European Commission Intelligent Energy Programme...European Commission Intelligent Energy Programme...

European Commission Intelligent Energy Programme Work package 2 Review and analysis of national and regional certificate schemes

Report presented to Intelligent Energy

Executive Agency by Ecofys

on behalf of the EWC team

With contributions from ZSW, eERG, ULUND

and the CEU.

Task Report

E I E / 0 4 / 1 2 3 / S 0 7 . 3 8 6 4 0

Stepwise towards European energy efficiency policy portfolios involving White Certificates

Project description The EuroWhiteCert project will support the conceptual and technical development of tradable white certificates systems covering energy savings and energy efficiency. In order to promote the introduction of such systems in the ecologically and economically most beneficial way at the European level, recommendations will be made for handling the interactions of white certificates and their possible integration with other existing and planned tradable certificate and permit systems (such as green certificates, cogeneration certificates), with other policy tools for sustainable energy, as well as with the EU ETS and the JI and CDM schemes. The project involves a critical evaluation of the experiences with already established certificate schemes in the energy sector and explores the practical implementation of a white certificate scheme by developing a uniform measurement and verification methodology, certifying existing projects, identifying a set of alternative market participants and by eliciting voluntary demand among these. The EuroWhiteCert project is supported within the Intelligent Energy for Europe (EIE) Programme of the European community (contract no. EIE/04/123/S07.38640). The kick-off meeting was in April 2005 and the project will last till April 2007. Project partners

www.eerg.it www.energyagency.at www.ademe.fr www.apat.gov.it www.armines.net www.ceu.hu www.cres.gr www.ecofys.com www.eneffect.bg www.esdb.bg www.esd.co.uk www.iiiee.lu.se www.isr.uc.pt www.vatt.fi www.zsw-bw.de

www.eurowhitecert.org Report authors: Monique Voogt, Ecofys Maxim Luttmer, Ecofys Erika de Visser, Ecofys

1


CONTENTS 1. EXECUTIVE SUMMARY .............................................................................................................. 6

The concept of white and green certificates ........................................................................... 6 Design of a certificate scheme ............................................................................................... 6 Measurement and verification................................................................................................. 6 Trading aspects ...................................................................................................................... 7 Case studies ........................................................................................................................... 7

2. RESEARCH QUESTIONS AND FRAMEWORK .......................................................................... 8 2.1 Introduction.............................................................................................................................. 8 2.2 Research questions for task 2.1: concept of tradable certificate schemes............................. 8 2.3 Research questions for task 2.2: Review and analysis of existing national and regional white and green certificate...................................................................................................................... 8

3. DESIGN OF THE SCHEME.......................................................................................................... 9 3.1 Policy issues............................................................................................................................ 9

3.1.1. Function of white and green certificate systems .......................................................... 9 3.1.2. The European framework ........................................................................................... 10 3.1.3. Policy objectives ......................................................................................................... 11

3.2 The certificate system ........................................................................................................... 11 3.2.1 Organisation of the system.......................................................................................... 11 3.2.2 Formulation, issuing, registration and redemption of certificates ................................ 12 3.2.3 System costs ............................................................................................................... 13

3.3 Measurement and Verification .............................................................................................. 14 3.3.1 The European Energy Certificate System .................................................................. 14 3.3.2 Standardisations from CEN/CENELEC/ETSI.............................................................. 15 3.3.3 The International Performance Measurement and Verification Protocol (IPMVP)...... 16 3.3.4 CDM/JI measurement and verification ........................................................................ 17

3.4 Creation of demand............................................................................................................... 18 3.4.1 Target setting............................................................................................................... 18 3.4.2 Involved actors/sectors................................................................................................ 18 3.4.3 Penalty systems........................................................................................................... 18

3.5 Market issues ........................................................................................................................ 19 3.5.1 Trading rules and limits................................................................................................ 19 3.5.2 Market transparency and liquidity................................................................................ 20 3.5.3 Marketing issues.......................................................................................................... 20

4. CASE STUDIES EXISTING GREEN AND WHITE CERTIFICATE SYSTEMS.......................... 22 4.1 Overview of schemes............................................................................................................ 22 4.2 Policy objectives.................................................................................................................... 23 4.3 The certificate system ........................................................................................................... 25

4.3.1 Issuing of certificates ................................................................................................... 25 4.3.2 Measurement and verification ..................................................................................... 26 4.3.3 Monitoring and control ................................................................................................. 27 4.4.4 Eligibility of technologies and measures...................................................................... 28 4.4.5 System costs ............................................................................................................... 29

4.5 Creation of demand............................................................................................................... 31 4.5.1 Obliged parties............................................................................................................. 31 4.5.2 Sector coverage........................................................................................................... 32 4.5.3 Compliance period and rules of transfer...................................................................... 32 4.5.4 Penalty systems........................................................................................................... 33

4.6 Market issues ........................................................................................................................ 34 4.6.1 Rules of trade .............................................................................................................. 34

2


4.6.2 Trading statistics.......................................................................................................... 35 4.6.3 Market liquidity............................................................................................................. 37

5. ANALYSIS................................................................................................................................... 39 5.1 Policy objectives ............................................................................................................. 39 5.2 The certificate system ........................................................................................................... 40

System costs ........................................................................................................................ 40 5.3 Creation of demand............................................................................................................... 41 5.4 Market issues ........................................................................................................................ 41 5.5 The international dimension .................................................................................................. 41

6. CONCLUSIONS AND RECOMMENDATIONS........................................................................... 43 Policy objectives ................................................................................................................... 43 Creation of demand .............................................................................................................. 43 Coverage of the schemes..................................................................................................... 43 Measurement and verification............................................................................................... 44 Monitoring and control .......................................................................................................... 44 System costs ........................................................................................................................ 44 Trading statistics................................................................................................................... 44

LITERATURE .............................................................................................................................................. 46

The sole responsibility for the content of this document lies with the authors. It does not represent the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.

3


Glossary of terms and abbreviations Additionality Projects realized in white certificate schemes should realize savings in

addition to savings that are realized anyway because of other existing supporting policies.

Banking Use of certificates for compliance in following obligation periods Base line The reference developments in energy use in a specific project Borrowing Meeting (part of) an obligation with certificates created in the future EECs Energy Efficiency Commitment; obligation system operating in Great

Britain since 2002. EE&ES Directive on Energy End-Use Efficiency and Energy Services ElCert Swedish certificate used on the green certificate market. End use energy: A measure of the energy content of fuels at the point where they are

consumed. EPBD Directive on the Energy Performance of Buildings ESCO Energy service company EESoP Energy Efficiency Standards of Performance programme, predecessor

programme of the EECs programme in Great Britain. Ex-ante calculation of energy savings

A calculation method that pre-defines the amount of energy used and saved by a measure before its implementation.

Ex-post calculation of energy savings

Calculation of savings after the measure has been implemented.

GoO Guarantee of Origin, a declaration on the origin of the energy source produced.

Green certificates A green certificate represents the attributes of a certain amount of energy produced from renewable energy sources.

IPMVP International Performance Measurement and Verification Protocol Liquidity Term to identify whether a market offers sufficient opportunities to trade

and where individual transactions have a limited impact on market prices

M&V Measurement and verification Redemption The system of taking certificates out of the market that have been used

to meet an obligation or for other purposes. RES-E Electricity produced from renewable energy sources ROCs Renewable Obligation system operational in the UK and Wales SROCs Renewable Obligation system operational in Scotland TGC Tradable green certificates TWC Tradable white certificates Verifier A party that carries out the verification of certificates based on standards

for verification. White certificates A white certificate represents a certain amount of energy saving that has

been achieved or is to be achieved during a certain pre-specified timeframe.

4

LIST OF TABLES Table 1 Overview of M&V opt ions identified in IPMVP. (source: IPMVP volume I) .............................. 17 Table 2. Overview of (planned) certificate systems and obligation systems in Europe. ............................. 22 Table 3 Policy objectives in white certificate systems............................................................................ 23 Table 4 Policy objectives in green certificate systems ........................................................................... 24 Table 5 Issuing of certificates in white certificate systems..................................................................... 25 Table 6 Issuing of certificates in green certificate systems .................................................................... 25 Table 7 Measurement and verification in white certificate systems ....................................................... 26 Table 8 Measurement and verification in green certificate systems ...................................................... 26 Table 9 Monitoring and control in white certificate systems................................................................... 27 Table 10 Monitoring and control in green certificate systems .............................................................. 27 Table 11 Eligibility of technologies and measures in white certificate systems.................................... 28 Table 12 Eligibility of technologies and measures in green certificate systems................................... 29 Table 13 System costs in white certificate systems ............................................................................. 30 Table 14 System costs in green certificate systems............................................................................. 30 Table 15 Creation of demand in white certificate systems ................................................................... 31 Table 16 Creation of demand in green certificate systems .................................................................. 31 Table 17 Sectors covered in white certificate systems......................................................................... 32 Table 18 Compliance period in white certificate systems..................................................................... 32 Table 19 Compliance period in green certificate systems .................................................................... 32 Table 20 Penalty systems in white certificate systems......................................................................... 33 Table 21 Penalty systems in green certificate systems........................................................................ 34 Table 22 Trading rules and limits in white certificate systems.............................................................. 34 Table 23 Trading rules and limits in green certificate systems............................................................. 35 Table 24 Statistics on trade in white certificate systems ...................................................................... 35 Table 25 Statistics on trade in green certificate systems ..................................................................... 36 Table 26 Means to support market liquidity in white certificate systems.............................................. 37 Table 27 Means to support market liquidity in green certificate systems ............................................. 37 LIST OF FIGURES Figure 1 Schematic presentation on the organisation of the green certificate scheme .......................... 12 Figure 2 Schematic presentation on the organisation of the white certificate scheme ........................... 12

5


1. EXECUTIVE SUMMARY This report provides both a theoretical and a practical overview of issues to be dealt with in the design of white or green certificate systems.

The concept of white and green certificates White and green certificate schemes are relatively new instruments in the European policy framework. They are an illustration of the steady movement towards implementation of market-based instruments and the gradual development from supply-side towards demand-side policy measures. The certificate systems are not a policy instrument in itself, but a means to achieving the objectives specified in a cost-efficient way.

A white certificate represents a certain amount of energy saving that has been achieved or is to be achieved during a certain pre-specified timeframe. Certificates can be created from investments in projects that result in energy savings beyond business as usual. The market actor receives certificates for savings achieved, which can be used for own target compliance or can be sold to (other) obliged parties.

A green certificate represents the attributes of a certain amount of energy produced from renewable energy sources. The major characteristic of the system is that electricity produced from renewable energy sources is certified, or guaranteed. The certificates have two main purposes. First, they function as an accounting system to the amount of electricity produced from renewable energy sources, and verify whether demand (voluntary or obligatory) has been met. When tradable, green certificates facilitate the creation of a green certificate market that functions independently from the commodity electricity market.

