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Swedish certificate proposal ‘threatens investments’

The Swedish Energy Agency’s (SEA) proposal to run the country’s green certificate system until the end of 2030 could drive down prices and bankrupt early investors, the country’s wind industry body has warned.

Sweden’s green certificate system should run until the end of 2030 regardless of how many renewable energy projects are granted certificates before then, the agency proposed.

But the Swedish Wind Energy Association (SWEA) suggested this proposed date could come at least nine years after the development goals for wind power in Sweden will have been reached.

This extension of the market will, in turn, drive down the value of certificates and deter investors, SWEA argued.

Instead, it favours a volume-based stop rule to ensure that the system closes in balance, without prices being reduced.

The Swedish Energy Agency, meanwhile, explained that the purpose of the electricity market, which was introduced in 2003, is to “stimulate a market-driven and technology-neutral expansion of renewable electricity expansion”.

Its director-general also said it must balance ensuring low costs for consumers with securing renewable energy investment in Sweden.

A date-based stop mechanism “retains most of these functions”, a spokesperson added.

Under the system, the Swedish government issues electricity producers certificates for each megawatt-hour produced.

These certificates can then be sold on the open market to consumers that have to fulfil an obligation of certified, clean electricity.

The system aims to help the country reach its renewable electricity production targets of 28.4TWh/year by the end of 2020 and 46.4TWh/year by 2030.

But SWEA expected the 46.4TWh annual production target would be reached by 2021, nine years ahead of schedule, at which point the electricity certificate system will be voided.

This impending shutdown of the market has prompted the energy agency to draft a mechanism for ending it in a balanced manner.

Norway, which joined the common electricity market with its neighbour in 2012, has extended its certificate system until the end of 2021.

In Sweden, however, the country’s energy agency has opted for an end date of 2030, which coincides with the date at which it should meet its production target.

Since the system was introduced in 2003, renewable energy production in Sweden has increased by almost 32TWh, the Swedish Energy Agency stated.

“If the proposal is implemented, a possible consequence could be that those who invested early go bankrupt, and that those who are active in the market today lose confidence and choose other markets”
– Charlotte Unger Larson, CEO, SWEA

It argued the 46.4TWh target will be met without market intervention and, therefore, there is no need for “a stop mechanism that aims to keep the price of electricity certificates up by balancing supply and demand for the electricity certificates”.

The agency’s director general, Robert Andrén, explained that a further goal of the electricity certificate system was reaching the 46.4TWh goal “at the lowest possible cost for the electricity consumers”.

He added, however, that this had to be balanced with the goal of not affecting future investments in renewable energy in Sweden.

Meanwhile, project manager at SEA, Fredrik Forsberg, added: “Our analysis shows that the so-called reserve of electricity certificates will be extensive after 2020 as a result of the early expansion of renewable electricity production.

“A likely development, regardless of which stopping mechanism is introduced, is that the price of electricity certificates will be low until the reserve has decreased.”

But the Swedish Wind Energy Agency disagreed, and CEO Charlotte Unger Larson feared a time-based stop rule will threaten investment as well as the country’s target of sourcing 100% of its electricity from renewables by 2040.

“The Swedish Energy Agency has completely failed to propose a stop rule that is fair for the early investors in renewable energy and that preserves the reliance that exists for the Swedish electricity market.

“If the proposal is implemented, a possible consequence could be that those who invested early go bankrupt, and that those who are active in the market today lose confidence and choose other markets,” she said.

The Swedish government and the Norwegian ministry of petroleum and energy will discuss the Swedish Energy Agency’s proposal until April 2019.

Read the full article at Windpower Monthly.