Energy Certification - an Efficient Tool to Achieve Ambitious RES Targets

Case Norway and Sweden

Low Carbon Earth Summit 28th September 2013. Xi’an, China

Slide 2 13.04.2023

Grexel in One Sentence

We enable energy certification by

providing market infrastructure

solutions and services

Slide 3 13.04.2023

Grexel Fact Sheet

• Field of Business Energy certification

• Services Central certificates

registries Regulatory and market

engineering• Achievements & Figures

80% of European energy certificates volume

11 countries covered Trade volume in registries

> 5 b€ annually

• Customers Government agencies

o Ministry of Employment and Economics, Finland

o ILR (Luxembourg)o Croatian Energy Market

Operatoro EgyptERA (Egypt)o Ministry of Industry and

Innovation, Iceland Main Grids

o Statnett (Norway)o Svenska Kraftnät (Sweden)o Energinet.DK (Denmark)o Landsnet (Iceland)o EMS (TSO, Republic of

Serbia)

Slide 4 13.04.2023

I Will Tell You About…

1. Energy certification and Renewable Portfolio Standards (RPS)

2. Swedish-Norwegian certificate based RPS

3. EU 20-20-20 targets burden sharing

4. RPS versus FiT efficiency data

5. Explanation to the above

6. What’s next

Slide 5 13.04.2023

What are Energy Certification?

• Unbundling the value related to origin from physical energy

• Enable efficient financial incentives to increase renewable energy generation and energy savings

• Do not require a liberalized physical power market in order to be effective

Production

attributeSold in

compliance or voluntary market

ElectricitySold in energy

market

Slide 6 13.04.2023Slide 3/26/13

Energy Certificates Enable Commercial Tracking of Electricity from Generation to Consumption

Certificate Markets

Certificate Registry

Cancellation Issuing Transfer

Electricity Markets

Authority issues certificates for eligible production based on valid measurement data

Certificates are traded separately from energy. Green investors get money from selling certificates.

Certificates are cancelled to meet quota or prove green consumption / sales.

Slide 7 13.04.2023

Renewable Portfolio Standard (RPS) Using Energy Certificates

• RPS = producer, consumers or e.g. regional government has to prove that certain share of electricity (quota) was produced using eligible production methods Eligible production is usually newly built renewable

• Authority issues quota certificate to the account of producer 1 MWh of produced electricity = 1 certificate

• Certificates are freely tradable separately from physical power• Quota Obliged Parties have to prove quota compliance by cancelling enough

certificates yearly

Certificate Markets

Electricity Markets

X

Y

Z = X + Y

Z

q*Z = YProducers

Y

Suppliers/Grid Company

Interaction with other Domains

Z = Total Electricity Sales of the Grid CompanyX = Fossil&Nuclear Production Y = Renewable Production q = Quota % for renewables for Producers

Slide 8 13.04.2023

How Governments Use RPS to Reach Their Quotas

• With quota certificates government can harness the market forces without loosing control over the electricity market

• In case of multiple support schemes, the RPS scheme can act as the flexibility element

Time

Unsupported RES

FIT Supported RES

GC Supported RES (QOP Quota)

Country RES Target

Slide 9 13.04.2023Slide 7 8/29/12

Case: Quota Certificate System for Sweden and NorwayBackground

• Both countries are bound by the 20-20-20 targets of the EU directive 2009/28/EC

• All RES support schemes were replaced by a joint quota certificate scheme

• Yearly elevating quota on consumption

• Quota obliged parties: electricity suppliers and major consumers

• Eligible production: all new renewable capacity for 15 years

• Competent authorities: Grid operators and regulators

NorwayTarget 67,5%

SwedenTarget 49%

Joint Quota Certificate Scheme

Slide 10 13.04.2023

Quotas in the European Union

• Common 20-20-20 target agreed in directive 2009/28/ECo 20 % of consumed primary energy from renewable sources by 2020o 20 % of GHG reduction as compared to 1990 level by 2020

• Burden sharing according to RES potential and economical capability• Member states are free to select strategies to reach the targets

o Support schemeso Build own capacity / buy from others

• Member states can trade using defined flexibility mechanismso Statistical transferso Joint projectso Joint support schemes

Bottom line: It is equally difficult to reach the targets for all countries.

Now it is interesting to see how different strategies have worked out!

Slide 11 13.04.2023

EU 20 RES Targets by Country

EU (27 co

untries)

Belgium

Bulgaria

Czech

Republic

Denmark

Germany

Estonia

Ireland

GreeceSpain

France

CroatiaIta

ly

Cyprus

Latvi

a

Lithuania

Luxe

mbourg

HungaryMalta

Netherlands

Austria

Poland

Portugal

Romania

Slovenia

Slovakia

Finland

Sweden

United Kingdom

Norway

0

10

20

30

40

50

60

70

80

2005 2011 TARGET 2020

Slide 12 13.04.2023

Premium in RPS and FiT

?

FiT price = F

Elec

tric

ity p

rice

= E

Premium =F-E

FiT

?

Elec

tric

ity p

rice

= E

Premium =C

RPS

Certi

ficat

e pr

ice

= C ?

Slide 13 13.04.2023

FiT vs. RPS Costs in the EU after 20-20-20 Targets

2009 2010 20110.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

25.8022.84

18.12

Onshore Wind Premiums (normalized to 20 y duration)

Czech Republic Germany Greece Netherlands Spain Sweden

€

Slide 14 13.04.2023

How do FiT and RPS Schemes Deal with Changes Assuming % RES Targets?

Change Energy Markets FiT RPS

Economy down • Electricity price ↘• Consumption ↘

• Investment ↗• Over/under target ↗• Cost to consumers ↗

• Investment ↘• Over/under target →• Cost to consumers ↘

Economy up • Electricity price ↗• Consumption up ↗

• Investment ↘• Over/under target ↘• Cost to consumers ↘

• Investment ↗• Over/under target →• Cost to consumers →

Give up Nuclear or Fossil(other replaces the other)

• Electricity price ↗• Consumption ↘

• Investment ↘• Over/under target ↘• Cost to consumers ↘

• Investment →• Over/under target →• Cost to consumers →

Build more Nuclear / Fossil

• Electricity price ↘• Consumption ↗

• Investment →• Over/under target ↘• Cost to consumers ↗

• Investment ↗• Over/under target →• Cost to consumers ↗

Slide 15 13.04.2023

Conclusions

• Well designed RPS scheme seems to cope better with changes Economic up/downturn Electricity consumption increase / decrease Electricity price changes Maturing of technology Changes in investment climate Political decisions

• Well designed RPS scheme seems to reach targets more efficiently. Why? Market optimizes itself in changing environment The market automatically drives towards the target using price flexibilities both in

consumption and production

• RPS is more sustainable in the long term. Why? Being market based, investors do not have to worry government budget cuts No danger of being suspended because of over investments

Slide 16 13.04.2023

Future Work

• Data is partly in contradiction Wait 3 more years for cost data

• See how investments go in SE and NO Likely to stall Cost to consumers going even more down

• Why are some RPS schemes expensive? Marked design failed?

• After 3-5 years, there should be enough of data to draw consclusions New genenric theory on optimal usage of support schemes

o Investment supporto FiTo RPS

Slide 17 13.04.2023

Thank You!

Marko Lehtovaara

CEO

Grexel Systems Ltd.

Finland

Marko.lehtovaara(at)grexel.com