Design of a certificate scheme Establishment of any certificate scheme is not an easy task. Choices made on a large number of design elements will strongly influence the success and operability of the scheme. Certificates schemes can be quite complicated in terms of operation and definitions. Although this is not necessarily the case, some minimum requirements have to be met to ensure the reliability of the scheme. When setting up a certificate system the following steps have to be organised: • Appoint an independent body that is responsible for issuing of certificates • Provide a clear definition of a certificate in terms of resource eligibility, validity, size, etc • Formulate the ‘rules of the game’: what are the rules to trading, who is responsible for what • Establish a registration system where each certificate and each trade is registered. • Establish independent monitoring and verification system • Formulate clear rules on compliance and in case of a mandatory system set automatic non-

compliance penalties • Organise that each certificate consumed is redeemed, i.e. taken out of the system Each step of the scheme is discussed in detail in this report.

Measurement and verification The concept of measurement and verification within the white certificate markets is quite different from that in the green certificate market. In the white certificate market a certain amount of energy or emissions are saved compared to a hypothetical reference scenario. In the green certificate market energy production from renewables can be easily measured (metered or calculated) without specific knowledge of such a reference situation. Both for green and white certificates internationally agreed guidelines on

6


measurement and verification have not yet been developed. However, a number of standards do exist, as discussed in this report.

Trading aspects There is yet very little experience in Europe with white certificate markets and limited experience with green certificate markets. Although several European countries have set up a green certificate market system, it is yet quite far from achieving a single European market. Instead, there exist a wide variety of very fragmented markets in which design, conditions, market actors and prices vary largely. The very few experiences with white certificate markets in Europe already show that each system is based upon different specific national requirements and specific policy objectives. The report discusses issues such as trading rules, market transparency and marketing issues. Moreover it illustrates first market experiences, volumes of trade, and existing market prices.

Case studies The report describes implementation of white and green certificate schemes in several European countries. The table below provides an overview of existing and planned schemes.

Certificate system Green White Country Austria GoO system since Jan 2003; tradable Belgium Three regional green certificate systems; first one in

operation in Jan. 2002. Energy saving obligation in Flanders without tradability of certificates

Bulgaria Planning to implement a TGC system with obligations from 2006/07.

Denmark Planned a scheme to start Jan 2003; scheme now cancelled.

Considering energy saving obligations, possibly with a TWC system.

France Will start a full TWC system with energy saving obligations in Jan. 2006

Italy Started a TGC system in Jan. 2002 Started energy saving obligation with TWC system in Jan 2005.

Netherlands TGC system in place since July 2001 Planning to start a TWC system in 2006/07

Poland Renewable obligation scheme combined with a tradable GoOs since Oct. 2005. No formal TGC system.

Romania Obligation system with TGC since May 2005. Sweden Swedish scheme started May 2003. Norway initially

planned to join the scheme in 2006, but has recently decided not to join.

United Kingdom/-Scotland/Northern Ireland

UK and Scottish scheme started April 2002. Northern Ireland scheme started April 2005.

United Kingdom Scheme started April 2002. Trade in obligations allowed; no certificate trade.

7


2. RESEARCH QUESTIONS AND FRAMEWORK

2.1 Introduction The Eurowhitecert project aims to clarify what are the conditions under which a white certificate scheme can operate and be effective, both in terms of the appropriate policy context and of the operational design of such a scheme.

This WP2 concentrates on review and analysis of existing green and white certificate schemes. It aims to enhance the understanding the relation between design of the schemes and actual effects such as behaviour by market actors, price setting, market liquidity and effectiveness of the schemes. The team has reviewed and analysed the concept of white and green certificate schemes as well as existing applications to enhance the understanding of design elements to its success in efficiently and effectively meeting its policy objectives.

Sections 2.2 and 2.3 below specify the research questions formulated for this workpackage. Section 3 contains the results of a short desk research on the design of the schemes, whereas Section 4 contains an overview and analysis of the country case studies. Conclusions and recommendations are included in Section 6. Details of the case studies are included in the Annex to this report.

2.2 Research questions for task 2.1: concept of tradable certificate schemes Task 2.1 concentrates on examining the characteristics of the certificate trading concept, acting as a point of departure for the review of the existing national schemes in the task 2.2 to follow. Work conducted in task 2.1 includes: a. Assessment of the effectiveness of white certificates in meeting different goals (e.g. climate change,

security of supply, technological development) and possible bottlenecks that may undermine the level of certainty of outcome,

b. Assessment of economic efficiency (cost effectiveness and dynamic efficiency), c. Identifying the determinants of transaction costs and ways to reduce these, d. Monitoring and enforcement requirements. e. Market and marketing opportunities

2.3 Research questions for task 2.2: Review and analysis of existing national and regional white and green certificate

Task 2.2 concentrates on analysing key design issues of existing white and green certificate schemes to understand the factors determining its success or failure. Work conducted includes: a. Creation and framing of demand, market delineation, including the market actors addressed in the

schemes, coverage of markets, unit of overall targets, allocation of targets and additionality of the scheme in line of existing policies.

b. The tradable instrument, including a review of the trading rules and limits in existing schemes and an analysis of the practical reasoning behind such limits and trading rules.

c. Measurement and verification (M & V), identifying the pros and cons of the available M&V options and the probable market reactions.

d. Non-compliance regime, providing an overview of compliance regimes and impacts e. Market and Marketing opportunities

8


3. DESIGN OF THE SCHEME Establishment of any certificate scheme is not an easy task. Choices made on a large number of design elements will strongly influence the success and operability of the scheme. Key issues to be dealt with include target setting, choice of obliged parties, the institutional setting and interaction with other policy instruments, and the operation of the market. This chapter discusses the theoretical background of such design elements. The following chapter provides practical illustrations of choices made in existing and planned white and green certificate system.

3.1 Policy issues White and green certificates are examples of market-based instruments that are used to support respectively energy efficiency improvements and energy from renewable sources on the European internal market. The certificate systems are not a policy instrument in itself, but a means to achieving the objectives set in (packages of) specific policies and measures in a cost-efficient way.

This section discusses the main policy issues affecting the choice and implementation of white and certificate systems. It starts off with an overview of the European policy framework influencing the choice and design of policy instruments. Next, it discusses the main policy objectives identified in white and green certificate systems and the regulation and relevant instruments currently used in the countries operating white and green certificate systems.

3.1.1. Function of white and green certificate systems As said, white and green certificate systems in itself should not be seen as a support measure, but as a means to facilitate the market in meeting the goals specified on energy and renewable energy developments in a cost-efficient way. Market parties that respectively achieve a certain amount of energy savings or produce a certain amount of renewable energy receive an agreed amount of certificates that can either be used for compliance or can be sold to third parties. Certificate schemes are often used in combination with an obligation scheme. Market actors (usually energy suppliers or distributors) are obliged to reach a certain amount of energy saving or renewable energy supply. Target compliance requires submission of a certain amount of certificates that show the amount of required savings or supplies to be achieved. The certificates are used for monitoring and compliance.

A white certificate represents a certain amount of energy saving that has been achieved or is to be achieved during a certain pre-specified timeframe. Certificates can be created from investments in projects that result in energy savings beyond business as usual. The market actor receives certificates for savings achieved, which can be used for own target compliance or can be sold to (other) obliged parties.

A green certificate represents the attributes of a certain amount of energy produced from renewable energy sources. The major characteristic of the system is that electricity produced from renewable energy sources is certified, or guaranteed. The certificates have two main purposes. First, they function as an accounting system to the amount of electricity produced from renewable energy sources, and verify whether demand (voluntary or obligatory) has been met. When tradable, green certificates facilitate the creation of a green certificate market that functions independently from the commodity electricity market.

Green certificates are known by many other names such as renewable energy credits or renewable energy certificates (RECs), tradable renewable energy credits (T-RECs), green tags and green tickets. In this report we have adopted the term (tradable) green certificates (GCs or TGCs). Green certificates may facilitate the sales of green energy products, may be connected to a labelling of such green energy products and can be used for disclosure of consumer information on the sources used for energy

9


production, as required in the Directive on the establishment of the internal market for electricity in Europe. For the latter only a few countries have currently implemented such a requirement and are currently using the guarantee of origin for disclosure.

3.1.2. The European framework The European regulatory environment for both energy efficiency and renewable energy policy has been considerably altered in the past decade. One of the striking elements is the strong role of the European Union in developing the regulatory framework; illustrated by the large set of newly formulated Directives and guidelines and the scope of its regulations formulated in them. Another striking element is the steady movement towards implementation of market-based instruments.

The EU policy framework for energy efficiency policy includes:

• The Directive on Energy End-Use Efficiency and Energy Services (COM (2003) 739 final), aiming at a cumulative saving of 1% annually from energy efficiency measures for final consumers in the domestic and tertiary sectors, industry not covered in the EU-ETS, and transport.

• Directive 2002/91/EC on the energy performance of buildings, among others requiring certification of larger buildings and setting minimum standards for energy performance of buildings

• Directive COM(97)514 final on Combined Heat and Power Production, aiming at doubling the share of electricity production from cogeneration to 18% by 2010.

• Directive 2005/32/EC establishing a framework on Eco-design requirements, specifying conditions and criteria for setting requirements regarding environmentally relevant product characteristics.

• The Green Paper on Energy Efficiency “Doing more with less”, discussing the options to achieve 20% savings in energy consumption by 2020 in a cost-effective way.

• The European Energy Star Programme; a voluntary energy labelling programme for office equipment.

• Energy Labelling of household appliances, aiming at increasing consumer’s awareness on the real energy use of household appliances through labelling schemes.

• Formulation of minimum efficiency requirements to encourage producers of household appliances to improve their product design and therewith lower energy consumption from these products.

The EU policy framework for green energy policy includes:

• The White Paper “Energy for the future” (COM(1997) 599 final), setting a target on doubling the share of renewable energy in primary energy consumption from 6% in 1997 to 12% in 2010.

• The Green paper on the security of energy supply in Europe (COM(2000) 769 final), identifying renewable energy as an important means to lowering dependency on imported energy in Europe.

• The Directive on the promotion of renewable electricity (RES-E Directive) on the internal market, aiming at reaching a 21.6% share of renewable electricity by the year 2010 for the EU-25 and specifying indicative targets for all 25 member states.

• The Communication on the support of electricity from renewable energy sources (COM(2005) 627 final), 7 December 2005.

• The Directive on the promotion of biofuels (2003/30/EC), aiming to increase the share of biofuels in total transport fuels from 0.6% to 2% in 2005 and 5.75% by the year 2010.

• Directive 2003/96/EC on restructuring the Community framework for the taxation of energy products and electricity, specifying minimum tax rates and allowing for tax exemption for among others biofuels.

10


The RES-E Directive requires all Member States to introduce a system of Guarantees of Origin (GoOs) as from 27th October 2003. With this guarantee, producers of renewable electricity can prove that the electricity produced did originate from renewable sources. The same Directive also requires that the different Member States shall mutually recognise each others’ GoOs. Nine EU Member States have now fully implemented this system, all nine from the former EU-151. The other 14 either are in the process of implementation (11 Member States) or have not yet started to implement the GoO (Estonia, Hungary and Latvia). Note that the GoO holds several elements of a certificate system, but is not necessarily identical to it. The RES-E Directive does not require the GoOs to hold all green attributes, and thus it is not required to allow GoOs to be eligible for national support systems. Nor does the RES-E Directive require use of GoOs for monitoring of the indicative target. However, some countries will monitor their target by measuring the amount of GoOs.

