The electricity certificate market
The electricity certificate scheme started up in 2012. Norway and Sweden have a common goal of increasing electricity production based on renewable energy sources by 28.4 TWh by 2020. Norway has undertaken to finance 13.2 TWh of this, and Sweden will finance 15.2 TWh.
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 is being gradually increased each year up to 2020, and will then be reduced gradually until 2035. The scheme will be terminated in Norway in 2036.
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 and which projects are carried out. 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 goal is for the joint electricity certificate market to give an increase of 28.4 TWh in electricity production from renewable sources by 2020. 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.
The Norwegian Water Resources and Energy Directorate is the administrative and supervisory authority for the electricity certificate scheme, and is responsible for approving plants so that they can receive electricity certificates.
Statnett is responsible for Norway’s electronic registry (NECS), where electricity certificates are issued and cancelled.