Statkraft Challenges EU to Introduce European Renewables Certificate Scheme

12.09.2007 08.00 | pressrelease

The EU has set ambitious and legally binding goals for renewable energy. By 2020 renewable energy sources should provide for 20 percent of all energy consumption. In order to achieve that target, as much as a third of all electricity consumed will probably have to be from renewable energy sources.

Compared to the last ten years, annual growth in new capacity must more than triple to achieve the agreed renewables target for 2020. Statkraft believe an EU-wide market for renewables certificates is the best way to reduce both the cost and the environmental burden of these huge investments.

A Renewable Certificate Scheme (RCS) would be a market in which the demand for renewable energy is secured by placing an obligation upon suppliers to buy a certain share of renewable energy. The generators receive certificates based on the amount of renewable electricity produced. The subsequent value of the certificate will be the support for new renewable energy, as seen today in countries like Sweden and the UK.

Electricity made from renewable sources is by and large not competitive at today’s market prices. In order to meet renewable energy targets, governments today subsidise new electricity generation in many different ways. The most common method is to offer a fixed tariff or a fixed surplus for providers of renewable power. With today´s multitude of support schemes across Europe for renewable energies, energy companies can easily be distracted away from developing the most efficient and sustainable energy projects, to looking for the most lucrative subsidy package.

All electricity production has environmental costs attached. A growth of renewable electricity of the scale implied by the agreed targets means that cost-effectiveness is not only a question of the funds needed to support investments, but also a question of the environmental burden of new power generation. Therefore it is very important to start with the best projects, in order to minimise the burden on the environment.

Statkraft believe an EU-wide market for renewables certificates is the best way to reduce both the cost and the environmental burden of these huge investments.

Statkraft shows that European consumers and taxpayers potentially could save five to ten billion euros annually, if the 34%-level of renewable electricity is achieved through a European Renewables Certificate Scheme, compared to un-coordinated national policies, mostly feed-in tariffs.

A market for renewables certificates would also enhance the development of an integrated energy market in Europe. The scheme would fit in well with the existing EU-wide market for CO2-allowances (EU ETS). The price of the renewables certificates would over time move contrary to the price of CO2-allowances. If CO2-prices increase, there is less need for additional support to make renewables profitable. A market for renewables certificates would therefore act as a partial hedge on the CO2-market for generators of renewable power. This will be more predictable for investors, less costly for consumers and give assurance for governments in providing the optimal support level.

The Statkraft position paper also points to auctioning revenues from CO2-allowances as a potential source of financing European renewables certificates.