3.1.3. Policy objectives Both renewable energy and energy savings meet several high priority objectives formulated within European energy policy. These objectives include: • A clean and sustainable energy supply

o Renewable energy significantly reduces greenhouse gas emissions as well as local pollution related to energy production, and does not contribute to the depletion of resources.

o Energy saving evidently is the simplest and most cost-effective way of meeting greenhouse gas emission reductions and improvement of local air quality.

• A secure energy supply o Renewable energy as well as energy saving reduces the European Union’s dependency on

fuels produced outside of Europe. • Competitiveness and the Lisbon agenda

o Energy saving increases the competitiveness of European industry. o Both energy saving and renewable energy could facilitate creation of many new high-quality

jobs in Europe. o The European Union could benefit from important trade opportunities when maintaining its

prominent position in the production of renewable energy technologies, energy-efficiency equipment, services and technology.

3.2 The certificate system

3.2.1 Organisation of the system Certificates schemes can be quite complicated in terms of operation and definitions. Although this is not necessarily the case, some minimum requirements have to be met to ensure the reliability of the scheme. When setting up a certificate system the following steps have to be organised: • Appoint an independent body that is responsible for issuing of certificates • Provide a clear definition of a certificate in terms of resource eligibility, validity, size, etc • Formulate the ‘rules of the game’: what are the rules to trading, who is responsible for what • Establish a registration system where each certificate and each trade is registered. • Establish independent monitoring and verification system • Formulate clear rules on compliance and in case of a mandatory system set automatic non-

compliance penalties • Organise that each certificate consumed is redeemed, i.e. taken out of the system

1 These are Austria, Belgium, Den mark, Finland, Germany, Italy, the Netherlands, Sweden and the United Kingdom.

11


Figure 1 and Figure 2 respectively present a schematic overview on the organisation of the green and white certificate scheme.

Figure 1 Schematic presentation on the organisation of the green certificate scheme

Supply Demandelectricitymarket

certificate market

Certificate system

Issuing Registration Redeeming

Figure 2 Schematic presentation on the organisation of the white certificate scheme

€obligation

RedeemingTWCs

TradingTWCs

€

IssuingTWCs

Monitoredenergy saving

Authority

Energy supplier

Energy saving project

EnergyConsumer

White Certificate

System

€obligation

RedeemingTWCs

TradingTWCs

€

IssuingTWCs

Monitoredenergy saving

Authority

Energy supplier

Energy saving project

EnergyConsumer

White Certificate

System

3.2.2 Formulation, issuing, registration and redemption of certificates At the start of each certificate system there should be a clear definition of what attributes the certificate exactly holds. As earlier mentioned, the white and green certificates respectively hold the attributes of a certain amount of energy saving and energy production from renewable energy sources. But what are

12


exactly these attributes? Different market participants and other stakeholders often hold very different opinions to this. For white certificates the narrowest view is that a certificate only registers energy savings from projects that result in additional energy savings beyond usual developments. Wider definitions also include the resulting greenhouse gas reductions from the achieved savings, the resulting increase in security of supply, and many other attributes of energy savings. For green certificates the narrowest view is that a certificate only identifying renewable generation and all other environmental attributes such as emission reductions are excluded. Market parties that advocate the wider view defined certificates as holding all environmental attributes. Based upon a clear definition of the attributes of the certificates, the market system should be organised. Each certificate system should define its organisations that are entitled to issuing certificates on the market, the conditions to this issuing of certificates and the rules and conditions to registration of the certificates. Issues to be decided upon in the issuing of certificates include: • What types of projects, in what sectors are eligible to receive certificates? • What is the size of the certificates (i.e. for how much renewable electricity generated or for how much

energy saved will a certificate be issued)? • What information should be registered on the certificate (e.g. location of the project, owner, etc.) • Requirements on the recording of issuance of certificates (f.e. in a central database, and with

requirements on among others the timing of registration) To secure a trustworthy system and avoiding double selling and double counting in the market each certificate should be uniquely identifiable. It should contain standardised information such as a unique certificate number, name of the certificate issuer, identification of the project and project owner, and time of issuing. For green certificates also information is required on the installed capacity and an indication of whether public support has been received. For white certificates also information should be included on the means of monitoring and verification. If the certificates are tradable, each trade should be notified to the organisation that has issued the certificate. Each transfer of ownership of the certificate is recorded in the central registration system. This central registration system should register all trade as well as redemption of certificates. When the certificate owner chooses to use the certificate to fulfill an obligation or otherwise use it to advertise its environmental performances, he needs to redeem the certificate. To redeem the certificate, the issuing body will transfer the certificate to a redemption account, therewith ensuring that the certificate can no longer be transferred or traded.

3.2.3 System costs Every policy instrument has certain costs of implementation. For market based instruments the main cost components are: • Operational market costs, including costs for setting up, monitoring and maintaining the market

system (also called monitoring and compliance costs) • Transaction costs, including costs to obtain information on the market (also called search and

information costs), enter the market, and settlement costs of finalising a trade (also called bargaining costs)

• Measurement and verification costs, including costs for meter reading, auditing and verification.

13


The height of transaction costs are strongly influenced by choices made in the design and operation of the scheme. Transaction costs are generally higher when markets are thin or when trade is mainly done on a bilateral basis. This as relatively little price information is available and costs for searching the best trading partner are higher. The availability of exchanges and other types of markets are another key element in lowering the transaction costs involved in searching and contracting for certificates. Experiences in green certificate markets have shown that transaction costs can be relatively high during the first years of market operation but strongly decline in the years thereafter. The costs for measurement and verification are in most green certificate markets relatively low, as these mainly concern costs of meter reading and auditing and thus are already paid for in the ‘normal’ operation of general electricity market. For white certificates this is not the case. In most systems costs are (or will be) additional to existing costs of operation and thus can be relatively high compared to other market systems. Several studies are ongoing on balancing the exactness of determining real energy savings and the costs for measurement and verification. Several systems have chosen to define several methods for measurement and verification, with different grades of exactness and costs. The choice of M&V method is often pre-described and depending on the complexity of the energy saving measure (see information on M&V methods in Section 3.3 below).

3.3 Measurement and Verification The concept of measurement and verification within the white certificate markets is quite different from that in the green certificate market. In the white certificate market a certain amount of energy or emissions are saved compared to a hypothetical reference scenario. In the green certificate market energy production from renewables can be easily measured (metered or calculated) without specific knowledge of such a reference situation.

Both for green and white certificates internationally agreed guidelines on measurement and verification have not yet been developed. However, a number of standards do exist, as discussed in the sections below.

3.3.1 The European Energy Certificate System On the green certificate market only one system exists that sets an international standard for measurement and verification of green certificate trade. This so-called European Energy Certificate System (EECS) is the key registration system used on the voluntary market for renewable energy. It however aims to become the standard registration system for all types of certificates, either for voluntary or obligatory markets, and not only for green certificates, but also for certificates for energy saving and CHP.

The EECS has been developed in the framework of RECS, the Renewable Energy Certificate System. RECS promotes the use of a standardised system for certification of renewable energy to ensure a reliable operation of energy certificate systems. The EECS has been developed by RECS’ association of issuing Bodies; the organisations appointed for the issuing of green certificates in their home market. The EECS Basic Commitment is the formal statement on the principles and rules of operation of the system, based on harmonised environment, structures and procedures. The Basic Commitment is the minimum common set of definitions and criteria for the creation, issue, transfer and use as evidence of transfer of ownership and eventually removal from the market of Certificates. Subsidiary documents to the Basic Commitment describe technical standards, codes etc. Additional rules for specific geographic domains are contained in Domain Protocols and are supplementary to the Basic Commitment. This Basic Commitment among others describes:

14


• The criteria for issuing of certificates, including the detailed information required being included on a renewable energy declaration and an earmarking indicating whether any public support has been received.

• Agreements on the transfer of ownership of certificates • Agreements with respect to the registration databases, on registration of production devices and

certificates issued. • The criteria on verification, audits and reports, including agreements on dealing with investigations and

modification requests and disputes With respect to verification the Basic Commitment requires: • Each generator to periodically confirm that the claimed production is reflected in the physical meter

reading. • The issuing bodies to arrange ad hoc checks on registered production devices ensure that claimed

production has actually been taken place and assure the validity of certificates issued. • The issuing bodies to monitor their home market and regularly report upon trade within their market as

well as on the functioning of their market. The Basic Commitment so far has only been used for transactions in voluntary green energy markets, but already it formed the basis for governmental market schemes based upon the so-called guarantees of origin. Already seven EU Member States have decided to standardise their systems for the guarantee of origin along the EECS. RECS is currently discussing a further use of EECS with the European Commission, DG TREN.

3.3.2 Standardisations from CEN/CENELEC/ETSI The European Committee for Standardization (CEN) is undertaking several activities to prepare new standards for energy management.

1. First, it has established a working group that is assigned to prepare the new standards required for implementation of the EPBD. The standards cover the uses of energy mentioned in the EPBD - heating, cooling, ventilation systems, hot water and lighting - as well as the calculation method of building's energy use, taking account of the aspects given in the EPBD Annex.

2. Second, together with Cenelec it has set up a joint work group on standardisation of energy management activities and improvement of energy efficiency standardization.

3. Third, it has formulated a project entitled ‘ European Building Performance Directive Concerted Action’ in which they aim among others to support the implementation of common methodologies for calculation of the energy performance of buildings as requested by the EPBD.

4. Fourth, together with Enelec and ETSI it was given a mandate by the European Commission to draw up a comprehensive standardisation programme aiming at producing standards which will assist the realisation of the objectives of the (draft) Eco-design Directive.

The activities of CEN et al have no direct relation to the use of white certificates. That is, they were not started up nor implemented to serve implementation of a white certificate system. However, indirectly the activities show a great deal of interaction to the formulation and implementation of a white certificate system. One of the possibilities would be to combine product standardisation and the standardisation of measuring the energy performance of buildings with the standardisation of measurement of energy savings as required for a white certificate scheme. Note that this would be quite a different approach than the registration of energy savings from individual projects.

15


In the standardisation of the energy performance of buildings two concepts are most discussed:

1. Asset rating, where standards are set for the type of building and its occupation under standard conditions of climate, occupancy, control and management.

2. Operational rating, where actual use of energy is taken into account based on metered data possibly corrected for changes in conditions of climate and occupancy.

The choice of the system will depend on the requirements set on accuracy, reproducibility, the costs for operation of the scheme and registration.

