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Renewable Energy Support in Europe

The Swedish Experience

Florence School of Regulators, April 29th, 2011

Karin WidegrenDirector, International Affairs

Energy Markets Inspectorate, Sweden


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Renewable energy targets for

EU member states

0

10

20

30

40

50

60

A u s t r

i a

B e l g i u

m

B u l g a

r i a

C y p r u

s

C z e c h R e

p u b l i c

D e n m

a r k

E s t o n

i a

F i n l a n

d

F r a n c e

G e r m

a n y

G r e e

c e

H u n g

a r y I r e

l a n d

I t a l y L a

t v i a

L i t h u

a n i a

L u x e m

b o u r g M a

l t a

N e t h

e r l a n

d s P o

l a n d

P o r t u

g a l

R o m a

n i a

S l o v a k

i a

S l o v e n

i a S p

a i n

S w e d

e n U K

%

2005 2020

Source: European Commission


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Swedish economic policy instruments

to support renewable energy Electricity certificate trading system for renewables

Launched 2003, Objective 25 TWh from 2002 until 2020 Joint market with Norway planned from 1.1. 2012

Jointly increase production 2012-2020 26,4 TWh Tax policy - energy and carbon taxes

Energy tax since 1950s; CO 2 -tax since 1991 Green tax shift since 2001 energy and CO 2 -tax shifted

against tax on labor

Other economic policy instruments Emissions trading (since 2005) within EU Support to electric and hybrid cars, biofuels for transports


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The Swedish Green Certificate System

Producers are granted one electricity certificate forevery MWh renewable electricity generated

Power suppliers and in certain cases consumersare obliged to buy certificates an annual quota,in proportion to their supply or consumption

Failure to comply with the quota is penalized The certificates are tradeable - a market place has

been established; the price is set to make offermeet demand


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Price development for green

certificates in Sweden


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Why did Sweden choose greencertificates?

Long term predictability for investors - moving costs topromote renewables from public financing to themarket

Market-based support system - reducing costs throughcompetition between different renewable energysources and technical development

Achieving policy targets for renewable electricityproduction controlling the volume through quotas

No immediate need to increase supply of electricity -develop trade first and domestic supply later


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A comparison between support schemes

FEED-IN TARIFFS

Investment security

Predictability of price (medium &long term)

Technology specific - Adjustable

according to policy goals

Unpredictable total costs of the

support scheme

High risk of overfunding

TRADABLE CERTIFICATES WITH

QUOTAS

Higher risk for investors

Predictability of reaching the

targets

Technology neutral - competition

between renewable sources

Risk of volatile price increase to

consumers

Limited risk of overfunding


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Lessons learned and need foradditional measures

Equal access to price information andtransparency important to stimulate trade andliquidity

A surplus of certificates is important to balancesupply and demand

The certificate system should be modified to givelocational signals to new wind power plants

Transmission and distribution network need to beenforced - Governmental support needed to atleast partly cover future costs for grid investments


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A joint certificate market betweenSweden and Norway

Common key principles for which renewableproduction units to include and the timeframe toreceive green certificates

Similar control and support functions Common platform for market information Coordinated ambitions regarding quota levels

higher liquidity, lower price risk, cost efficiency


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Renewable energy support in Europe -Future Challenges

Large and unpredictable variations in productionand flows Need to secure effective utilization of the network and the

right cross border capacity Support systems with locational signals will be needed

Large volumes of renewable production that donot respond to economic signals Support schemes hides market signals, influence peak

load, maximum and minimum prices etc. Increased volatile prices and price spikes

Need for a capacity market?


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Choice of policy instruments

Support system design alone not decisive foreffectiveness of promoting renewables

Other factors are often as important:l - Domestic energy resources

l - Priorities in national energy or fiscal policy

l - Structure and function of domestic market

l - Regional cooperation

Coordination of measures crucial


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