Renewable Energy Support in Europe

The Swedish Experience

Florence School of Regulators, April 29th, 2011

Karin Widegren
Director, International Affairs
Energy Markets Inspectorate, Sweden
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Renewable energy targets for

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Source: European Commission
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 1950’s; CO2-tax since 1991
–  Green tax shift since 2001 – energy and CO2-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
The Swedish Green Certificate System

•  Producers are granted one electricity certificate for

every MWh renewable electricity generated
•  Power suppliers and in certain cases consumers
are 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 offer
meet demand
Price development for green
certificates in Sweden
 Why did Sweden choose green
certificates?
•  Long term predictability for investors - moving costs to
promote renewables from public financing to the
market
•  Market-based support system - reducing costs through
competition between different renewable energy
sources and technical development
•  Achieving policy targets for renewable electricity
production – controlling the volume through quotas
•  No immediate need to increase supply of electricity -
develop trade first and domestic supply later
A comparison between support schemes
FEED-IN TARIFFS TRADABLE CERTIFICATES WITH
QUOTAS

•  Investment security •  Higher risk for investors

•  Predictability of price (medium & •  Predictability of reaching the

long term) targets

•  Technology specific - Adjustable •  Technology neutral - competition

according to policy goals between renewable sources

•  Unpredictable total costs of the •  Risk of volatile price increase to

support scheme consumers

•  High risk of overfunding •  Limited risk of overfunding

Lessons learned and need for
additional measures

•  Equal access to price information and

transparency important to stimulate trade and
liquidity
•  A surplus of certificates is important to balance
supply and demand
•  The certificate system should be modified to give
locational signals to new wind power plants
•  Transmission and distribution network need to be
enforced - Governmental support needed to at
least partly cover future costs for grid investments
 A joint certificate market between
Sweden and Norway
•  Common key principles for which renewable
production units to include and the timeframe to
receive green certificates
•  Similar control and support functions
•  Common platform for market information
•  Coordinated ambitions regarding quota levels

•  higher liquidity, lower price risk, cost efficiency

Renewable energy support in Europe -
Future Challenges
•  Large and unpredictable variations in production
and 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 do

not 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?
Choice of policy instruments

•  Support system design alone not decisive for

effectiveness 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
To find out more about us….
…..and our work, please visit us at:

•  www.ei.se
•  www.nordicenergyregulators.org

THANK YOU FOR YOUR ATTENTION !