3.3.3 The International Performance Measurement and Verification Protocol (IPMVP) The main protocol currently used to verify energy savings is the International Performance Measurement and Verification Protocol (IPMVP). IPMVP provides an overview of current best practice techniques available for verifying results of energy efficiency projects in commercial and industrial facilities. It may also be used by facility operators to assess and improve facility performance. Energy conservation measures covered in the protocol include fuel saving measures, water efficiency measures, load shifting and energy reductions through installation or retrofit of equipment, and/or modification of operating procedures. Each of the four Monitoring and Verification options defined in the IPMVP is applicable to different types of performance contracts, project values, and risk sharing between the energy service company (ESCO) and the owner. The purpose of defining several M&V options is to allow for variations in the cost and methods for assessing savings. Consequently, the M&V options described within the IPMVP vary in accuracy, cost of implementation, strengths, and limitations. Each of the four M&V options follows the seven generic Monitoring and Verification steps: • Definition of baseline • Definition of energy efficient design and projected savings. • Definition of general M&V approach (i.e. selection from options A-D). • Preparation of project-specific M&V plan. • Verification of installation and commissioning of energy conservation measure or energy efficient

strategies. • Determination of savings under actual post-installation conditions. • Re-evaluation at appropriate intervals. These M&V options are: A. Partially Measured Retrofit Isolation: only the facility systems upgraded or retrofitted are measured

and verified. Some parameters are stipulated, aiming to strike a balance between accuracy (stipulation only for those parameters where potential errors made do not have a significant impact on calculations of energy savings) and costs (stipulation is cheaper than measurement).

B. Retrofit Isolation: only the building systems upgraded or retrofit are measured and verified. No stipulation is used. Measurements

C. Whole Facility: measurement is made at the whole building level. This option compares baseyear performance of the whole facility with post retrofit performance.

D. Calibrated Simulation: savings are determined through simulation of energy use, either at the system level or the whole building level. Simulations are calibrated with hourly or monthly utility billing data and/or end-use metering.

Table 1 lists the four M&V options, the method of calculating energy savings and some of its typical applications.

16


Table 1 Overview of M&V opt ions identified in IPMVP. (source: IPMVP volume I) M&V Option How Savings are

Calculated Typical Applications

A. partially Measured Retrofit Isolation Savings are determined by partial field measurement of the energy use of the system(s) to which an ECM was applied, separate from the energy use of the rest of the facility. Measurements may be either short-term or continuous.

Partial measurement means that some but not all parameter(s) may be stipulated, if the total impact of possible stipulation error(s) is not significant to the resultant savings. Careful review of ECM design and installation will ensure that stipulated values fairly represent the probable actual value. Stipulations should be shown in the M&V plan along with analysis of the significance of the error they may introduce.

Engineering calculations using short term or continuous post-retrofit measurements and stipulations

Lighting retrofit where power draw is measured periodically. Operating hours of the lights are assumed to be one half hour per day longer than store open hours.

B. Retrofit Isolation Savings are determined by field measurement of the energy use of the systems to which the ECM was applied, separate from the energy use of the rest of the facility. Short-term or continuous measurements are taken through the post-retrofit period.

Engineering calculations using short term or continuous measurements

Application of controls to vary the load on a constant speed pump using a variable speed drive. Electricity use is measured by a kWh meter installed on the electrical supply to the pump motor. In the baseyear this meter is in place for a week to verify constant loading. The meter is in place throughout the post-retrofit period to track variations in energy use.

C. Whole Facility Savings are determined by measuring energy use at the whole facility level. Short-term or continuous measurements are taken throughout the post-retrofit period.

Analysis of whole facility utility meter or sub-meter data using techniques from simple comparison regression analysis.

Multifaceted energy management program affecting many systems in a building. Energy use is measured by the gas and electric utility meters for a twelve month baseyear period and throughout the post-retrofit period.

D. Calibrated Simulation Savings are determined through simulation of the energy use of components of the whole facility. Simulation routines must be demonstrated to adequately model actual energy performance measured in the facility. This option usually requires considerable skill in calibrated simulation.

Energy use simulation calibrated with hourly or monthly utility billing data and/or end-use metering.

Multifaceted energy management program affecting many systems in a building but where no baseyear data are available. Post-retrofit period energy use is measured by the gas and electric utility meters. Baseyear energy use is determined by simulation using a model calibrated by the post-retrofit period utility data.

3.3.4 CDM/JI measurement and verification Measurement and verification in white certificate schemes hold many parallels to measurement and verification in CDM and JI projects. In both systems the amount of energy or emissions saved should be compared to a hypothetical reference scenario. Common methodologies should be agreed upon to determine the exact amount of energy or emissions saved on a project basis.

A project design document has to be developed for each CDM project. This PDD contains among others the choice of a monitoring methodology, selected from a set of existing methodologies registered with the UNFCCC or a newly developed methodology. Each newly developed methodology has to go through a thorough review and revision procedure, including members of the CDM Executive Board (EB) and its supporting Methodology Panel, UNFCCC baseline and monitoring methodology review experts and include a public consultation. The PDD has to be validated by an accredited verifier and submitted to the EB. In the implementation phase of the project monitoring reports have to be submitted on the exact amount of emissions reduced, calculated or measured on the basis of the approved monitoring methodology. The monitoring plan should include identification of data to be collected for baseline verification, project emissions, off-site project effects such as leakage, and procedures for quality assurance and quality control to be undertaken with respect to monitoring the data. The monitoring report again has to be verified by an accredited verifier and submitted to the EB.

17


3.4 Creation of demand One of the key elements in certificates system is the creation of demand for certificates. Clearly, when all is left to voluntary demand, the amount of trade in the market, the overall size of the market as well as the prices of certificates will all be much lower than in a market where parties are obliged to purchase certain amounts of certificates. This section discusses the key issues in the creation of demand for green and white certificates.

3.4.1 Target setting Most certificate markets are driven by a mandatory target setting. For an optimal target design the following requirements should be met: • Targets should be set beyond business as usual, where business as usual should be formulated

including achievements of existing framework of policies and measures. • In the target setting it should be clear how achievements are accounted for. In the European

renewable energy markets it has long been unclear whether the indicative targets set in the RES-E directive were production targets or consumption targets.

• Targets should be set for a longer-term horizon. This is especially important for investors in renewable energy or energy saving projects. A minimum of 10 to 15 years is typically required for renewables investors or investors in larger energy saving projects to collect a breakeven return.

3.4.2 Involved actors/sectors Market actors can play different roles in certificate systems. Note that one type of actor can carry out several activities. For instance, an energy distributor develops and finances its own energy efficiency project and uses the savings obtained to comply with its own target. The various roles are defined below. • Generator: development and implementation of projects; creation of certificates • Investor: funding of projects; in return for direct financial return, reduction of energy costs or part of

the certificates generated • Market facilitator: a body that facilitates trade in certificates, for instance an exchange • Bundler: a party that combines reductions from individual smaller projects into a portfolio to either

meet certificate thresholds or create a portfolio for clients. This role could be taken up by ESCOs. • Trader: a party that buys certificates and sells them to its clients, either through a brokering service or

an exchange. • Verifier: a party that carries out the verification of certificates based on standards for verification • Standards developer: a party that develops project selection criteria and/or monitoring and verification

standards to use for screening projects and certificates. • Service provider: a party that provides access to information, tools and services without being active

in creating, verifying, trading or using certificates. • User: the party that is using the certificates, either against a voluntary target or against obligations.

3.4.3 Penalty systems Experiences with market-based instruments provide an important reminder on the importance of penalty systems, monitoring and enforcement. In many systems analysed in the past, the lack of monitoring and enforcement resulted in inefficient or insufficient achievement of policy objectives.

18


Setting the level of non-compliance penalties should be done carefully as the height of the penalties definitely influences market expectations of potential investors and may significantly affect market prices. Theoretically penalties set a ceiling for certificate prices because economic rationality says that obligated parties would pay the penalty when the market prices exceed this penalty price. However, market experiences in for instance the United Kingdom show that there is more to the market than only economic rationality. In the UK ROCs (Renewable Obligation Certificate’s) market non-compliance penalties are collected in a penalty fund and redistributed to those market actors that do comply with the targets set. Therewith, market actors that do not comply pay funds to their direct competitors. This has been one of the reasons leading to market prices sometimes being higher than the penalty price.

Trade on the market does not always occur against a price close to the penalty price. If markets are short – i.e. there is insufficient supply of certificates to cover demand – market prices are usually quite close to the penalty price. However, if markets are long – i.e. there is sufficient supply of certificates on the market – trades may occur at prices well below the penalty price.

3.5 Market issues There is yet very little experience in Europe with white certificate markets and limited experience with green certificate markets. Although several European countries have set up a green certificate market system, it is yet quite far from achieving a single European market. Instead, there exist a wide variety of very fragmented markets in which design, conditions, market actors and prices vary largely. The very few experiences with white certificate markets in Europe already show that each system is based upon different specific national requirements and specific policy objectives. It is therefore no use to draw any comparison of existing market prices and/or make an estimate of future price developments in existing or upcoming markets. This section discusses some theoretical market issues such as trading rules, market transparency and marketing issues.

3.5.1 Trading rules and limits The key elements to be included in the design of certificate markets that affect tradability of certificates are: • Specification of the compliance period. Often obligations for green and white certificate systems are

set on an annual basis, whereas for instance obligations in the EU emissions trading system are set on a multi-annual basis. Specification of the compliance period needs to balance issues such as environmental integrity, environmental effectiveness. Shorter compliance periods in general will increase transaction costs, possibly increase market prices, enhance market liquidity and increase price transparency.

• Lifetime of the certificates. When the certificates have a too short lifetime, market prices may be significantly distorted. Should certificates for instance have a validity of one year, certificate owners that receive their certificates only in November will be faced with an urgent need to find a buyer before the end of the year and will thus be willing to largely drop prices. A longer validity period for the certificates will help stabilize the costs incurred by the obligation, but unlimited lifetime will enhance the possibility of hoarding certificates and could induce market play. It is generally advised to specify a restricted lifetime of a certificate that is at least equal to several target periods.

• Banking/borrowing: decisions whether certificates can be used for compliance in following obligation periods (banking), or whether (part of) current demand may be met with certificates created in the future. Allowing banking and/or borrowing of certificates could have a positive influence on market liquidity and stability of prices. However, restrictions should be set as several studies and limited market experiences have shown that high levels of banking and borrowing might induce hoarding of

19


certificates, lowering of the integrity of the system and in the end non compliance. Possibilities to reduce banking and borrowing are introducing levies to banking and interest rates to borrowing as well as formulating quantitative restrictions to the amount or share of banking and/or borrowing.

• Size of certificates: each certificate system should specify a standard unit and amount that one certificate represents. Determining the size of the certificate will affect operation, prices and tradability of certificates. The smaller the size of the amount of energy saved or renewable energy produced, the higher the administration costs of the system, both for issuing, trading and compliance. On the other hand, when the threshold for one certificate is too high, several technologies will be excluded from the system and tradability will be limited. For green certificate systems this would for instance affect the possibilities for inclusion of solar energy. For white certificate schemes this would affect the possibilities for inclusion of domestic appliances.

• Number of trading opportunities: The availability of sufficient trading facilities is important for the market to be truly liquid. Experiences in European green certificate markets show that most trade is conducted over-the-counter and via a very small number of brokers. The national green certificate markets so far have shown to be too small to allow for a sound operation of an exchange. Several initiatives have been started, but none of the exchanges have really been successful. White certificate markets are yet in their infant stages, but also seem too small to allow commercial operation of exchanges. For both systems this could change when the markets are growing because of international co-ordination, higher targets or inclusion of more market parties.

