.
All electricity suppliers and certain categories of end-users are required to purchase electricity certificates for a specific percentage of their electricity consumption (their quota). This percentage was gradually increased each year until 2020. The percentage will be gradually reduced until 2035.
The quota obligations imposed by the Norwegian and Swedish governments create a demand for electricity certificates, so that they acquire a value. Thus, the authorities decide how many certificates must be purchased, but the market determines their price. Producers of renewable electricity gain an income from the sale of electricity certificates, in addition to their earnings from electricity sales. The income from the electricity certificates is intended to make the development of new electricity production based on renewable energy sources more profitable. End-users contribute to this through their electricity bills. In Norway, the framework for the scheme is governed by the Electricity Certificate Act.
The electricity certificate market is based on a bilateral agreement between Norway and Sweden. The two countries are making use of a cooperation mechanism under the EU Renewable Energy Directive (2009/28/EC). .The establishment of the joint Norwegian-Swedish market was contingent on the possibility of meeting a quota obligation in Sweden by purchasing Norwegian electricity certificates, and vice versa.