Renewable energy must be supported in an efficient manner
A Nordic-wide green certificate scheme for supporting renewable-based electricity production could save EUR 1 billion, or 25%, annually, compared to national schemes. By utilising the resources in a more efficient manner, increasing renewable-based electricity production would be cheaper, thus lowering the needed support ultimately paid by taxpayers or electricity customers.
The European Union has committed to increase its share of renewable energy in the final energy consumption from 8.5% in 2005 to 20% in 2020. The target has been allocated nationally to each member state. Achieving the targets will require a significant increase both in energy efficiency and in all forms of renewable energy production, in particular wind, biomass and hydro.
“The target cannot be reached without significant public support. If the targets are to be achieved with national measures only, the costs to society will be even higher. Therefore, the way in which renewable energy is supported is extremely crucial”, says Fortum VP for Public Affairs Esa Hyvärinen.
The electricity market today is Nordic, and the EU has set a target to move towards an internal electricity market for the whole Union. Also the EU Emissions Trading Scheme is evolving towards a centralised and harmonised system that is steering investments towards lower CO2 emissions.
“In the integrating energy market, it is important to design the renewables support schemes in a manner that has the minimum distorting effect on the regional power market. Ideally, support schemes should be regional, eventually EU-level, corresponding to the size of the market. Green values cannot be an exception to market principles. This makes a Nordic green certificate scheme an interesting option to be investigated in more detail – market integration is pursued to address also environmental concerns in the most efficient way, at the lowest cost to society”, Hyvärinen says.
A Nordic-wide support scheme the most cost-efficient
A Nordic-wide support scheme would enable investments in the most cost-efficient production methods, not only within one country, but across the Nordic region. This would create annual savings of close to EUR 1 billion, or 25%, compared to national support schemes based on feed-in tariffs. A joint certificate scheme just between Finland and Sweden would lower costs by about half a billion euros annually.
If every Nordic country must achieve the high targets on their own, they must invest more in the most expensive production methods, such as offshore wind. On the other hand, when the resources are pooled at a Nordic model, lower-cost resources available in all four countries would be sufficient to meet the needed production increase. Building capacity in the most optimal locations first will create cost benefits for all stakeholders involved.
In a Nordic model, wind power could be built especially in Norway, which has the best wind conditions, whereas biomass-based capacity could be built in Finland and Sweden, which have the most abundant biomass resources. Nor would the location of investments be an issue; in the common Nordic market, electricity produced in one country would be available for consumers in all Nordic countries. Trading of green values creates a win-win situation.
“Fortum encourages the authorities to study the Nordic model in more detail – for the whole Nordic region or for at least two or three countries therein – as it would create considerable cost savings, lead to more efficient use of natural resources and would be a good fit with the open Nordic power market. At the same time, it must be ascertained that he proposed EU Directive on renewable energy sources not only allows, but actively promotes, the use of regional support schemes”, Hyvärinen concludes.
For a description of the functioning of the different support schemes, such as green certificates and feed-in tariffs, please see the report "Renewable energy promotion instruments" prepared by GreenStream Network and available on Fortum's website www.fortum.com/public_affairs
For more information:
Esa Hyvärinen, Vice President, Public Affairs, Fortum Corporation, +358 40 826 2646