3.5.2 Market transparency and liquidity Tradable market systems are usually set up to achieve the targeted goals against the lowest price. In order to realise this cost-efficiency, the market needs to have certain levels of transparency and liquidity. Economic theory tells us that a market is transparent if much is known by many about what products are available at what price and where. Liquidity of the market means that it offers sufficient opportunities to trade and that individual transactions have a limited impact on market prices. The liquidity of markets can be identified by the number of active market players, the volumes traded, price volatility, the degree of potential arbitrage, the spread in bids, and the amount of transactions.

Market transparency and liquidity can be enhanced by among others:

• Exchange platforms which publish volume and price of transactions • Broadening the geographic scope of the market (e.g. linking to other systems, allowing for imports and

exports of certificates) • Allowing (limited) banking and borrowing of certificates • Providing certainty on demand (e.g. by formulating both long-term and intermediary targets) • Development of a forward market • Introduction of financial products

3.5.3 Marketing issues Next to purchases due to market obligations, white and green certificates can be bought on voluntary markets. Little experiences exist with white certificate trading and so far no large voluntary purchases have been reported. On the green certificate markets limited voluntary trades exist. On the European market trade most so-called voluntary trades were due to direct financial incentives; relatively little trade has taken place due to marketing reasons.

20


In case green certificates are used for marketing reasons, this includes including branding of products, CSR objectives, and adding credibility to a green and clean image. For marketers it is quite a challenge to communicate a clear and transparent message on the consumer value of certificates.

21


4. CASE STUDIES EXISTING GREEN AND WHITE CERTIFICATE SYSTEMS

This section provides an overview and analysis of national and regional green and white certificate systems, including systems that do no (yet) include tradable certificates, but allow trading of obligations. The section starts with an overview of schemes, followed by an analysis for issues such as the policy objectives formulated in the schemes, the creation of demand for certificates, tradability, transaction costs, etcetera. Detailed country level information is included in the Annex.

4.1 Overview of schemes Table 2 provides and overview of the certificate systems and obligation systems in Europe that are either in operation or planned to start in the coming years.

Table 2. Overview of (planned) certificate systems and obligation systems in Europe.

Certificate system Green White Country Austria GoO system since Jan 2003; tradable Belgium Three regional green certificate systems: Flanders

since Jan. 2002, Wallonia since Jan. 2003 and Brussels since July 2004. On federal level green certificates may only be obtained for offshore wind. The first green certificate is expected for 2007.

Flanders has implemented an energy saving obligation for energy grid companies without tradability of certificates

Bulgaria Planning to implement a TGC system with obligations from 2006/07.

Denmark Planned a scheme to start Jan 2003; scheme now cancelled.

Seriously considering implementation of energy saving obligations, possibly with a TWC system.

France Will start a full TWC system with energy saving obligations in Jan. 2006

Italy Started a TGC system in Jan. 2002 Started energy saving obligation with TWC system in Jan 2005.

Netherlands TGC system in place since July 2001 Planning to start a TWC system in 2006/07

Poland The renewable obligation scheme is combined with a GoO system since Oct. 2005. No formal TGC system but derivates based on the GoO that can be traded at the exchange.

Romania Obligation system with TGC since May 2005. Sweden Swedish Elcertificate scheme introduced in May 2003.

Norway initially planned to join the scheme in 2006, but has recently dedided not to join .

United Kingdom/-Scotland/Northern Ireland

The Renewables Obligation (Scotland) Order defined mandatory obligations with TGCs since April 2002. UK certificates are named ROCs, Scottish certificates SROCs. The (Northern Ireland) Renewables Obligation started April 2005.

United Kingdom Energy Efficiency Commitment (EEC) started April 2002. Trade in obligations allowed; no certificate trade. Preceding system Energy Efficiency Standards of Performance programme (EESoP) ran from 1994 until 2002.

22


Next to these governmental systems, several systems for the voluntary green power market are in place. The RECS – Renewable Energy Certificate System – issues certificates based on an international standard. Certificates are traded among parties having adopted the RECS system. RECS International is active in 14 countries in Europe2.

4.2 Policy objectives As illustrated in Table 2 above, certificate schemes are mostly combined with obligation schemes. These obligation schemes often aim to meet a mix of policy objectives. Clearly an increased share of renewable energy and an uptake of energy saving is the key driver for respectively green and white certificates schemes. Other important policy drivers targeted are increased security of supply (both schemes), greenhouse gas reductions (both schemes), reduction of energy costs (white certificates), increase of employment (green certificates).

Table 3 Policy objectives in white certificate systems

Country Policy objectives Denmark Entire package of energy saving measures should correspond to an average of 7.5

PJ annually during the period 2006-2013. With total energy consumption estimated at 430 PJ in 2013 this would be 1.7% energy saving.

France The national energy saving target is 54 TWh (194 PJ) for the period 2006-2008; with an estimated final energy demand of 6800 PJ in 2008, this represents an energy saving of 1% on energy consumption.

The overall objective of the TWC system is a reduction of 2% of French Energy intensity by 2015 and of 2.5% by 2030 with respect to the present one.

Concerning renewable energy sources; national production of renewable energy will increase from 16% to 21% by 2010.

Great Britain The first phase of the EEC (April 2002 – March 2005) involved a target of 62 TWh (223 PJ). With an estimated energy consumption of 6500 PJ in 2005, the energy saving target is about 1%. The EEC phase two entails an overall saving target of 130 TWh.

Other objectives mentioned: - National Kyoto target to reduce GHG emissions with 12.5% by 2008-2012 - The EEC supports the Fuel Poverty Strategy; at least 50% of the energy savings

have to take place in low-income households. Italy The energy saving target for the first 5 years of application (2005-2009) is 2.9 Mtep

(130PJ), which equals to annual energy savings of 0.5%. Other objectives mentioned: - Contribution to national Kyoto targets and the EU renewable directive - Economic and social benefits, such as reduction of the energy bill and

improvement in energy services - Collective benefits, such as reduction of national energy dependence, reduction

of pollution, better control of demand peaks, improvement of balance between energy demand and supply

Netherlands Projections of the energy savings that can be realised with implementation of a TWC system add up to 65 PJ in 2020; which is an energy saving of almost 2%.

2 These countries are Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Latvia, the Netherlands, Norway, Poland, Portugal, Slovenia, Spain, Sweden, Switzerland, Turkey and the United Kingdom.

23


Table 4 Policy objectives in green certificate systems

Country Policy objectives Austria Hydropower certificate system:

The Electricity Act 2000 (ElWOG 2000), adopted in July 2000 and implemented on 1st October 2001, introduced a certificate system for domestic small-scale hydropower together with an 8% supply obligation.

For other renewables, a general renewables obligation was introduced that should be achieved in addition to the hydropower obligation. However, the obligation system utilising certificates never functioned properly and expired after one year at the end of 2002.

Guarantees of origin: To comply with the EU renewable electricity Directive the Eco Electricity Act/the

Ökostromgesetz (Official Journal BGBl I 2002/244) was introduced; a new support scheme based on feed-in tariffs for RES-E electricity generation together with a system of Guarantee of Origin is established.

The indicative target for eco-electricity in Austria is 78.1% in 2010. The following objectives are formulated in the Eco Electricity Act: - to raise the share of small-scale hydro plants (<10 MW) in total energy

generation to 9% in 2008 and - to increase the electricity generation from eco power plants stepwise with 2%

by 1 January 2004, 3% by 1 January 2006 and at least 4% by 1 January 2008. Belgium EU renewable directive; 6% in 2010.

Targets for RES-E on regional level: - Flanders: 2% in 2005 (31 March), 5.25% in 2010 (31 March) and 6.0% in 2011

(31 March). For CHP different targets are set: 1.2% in 2005, 4.4% in 2010 and 5.3% in 2013.

- Wallonia: 2.9% by 1 January 2002, 5% by 1 October 2004 and 12% by 1 October 2009 (of which 20% comes from CHP)

- Brussels: 2% in 2004 and 2.5% in 2006 Italy EU renewable directive; 25% in 2010.

Increasing consumption of energy produced by renewables, Reducing risks on the stability of energy supply, Promoting employment growth and reducing environmental impacts.

Netherlands The leading driver is the indicative target specified in the EU renewable directive: 9% in 2010.

A target of 10% renewable energy by 2020 has been set with an interim indicative target of 5% by 2010.

Prove of renewable energy supply (cross borders) Poland Meeting targets as set in the Renewable Energy Sector Development Strategy:

- RES in primary energy: 7.5% in 2010 and 14% in 2020 - RES-e in gross domestic electricity consumption: 7.5% in 2010

Additional objectives as formulated in the "Energy policy" chapter of the “Long-term strategy for sustainable development of Poland until 2025”: decrease of demand for coal and lignite, increase of natural gas, petroleum and renewable energy, and an increase of the share of renewable energy in the fuel and energy balance to a minimum of 14% in the year 2020.

Romania National indicative target for 2010: 30% of gross national electricity consumption to be covered by electricity produced by renewable energy sources.

Increase energy independence from imported electricity by getting a wider range of energy sources

Economic and social cohesion Sweden Quantitative target of the Electricity Certificate Act is to increase the production of

renewable electricity by 10 TWh by 2010 compared to the 2002 level of 72 TWh. Achieve the Swedish Kyoto target; reduce GHG emissions to –4% of 1990 level

24


Country Policy objectives Increasing the proportion of renewable energy in the Swedish energy system

Security of energy supply Support the EU directive on RES-E The purpose of the new system is to create competition between different

technologies. Because it is a market-based system rather than feed-in subsidies, it is expected to stimulate cost efficiency.

The Swedish certificate system has also been developed to be prepared on possible international harmonization.

UK & Scotland National target of increasing contribution of renewables as of 2010. In the obligation period 2010-2011, 10.4% of the electricity supplies should come from renewable energy sources.

The Renewables Obligation is a significant part of the UK government’s Climate Change Program, aimed at meeting national and international targets for the reduction of greenhouse gas emissions.

Security of energy supply

4.3 The certificate system

4.3.1 Issuing of certificates In most markets the official body responsible for issuing of certificates – and mostly also registration of transactions and redemption of certificates – are dedicated governmental institutes. Country information listed below show that either the TSO or the market regulator is appointed to conduct these tasks.

Table 5 Issuing of certificates in white certificate systems

Country Issuing body Denmark Not specified yet France DRIRE (Regional Directorate of the Industry, Research and Environment of Ile-de-

France) issues white certificates. Great Britain The EEC is not a tradable certificate based scheme; no issuing or redemption as

such takes place. Italy AEEG, the Italian Regulatory Authority for Electricity and Gas, manages the WhC

system. Netherlands Not yet indicated. Most likely it would be CertiQ; the body currently responsible for

issuing Guarantees of Origin (formerly green certificates) and CHP certificates.

