Subsidization of renewable energy...Carl Jørgen Basberg Johannessen Higher executive officer Norges vassdrags- og energidirektorat Agenda Purpose Different types of subsidies Green

Subsidization of renewable

energyGreen certificates

An introductionUniversity of Oslo, may 6th 2011

Carl Jørgen Basberg Johannessen

Higher executive officer

Norges vassdrags- og energidirektorat

Agenda

■ Purpose

■ Different types of subsidies

■ Green Certificates

■ How do they work

■ Why do we need them

■ Future oppurtunities

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Purpose & background

■ Fossil energy sources

■ Coal = 40 EUR / MWh

■ Gas = 49 EUR / MWh

■ Oil = 90 EUR / MWh

■ Nuclear = 35 EUR / MWh

■ Renewable energy sources

■ Hydro = 5 EUR / MWh

■ Wind = 75 EUR / MWh

■ OS Wind = 200 EUR / MWh

■ Solar = 125 EUR / MWh

■ Bio = 125 EUR / MWh

■ Wave = +++++

■ Tidal = +++++

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Purpose & background

■ Why do we subsidize?

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How do we subsidize?

■ Direct or indirect

subsidies?

■ What’s beneficial for

society?

■ What’s fair with respect to

competition?

■ Discussion: How do you

think energy should be

subsidized??

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■ Feed in tariffs

■ Contribution per MWh

■ Technology specific

■ Difficult to set the right

tariff

■ Can allow expensive

technologies to produce

■ Efficient way to subsidize,

used in over 60 countries

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■ Green certificates

■ Market based subsidy

system

■ Can be compulsory or

voluntary

■ Market decides the price

■ Most efficient technology

will produce first



■ R&D support

■ Strategic public

procurement

■ Taxes that increases the

price of fossil energy

■ Tax cuts for green energy

■ Public relation campaigns

(free marketing)

■ Guarantees of origin

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Experience from

other countries

■ Main driver: environmental concerns &

climate change

■ A combination is most common

■ SWE, UK and ITA use certificates

■ No production support in FIN, but fiscal

support

■ Conclusion = feed in tariffs is most effective,

but differences between countries

■ Investments in renewable energy is way

more risky and will rely on public support

schemes for years

•2008 Study from ECON

•SWE

•DEN

•GER

•UK

•AUT

•FIN

•ITA

•FRA

•NED

•ESP

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Norges vassdrags- og energidirektorat 26.05.2011

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Green Certificates

■ Norway will enter a common market with Sweden in 2012.

■ Objective: As a support scheme, contribute to more

renewable energy in the market through promoting the

most efficient projects, independent of technology.

■ The size of the support will be decided by the market

(supply and demand)

■ Each certificate is valid for 15 years and the support

scheme will issue certificates until 2020.

■ Objective: 26,4 TWh of new renewable energy within 2020.


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GC’s – How do they work??

■ Producers of new renewable energy will receive a GC per

MWh delivered to the market.

■ The government will decide a specific share of GC’s, which

all suppliers of energy have to buy each year within a

specific date.

■ The share is a percentage of total sales.

■ If the suppliers fails to comply with the procurement of

certificates – they will be fined. Average certificate price *

150 %


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GC’s – The quota

0,0 %

5,0 %

10,0 %

15,0 %

20,0 %

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

Proposed quota

Quota

0,00 TWh

5,00 TWh

10,00 TWh

15,00 TWh

20,00 TWh

Generation

Generation


GC’s – How do we do this practically?

1. The government

decides the quota

2. The government

issues certificates

3. The suppliers have to

buy certificates

4. Price is decided in

the market

5. The supplier bills the

customer

6. Increased quota and

on again…….

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GC’s – price formation

Without GC With GC

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D(g)

A B

PC

PE

S(g)

Price

Quantity

D(g)

A

PE

S(g)

Price

Quantity

Price el + Price GC = Prod.cost


GC’s - Price formation

Price formation Events

1. The government decides

a quota (B)

2. Producers enters the

marked

3. Price is decided in

intersection quota-

supply-demand

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D(g)

A B

PC

PE

S(g)Price

Quantity


Who decides the

price??

In theory: SIMPLE

• Production cost to the last

producer

Complications:

• Competition between

producers within same

technology

• Financial behavior

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D(g)

A B

PC

PE

S(g)

Price

Quantity

Windfall profits


Erfaringer fra Sverige

■ Brukte noe tid på å tilpasse seg

■ For lav kvoteplikt innledningsvis = lav pris

• Mange hadde ventet på sertifikatene

• Varmekraftverk begynte på biobrensel

■ Stigende priser mot 2008

• Billigste teknologi utbygget

■ Finanskrisen – redusert forbruk

• Absolutt andel redusert – for mange sertifikater

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Konklusjon

■ Systemet fremmer effektivitet

• Grønn energi produseres der den gir mest per input

■ Samarbeid = et mer solid marked og bedre forutsigbarhet

■ Teknologier vil modnes

■ Suksessfaktorer:

• Forutsigbarhet og tillit

• Tålmodighet

• Huske på hva som faktisk er målsetningen!

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Documents

Subsidization of renewable energy...Carl Jørgen Basberg Johannessen Higher executive officer Norges vassdrags- og energidirektorat Agenda Purpose Different types of subsidies Green