Table 6 Issuing of certificates in green certificate systems

Country Issuing body Austria Hydropower certificate system: small hydro producers were entitled to issue the

certificates themselves. Guarantees of origin: The energy regulation office, Energie Control GmbH,

supervises the issuing of guarantees of origin. Energie Control is also the issuing body for RECS in Austria.

Belgium Flanders: The VREG (Flemish office for regulation of electricity and gas markets) is the issuing body for green certificates in the Flemish region. The VREG is also responsible for M&V and control.

Wallonia: CWAPE (Commission Wallone pour l’electricite), the regional regulator, is the issuing body for green certificates.

Brussels: IBGE-BIM is the regulator in the Brussels region and issues green certificates.

Italy The Transmission System Operator (GRTN) manages the Green Certificates

25


Country Issuing body system.

Netherlands CertiQ manages the system on behalf of the Dutch grid operator TenneT. Poland The president of the energy regulator issues Guarantees of Origin Romania The transmission and system operator, CN Transelectrica SN, issues certificates on

a monthly basis. Sweden The Swedish National Grid Company (‘Svenska Kraftnät’) issues the certificates

based on metered values from eligible electricity production. UK & Scotland The regulator Ofgem issues ROCs.

4.3.2 Measurement and verification Table 7 and Table 8 provide an overview of the measurement and verification systems in place in the white and green certificate markets. As mentioned in the previous chapter, M&V in green certificate systems are often linked to existing meter reading and auditing schemes that are in operation in the ‘normal’ electricity markets. Costs for measurement and verification in these schemes are therefore relatively low and often not separately registered. For white certificate markets the market moderators have chosen different approaches, but most of them rely on ex-ante specified default saving values.

Table 7 Measurement and verification in white certificate systems

Country Measurement and verification system in place Denmark Not specified yet France ADEME (French Agency for Environment and Energy Management) and ATEE

(Association Technique Energie Environment) are in charge of setting methodologies for calculation of the achieved savings.

Savings are validated by the French High Council for Energy. Great Britain The regulator OFGEM assesses and approves all measures suppliers take

DEFRA (Environment Ministry) developed a ‘Target-setting Model’ for ex-ante determining the energy savings attributed to measures

Italy AEEG, the Italian Regulatory Authority for Electricity and Gas, uses three evaluation approaches: Default value: energy saving is defined ex-ante Engineering approach: on-field measurement Energy monitoring plan

Netherlands No information provided yet on measurement and verification; the Dutch government is currently detailing the scheme

Table 8 Measurement and verification in green certificate systems

Country Measurement and verification system in place Austria Feed-in tariffs: Utilities must document calculations and information concerning the

disclosure and a chartered accountant must verify this documentation. Belgium Flanders: Two separate GC systems exist for renewable electricity and CHP.

- Produced “green” electricity 1 MWh RES-E, based on meter reading. - For CHP 1 MWh primary energy saved, based on calcultions. Certificates are accredited, based on measurement info provided by a producer or grid operator. The Flemish Regulation Entity for the Electricity and Gas market (VREG) is responsible for measurement and verification.

Wallonia: M&V is based on calculations with standard factors on avoided CO2 456 kg CO2-emission avoided (covers both RES-E production and CHP). Annual verification is conducted by a certified verification body or by CWaPE.

Brussels: As in Wallonia M&V is based on calculations with standard factors on avoided CO2.The factor differs though, as the standard mix of electricity production

26


Country Measurement and verification system in place varies between regions 217 kg CO2- emission avoided (to cover both RES-E production and CHP).

Italy Produced “green” electricity based on meter reading (kWh). The system of Green Certificates foresees a yearly check of obligation fulfilment.

Every year (before March 31) obliged subjects have to transmit to GRTN Green Certificates related to the previous year.

Netherlands Produced “green” electricity based on meter reading (kWh). Grid operators provide CertiQ with electricity production data, which they obtain from

the certified metering companies. Poland The Polish regulator URE (Energy Regulatory Authority) is responsible for

verification. Each installation needs to have a licence. This information is checked on a regularly basis, without a visit to the plant location.

Romania Produced “green” electricity based on meter reading (kWh). Measurement of production is performed by the distribution company which owns the

grid at which the RES-E units are connected. Sweden Produced “green” electricity based on meter reading (kWh). UK & Scotland Produced “green” electricity based on meter reading (kWh).

4.3.3 Monitoring and control In most existing green and white certificate markets the market operator responsible for issuing and redemption of certificates is also charged with monitoring and control of the system. Table 9 and Table 10 list the monitoring and control system in place and the parties charged with these tasks in respectively the white and green certificate systems.

Table 9 Monitoring and control in white certificate systems

Country Monitoring and control system in place Denmark Not specified yet France The Ministry of Industry will verify that energy saving measures are properly

implemented. Every three years the State will publish a report about the functioning of the system and transactions performed.

Great Britain The regulator OFGEM developed administrative procedures (EEC scheme spreadsheet) to monitor delivery and supervise supplier’s progress

Registration of the energy savings is done by OFGEM Italy AEEG, the Italian Regulatory Authority for Electricity and Gas, executes sample

controls Netherlands Not specified yet

Table 10 Monitoring and control in green certificate systems

Country Monitoring and control system in place Austria • Guarantees of Origin: Utilities must document the calculations and information

concerning the disclosure and a chartered accountant must verify this documentation. The energy regulation office, Energie Control GmbH, supervises the issuing of guarantees of origin. From 1st July 2004 all electricity suppliers should have standardised the presentation of their energy mix on the electricity bills.

Belgium Flanders: A certified bureau has to visit the energy-installation and has to deliver an attestation that renewable energy is being produced at the site (only installations producing 100.000 kWh electricity a year). At the end of the year the difference between the amount of electricity sold for the year and the amount for which a green certificate was asked for, is checked by the VREG.

27


Country Monitoring and control system in place Wallonia: The regulator checks the quota obligation every three months and

publishes information on green certificates Italy GRTN verifies if electricity from renewable and GCs transmitted by obliged subject

equal or exceeds subject’s burden. Netherlands Grid operators provide CertiQ with electricity production data, which they obtain from

the certified metering companies. The metering company has to verify the data contained in metering reports drawn up

by the producer in line with the metering protocol. Each metering report contains all the metered data for a given calendar month.

Poland Monitoring is performed by the regulator URE (Energy Regulatory Authority) Romania Monitoring is performed by the regulator ANRE Sweden All quota obligors must submit a declaration to the Swedish Energy Agency by 1

March each year specifying electricity consumed or invoiced during the previous year.

On-site inspections and requirements of the plants UK & Scotland Audits of generating stations: during the 2nd obligation period Ofgem carried out 30

audits of accredited generating stations. Audits of suppliers: during the second obligation period Ofgem carried out 2 audits

among electricity suppliers.

4.4.4 Eligibility of technologies and measures Whereas initially one would not expect too much variation between different national green and white certificate schemes in terms of coverage of technologies and measures, practice proofs us wrong. In green certificate markets this is somewhat remarkable as the European Union has adopted a common definition of what is regarded renewable energy. However, national governments wish to express national policy objectives in the target setting. This is specifically illustrated by restriction on the inclusion of large-scale hydro power and several biomass and waste streams. On the white certificate markets variations in coverage of technologies and measures mainly arise from differences in the sector coverage of the schemes and again from political objectives. This is for instance illustrated on the UK market where fuel poverty alleviation is a strong political objective within the EEC scheme. Table 11 and Table 12 list the eligibility of technologies and measures in respectively the white and green certificate systems.

Table 11 Eligibility of technologies and measures in white certificate systems

Country Eligible technologies in the white certificate system Denmark No decision made on TWC system; no specification on eligibility of technologies yet France All energies (including fuel) and sectors (including transports) are eligible.

Installations covered by the EU-ETS system are excluded. Currently about 30 standardised measures in residential/tertiary sectors, about 10

standardised measures in industry and about 5 standardised measures in transport are in course of definition (See annex for a list of selected measures)

Great Britain Eligible technologies cover measurements in the residential sector: Cavity wall insulation Loft insulation, top-up Fridge saver-type programme Condensing boilers Appliance replacement CFL – first or extra light bulbs Tank insulation, new Tank insulation, top-up

NB: this is an ‘open’ list of measures Italy Eligible energy efficiency measures are grouped in 14 categories that cover

28


Country Eligible technologies in the white certificate system typologies ranging from electric motors to education, information and training.

AEEG developed data sheets for the energy saving calculation of projects employing the ‘default approach’ or the ‘engineering approach’. (See Annex for an overview of selected measures)

Netherlands Not yet specified

Table 12 Eligibility of technologies and measures in green certificate systems

Country Eligible technologies in the green certificate system Austria Hydropower certificate system: small-scale hydropower plants up to 10 MW.

Feed-in tariff: RES-E sources small scale hydropower (<10MW), wind, biomass, biogas, landfill gas, small PV (<15MW) and geothermal energy.

Belgium Flemish region: Wind, small hydro (<10MW), wave energy, geothermal energy, biomass or solar PV. CHP installed before 1.1.2002 does not obtain certificates.

Wallonia: RES-E sources and CHP based on avoided CO2 emissions Brussels: Wind, small hydro (<10MW), wave energy, geothermal energy, biomass or

solar PV and CHP. Italy Wind turbines, biomass plants (including waste incinerators), solar power plants,

hydropower plants, geothermic sources, tides, undulating motion. The renewable energy plants must be newly built, re-powered or recommitted after April 1999 or have to (partly) use ‘new’ energy (from biomass and waste).

Netherlands Wind turbines, biomass plants (including waste incinerators), solar power plants, hydropower plants. CHP plants will receive CHP certificates, but for Dutch CHP producers only and the certificates are not tradable.

Poland Renewable energy sources: wind, PV, geothermal energy, wave-, stream- and tidal energy, energy from waterfalls in the rivers, energy from biomass, landfill gas, biogas and sludge.

Romania Only wind, biomass, solar and small hydro producers (below 10 MW, commissioned or refurnished before or in 2004) can receive green certificates.

There is no geothermal electricity generation in Romania (only heat). RES-E generation license is issued to power units with installed power higher than

250 kW. Sweden The types of renewable energy technologies (RETs) that are eligible for gaining

certificates are: wind power, solar energy, geothermal energy, biofuels (including ‘peat’ since April 2004), wave energy (including tidal energy) and hydro power: − Smaller plants –units with installed capacity up to 1500 kW- − Increase of production from existing plants – units > 1500 kW- − New plants

UK & Scotland Wind, solar, thermal, wave and tidal, certain types of hydroelectric stations and biomass

Co-firing of biomass and fossil fuels is eligible under the obligation and only the portion of energy derived from the biomass is considered for granting of ROCs

Eligible stations are: - stations built from 1 January 1990 onwards - new and refurbished hydroelectric stations up to 20 MW

4.4.5 System costs With relatively few practical market experiences, little information is known on the costs of operation of the scheme, transaction costs and the costs of measurement and verification. This holds especially for the white certificate scheme as there yet has not been a system in place long enough to allow for a proper evaluation of the scheme. The only practical information available comes from experiences on the UK

29


market, which does not include actual trade in certificates and therefore only provides costs of operation. On the green certificate markets multi-year experiences have been gained and costs for specifically market transactions are regularly published. Table 13 and Table 14 provide an overview of practical information obtained on the system costs in respectively the white and green certificate markets.

Table 13 System costs in white certificate systems

Country System costs Denmark No trade yet, so no information available France No trade yet, so no information available Great Britain Overall administration costs of OPGEM for administering the programme accounted

for ₤ 1 million Italy Information not available Netherlands No trade yet, so no information available

Table 14 System costs in green certificate systems

Country System costs Austria No information available Belgium Flemish region: No costs for issuing or transaction of certificates. The VREG

(internet) database can be used without a fee (producers have to be registered). Wallonia: no information available

Italy No information available. Netherlands Producer: EUR 25 + EUR 25 for each calendar year.

Aggregator (intermediary who acts for the producer and the trader): EUR 750 + EUR 750 for each calendar year.

Per trader account: EUR 750 + EUR 750 for each calendar year. If aggregators and traders have more than 50,000 MWh of transactions at the end of the calendar year, an additional fee is applicable of EUR 1750.

Fee per certificate transaction: EUR 0.01 per MWh (charged to the purchaser’s account).

Fee for redeeming EUR 0.074 per MWh (charged to the trader). Due to the unexpected high volumes of created, transferred and redeemed

certificates an income-surplus was created. The contracts mention the allowed maximum surplus. In order to lower the surplus as soon as possible a rebate of 36% on transaction costs is set for the coming period.

Poland Administration costs so far are just 5 PLN for application to issue a GO. The administration costs of connected activity on PolPx are published on

www.polpx.pl (Polish Power Exchange) Romania There is a small fee for producer license and no fee for priority production.

The fee for the producer is composed by 3 components: 1. A tariff of 1225 lei (ca. 3€ct) paid by the company for at the beginning of the process for license obtaining. The tariff is set by ANRE (Romanian Electricity Authority), 2. A tariff for the production license according to the company’s forecasted turn-over for the current year. This tariff is 0.06% from the forecasted turn-over. 3. A tariff of 16 lei (0.004€ct) for each MW installed capacity, paid by the company at the moment of license granting. From this amount ANRE subtracts the amount of 1225 lei and the company will pay the difference. OPCOM charges a fee for participation on the green cert market, consisting of two components: 1. the fee for registration to the market – a fixed fee 2. the fee for market administration. This fee is a percent from the number of green certificates traded (sold/bought) by each participant on the centralized market. Administrative costs for transaction and redemption are not known yet, since this is

30

http://www.polpx.pl/


Country System costs the first year of commitment.

Sweden Per transferred certificate a fee of 0.05 SEK (0.5 €ct) is paid by the seller ‘Kontoavgift’: It is calculated on the highest number of certificates that has registered

on the account the previous quarter, the fee is SEK 0,30 (3 €ct)per certificate ‘Administrative fee’: This is applied if the actor does not use Svenska Kraftnät’s

website system for administration or related issues. Then, the charge is 100 SEK (11€) for the use of direct Svenska Kraftnät’s administration service.

In addition, Svenska Kraftnät also has the possibility to charge all actors 200 SEK/per year (21.5€) for using the website system. This has not happened yet.

UK & Scotland No information available

4.5 Creation of demand

4.5.1 Obliged parties Electricity and gas suppliers are the parties faced with an energy saving obligation in most of the existing and planned white and green certificate schemes. Italy is the exception to the rule where energy and gas distribution companies are the obliged party on the white certificate market and producers and importers of electricity are the obliged party on the green certificate market.

Table 15 Creation of demand in white certificate systems

Country Creation of demand Denmark Not final decision yet France Legal persons that sell natural gas, GPL, heat or cooling to stationary applications

(threshold of >0.4 TWh/year is discussed). Legal or natural persons that have sold domestic fuel (threshold of > 5000 litres is

discussed). Great Britain Electricity or gas suppliers with more than 15,000 clients are subject to the target.

OFGEM is responsible for the apportionment of the overall target among obliged parties.

Italy Distributors of gas and electricity with more than 100,000 clients (as from 31.12.2001)

Netherlands Electricity and/or gas suppliers; to date no final decision has been published

Table 16 Creation of demand in green certificate systems

Country Creation of demand Austria Hydropower certificate system: Obliged actors are electricity suppliers.

Guarantees of origin: Electricity companies supplying end consumers are obliged to disclose the production sources of the electricity they sell on energy bills.

Belgium Flanders: Obligatory targets have been put upon electricity suppliers. Wallonia: Obligatory targets have been put upon electricity suppliers.

Italy Obliged actors are producers and importers of electrical energy from non renewable sources.

From 2000 energy producers and importers have to put into the Italian grid an amount of renewable energy that equals at least 2% of total of energy produced and imported as from 2000. From 2004 to 2006 a 0,35% annual increase of the 2% obligation.

Netherlands No obligations. The Netherlands has a voluntary market for green energy (in the past stimulated by tax-exemption, currently by a subsidy on green energy).

Poland Electricity suppliers are the obliged actors

31


Country Creation of demand Romania Electricity suppliers are the obliged actors Sweden Consumers are the obliged actors under the Swedish TGC scheme. Electricity

suppliers are responsible for meeting their customer’s quota obligation. UK & Scotland Electricity suppliers need to fulfil the obligation. The obligation is on electricity

supplies to customers in the UK. Supply to transmission connected customers is not subject to the Renewables Obligation.

4.5.2 Sector coverage

Table 17 Sectors covered in white certificate systems

Country Sectors covered in the system Denmark Not yet specified France All energies and all sectors are eligible; including fuel and transports, excluding

installations covered by the EU-ETS Great Britain Residential sector Italy All energy end-use sectors (plus intermediate uses in the gas sector). At least 50%

of the target has to be achieved via a reduction of electricity and gas end-uses. Netherlands Residential sector In the green certificate systems the sectors covered are always the renewable energy production industry.

4.5.3 Compliance period and rules of transfer Another element that illustrates the variation in certificate schemes is the compliance period and rules of transfer of certificates from one compliance period to the next. With each country choosing its own set of rules it is clear that an international market is still far away. Table 18 and Table 19 provide an overview of the choices made in individual system.

Table 18 Compliance period in white certificate systems

Country Compliance period and rules of transfer Denmark No information available yet France At the end of the first three years (2008) the obliged parties have to submit a quantity

of certificates corresponding to their obligation. Great Britain At the end of each three years (March ’05 and March ’08) individual targets should

be achieved. Energy suppliers report to OFGEM each quarter. Suppliers that exceed their individual targets during EEC1 can add these excess

savings to their individual target of EEC2. Italy Each year AEEG verifies the correspondence of the value of redeemed white

certificates with the grid distribution company’s burden. After the obligation period of five years, 50% of the target should be achieved. In

case of non-compliance the grid distribution company is allowed to compensate for the residual quota during two successive years.

Netherlands No information available yet

Table 19 Compliance period in green certificate systems

Country Compliance period and rules of transfer Austria Hydropower certificates: The certificates had a uniform lifetime of two years and the

commitment period was done on an annually and semi-annually basis depending on

32


Country Compliance period and rules of transfer the federal province. Banking over some commitment periods is possible. No borrowing was foreseen, but some flexibility was brought in by a tolerant “grace period” of 2 to 4 weeks.

Guarantees of origin: The compliance period for guarantees of origin is one year. Belgium Flemmish region: Certificates are issued on a monthly basis and suppliers have to

comply every year with the imposed obligation. Electricity suppliers have to deliver certificates to the VREG. Electricity suppliers can save certificates in order to offer them in a later year (a certificate is valid for 5 years).

Wallonia: Every four months certificates are issued and submissed. A certificate is valid for five years.

Italy Certificates are valid for one year after being issued and banking is allowed for two years as from their emission date.

Netherlands Certificates are valid for one year after being issued. No compliance period (as no obliged actors).

Poland The compliance will be checked by the regulator at the end of the first quarter of the following year.

There is no time limit for validity of GOs. Romania Certificates are valid for one year after being issued.

Excess certificates can be used in the next year. Sweden The overall compliance period runs from 2003 to 2010.

Every year producers can redeem certificates at a guaranteed price. Certificates are valid for an unlimited period of time. The certificate remains valid as

long as no supplier/customers use it for meeting his quota obligation or transferring it to the RECS system.

UK & Scotland Each obligation period is from 1 April till 31 March. Banking of ROCs generated in the previous year and use them to fulfil the current

obligation is allowed till a maximum of 25% of the current obligation. Borrowing ROCs from future generation is not allowed.

4.5.4 Penalty systems Penalty setting seems to be one of the most difficult elements in the design of a certificate system. Often this is one of the last details set before the systems take off; in some cases (e.g. the green certificate market in Poland and the white certificate market in Italy) operators have chose to start operation of the scheme without the details of penalties being known. The type of penalties ranges from an explicit price to a percentage of the maximum market prices and a percentage of the non-compliant party’s turnover.

Table 20 Penalty systems in white certificate systems

Country Penalty system in place Denmark No decision made on TWC system; no penalty defined yet France The penalty will be 2 €ct/kWh.

If necessary incentives campaigns to stimulate the purchase of certificates will be promoted.

Great Britain Penalties are set by OFGEM and could be up to 10% of total turnover Italy Penalties have not been explicitly set. The regulatory framework specifies that

penalties will be established and applied by the Regulator “proportional to and in any case greater than the investment needed to compensate the non-compliance”.

Netherlands No final decision made on TWC system; penalty not yet defined

33


Table 21 Penalty systems in green certificate systems

Country Penalty system in place Austria Hydropower certificates: Equalisation levy on the provinces’ level for those who

cannot prove the 8% obligation. The equalisation levy varied between 3.91 ct/kWh for Styria to 1.01 ct/kWh for Vienna.

Belgium Flemish region: Those suppliers who fail to reach the target have to pay a fine of 75 € per green certificate missing in 2003, 100 € in 2004 and 125 € thereafter. The penalty revenues are put into a renewable energy fund.

Wallonia: the penalty for non compliance is set at 100 € for the year 2003. Italy For GCs non compliant subjects are obliged by AEEG (Italian Regulatory Authority)

for Electricity and Gas to pay a sanction corresponding to 1.5 times the price3 of a number of GCs equivalent to the quota of non-fulfilment.

Netherlands Not relevant. Voluntary system. Poland There is a so-called ‘substitute fee’ of 240 PLN/MWh (appprox. 60 Euro/MWh), the

money from which go to the Environmental Fund. A penalty is specified proportional to the quantity of non-purchased energy and an

average annual price. Romania The penalty is calculated based on the market price of certificates in the year of non-

compliance. The will pay to the TSO the maximum trade value of the green certificates they were unable to buy. This value is set up by ANRE regulations.

Sweden Parties that do not meet their obligation are charged with a penalty fee. This accounts for 150% of the average certificate price of the previous period. The penalty for the year 2004 was set at SEK 175 per certificate4. For the year 2005, the fee is SEK 240.

UK & Scotland Imposing surcharges on late payments should force suppliers to make their payment (by means of producing ROCs or paying the buy-out price) on time. The surcharge rate on late payments to the buy-out fund is 5% over the Bank of England base rate.

For 2005/2006 the buy-out price is £32.33 per MWh. The height of the buy-out price floats with the Retail Prices Index.

4.6 Market issues

4.6.1 Rules of trade The following two tables specify the rules and limits to trading in the green and white certificate systems in operation in Europe.

Table 22 Trading rules and limits in white certificate systems

Country Trading rules and limits Denmark No decision made on TWC system; no trading rules defined France De body of state will stimulate gradual increase in the exchange of certificates and

will publish a list of potential sellers at the end of the first period. The average price will be regularly published from the responsible of the national

register of certificates. The upper limit for the price of certificates is established at 0.02 €/kWh.

Great Britain Both energy savings and obligations can be traded Energy savings or obligations that are traded have to be reported to OFGEM

Italy White certificates can be bought on the market or via bilateral contracts Netherlands No decision made on TWC system; no trading rules defined

3 The price is evaluated taking the previous year as reference 4 1 Euro = 9.3 Swedish Krona (SEK) – August 9th 2005.

34


Table 23 Trading rules and limits in green certificate systems

Country Trading rules and limits Austria Guarantees of origin: Guarantees of origin can be traded separately from the

electricity. GOs are compatible to the RECS scheme. Some electricity companies already participate in RECS: E&T Energie Handels-GmbH, EEVG - Entsorgungs- und Energieverwertungs-GmbH, Energie AG, Energie-Control GmbH (issuing body), Linz Strom GmbH, TIWAG.

Belgium Flanders: Producers, suppliers and traders can buy and sell certificates. The Flemish system only accepts certificates originating from production plants within the Flemish region. Since 2003 foreign production is eligible. Trades from outside Flanders can be used for selling “green power” to consumers in Flanders.

Wallonia: Certificates issued by another Belgian region are automatically accepted if reciprocity. Certificates issued by another country are accepted if they are mutually recognized.

Italy The GC market actors are allowed to exchange GCs through bilateral contracts (private GCs only) or on the market (both private GCs and GCs generated on behalf of GRTN) called Power Exchange and organised by Electricity Market Operator (GME).

Netherlands No specific restrictions; all producers of renewable energy that are accepted by CertiQ.

Poland Trade on PolPX will be possible as of 1 October 2005. Romania A centralised market exchange for green certificates will be organised once per

month by the market operator OPCOM. There is also a possibility of bilateral OTC agreement contracts.

Sweden Every trade has to be reported to the Swedish National Grid company The system is closed so there cannot be anonymous trades The Swedish system allows voluntary ‘quota obligators’

UK & Scotland The majority of trades is done on a bilateral basis and there is few trading for speculative purposes.

4.6.2 Trading statistics There is yet no single green or white certificate market in Europe. Instead, there are a variety of fragmented markets, in which prices vary considerably. Prices are mainly determined by the penalties or maximum prices specified on the national markets. Prices on the pure voluntary market have been very low.

Table 24 Statistics on trade in white certificate systems

Country Trading statistics Denmark No decision made on TWC system; no trading occurred yet France To date no trade occurred Great Britain As a result of EEC1, very little trading activity of savings and obligations has been

seen so far. Up to November 2004 there was only one trade of obligation between suppliers

reported. Italy White certificates are tradable via bilateral contracts or in a specific market organised

and administered according to rules set out jointly by AEEG and the Electricity Market Operator.

The white certificate market did not start properly yet. Netherlands No decision made on TWC system; no trading occurred yet

35


Table 25 Statistics on trade in green certificate systems

Country Trading statistics Austria Hydropower certificate system: In 2002 a significant surplus of 3.725.304 certificates

was given. RECS certificates: In the period from 1 Dec. 2001 to 31 Dec. 2004 following

transactions of RECS certificates were made: − Issued: 5.462.081 − Transferred: 433.430 − Redeemed: 1.274.996 − Exported: 386.031 − Imported: 1.750.501

Belgium Flemish region: Volume of trade and average price. Period: 01/01/2002 - 31/03/2003 - volume 94.645, average price 73,85 Euro Period: 01/04/2003 - 31/03/2004 - volume 155.713, average price 91,18 Euro Period: 01/04/2004 - 31/03/2005 - volume 226.505, average price 109,01 Euro Period: 01/04/2005 - 30/06/2005 - volume 45.986, average price 108,79 Euro

Wallonia: price in 2003 was 85.24 Euro. In 2004 700,000 green certificates were issued in Wallonia at an average price of 91.87 Euro.

Italy GCs trading started in 2002.In 2002 demand of GCs from the 35 obliged actors amounted to 3.23 TWh and the offer was of 0.9 TWh. The residual amount of 2.33 TWh was covered with 23,300 GCs emitted by GRTN on its behalf. In 2003 demand from 42 obliged actors reached 3.46 TWh, while the offer was of 1.3 TWh. The residual amount of 2.16 TWh, corresponding to 21,600 GCs, was covered with GRTN GCs.

The value of GRTN GCs is determined on the basis of the difference between the average cost of the energy generated by CIP 6/92 plants and its sale price on the market. In 2002 and 2003 this value was fixed at 84.10 €/MWh and 82,40 €/MWh respectively. In 2004 the value was 97,39 €/MWh. In 2005 market prices for trades at the Italian Green Certificates Market (GME) were approx 115 €/MWh.

The value of private GCs price is agreed with bilateral contracts or on Power Exchange market on the basis of the price of the last GC necessary to comply with the demand (marginal price).

Netherlands Since 2001: Issued certificates 32 TWh, Imported 11TWh, Exported 17TWh, Redeemed 38TWh, Non transferable 0.1TWh, Expired 2.3 TWh, Withdrawn 0.2TWh.

Dutch annual green energy (GoOs) production: about 4 TWh, Dutch annual green energy (GoOs) consumption: about 9 TWh.

Since beginning of 2005 the price of a GoO lies around 20-25 eurocent/MWh. Price will remain in this range in the coming period, unless country obligations will be linked completely (creating real shortages) and certificates systems will be fully harmonised.

Poland No trading has occurred so far Romania No trading has occurred so far, only the minimum and maximum prices for 2005

have been published by the regulator: Minimum market price: 102.2 RON/GC (approx. 29 €/MWh) Maximum market price: 153.3 RON/GC (approx. 44 €/MWh)

Sweden Issued: 23,365,930 certificates have been issued (August 18th 2005) Redeemed: 11,322,336 (2004: 3,489,984 ; 2005: 7,832,352) (August 18th 2005)

certificates have been redeemed Traded: 26.8 million certificates have been traded (August 18th 2005) During 2003 there was a rapid escalation of the price, going from around 17.20 to

25.81 EUR per certificate. Prices reached a peak of 26.88 EUR at the beginning of 2004 followed by a rapid fall that brought the prices around 21.50 EUR in April-May 2004.

36


Country Trading statistics In 2005, prices have been within the range of 21.50 – 23.66 EUR per certificate.

From 18th August 2004 to 18th August 2005, the average price is 24.77 EUR. UK & Scotland Issued 2002-2003: 5,583,560 ROCs and SROCs

Issued 2003-2004: 7,546,787 ROCs and SROCs The value of a certificate can be estimated as follows (theoretical value, calculated

ex-post): − 2002-2003: 1 ROC/SROC is £45.94 (approx. 73.1 EUR) under the RO and

£53.55 (approx. 85.2 EUR) under the ROS. − 2003-2004: 1 ROC/SROC is £53.43 (approx. 78.1 EUR) under the RO and

£54.21 (approx. 78.4) under the ROS. =

Prices on the voluntary markets have been rather low in the past year. On average the price in 2005 for GoOs based on the EECS standard was 0.20 Euro per MWh.

4.6.3 Market liquidity As explained in the previous chapter, market exchanges and publication of information on buyers, sellers, prices and conditions all are means to support liquidity in the market. As the individual markets are all rather small, it is clear that a profitable operation of commercial trading platforms will not be easy. Table 26 and Table 27 provide an overview of the means in operation to support market liquidity on the white and green certificate markets.

Table 26 Means to support market liquidity in white certificate systems

Country Means to support market liquidity Denmark No decision made on TWC system; market has not started France The market has not started yet. Measures to support market liquidity include

publication of the list of sellers and publication of average prices. Great Britain The system is not really a TWC system and trade rarely occurs. No measures are

taken to support trade. Italy The system does not include any measures to support market liquidity. Netherlands No decision made on TWC system; market has not started

Table 27 Means to support market liquidity in green certificate systems

Country Means to support market liquidity Austria Hydropower certificates: E-control, the regulator for the Austrian electricity and gas

market, set up a registry for the small hydropower certificates. Guarantees of origin: The registry is further developed by E-control to administrate

the guarantees of origin on a voluntary basis. This registry is not a marketplace, but operates more like a bank, which administers the certificate amounts of the involved actors.

Belgium Flanders: The VREG publishes potential buyers and sellers of certificates on their website. Potential buyers and sellers of certificates are announced on the website of the VREG.

Wallonia: no information available Italy The GC market actors are allowed to exchange GCs through bilateral contracts

(private GCs only) or on the market (both private GCs and GCs generated on behalf of GRTN) called Power Exchange and organised by Electricity Market Operator (GME).

Netherlands End 2004, NewValues starts trades of green certificates on CertiChange, a Dutch platform. Most trades are still bilateral and OTC. After one year of operation this trade platform stopped business.

37


Country Means to support market liquidity Poland The Polish Power Index is responsible for the registry of GOs and the organisation of

trading platforms for GOs. On the Polish power exchange data on volumes and prices can be found

(www.polpx.pl). Romania OPCOM organises green certificate platforms on a monthly basis.

There are possibilities for bilateral trade of certificates. Sweden Specialised brokers act on the market, such as Greenstream Network, Natsource,

Montel, ICAP and SKM. In the spring of 2004, Nord Pool introduced a spot-product with a related financial

settlement UK & Scotland Ofgem publishes the number of ROCS issued, but has no responsibility in relation to

traded ROC market or ROC pricing (www.ofgem.com). NFPA publishes details of the prices obtained for ROCs issued in respect of

electricity generated under a Scotland Renewables Obligation (CRO) contract in auctions on its website www.nfpa.com.

Platts Power UK publishes predicted ROC prices on its website www.platts.com. One other organisation that publishes prices is Natsource. ROCS cannot be cashed in without a quota obligation, thus limiting the role of

traders that have no direct access to end consumers.

38

http://www.polpx.pl/

http://www.ofgem.com/

http://www.nfpa.com/

http://www.platts.com/


5. ANALYSIS

This section provides a short analysis of white and green certificate systems. The analysis is based on the theoretical overview of white and green certificate systems as provided in Chapter 3 as well as the overview of current and planned systems included in Chapter 4.

5.1 Policy objectives As mentioned above, both renewable energy and energy savings meet several policy objectives in the European energy policy arena. In the country illustrations we have for instance seen that the UK EECs system combines energy saving targets with the aim of poverty alleviation. In Italy the white certificate scheme has various explicit objectives such as contribution to the national greenhouse gas reduction target, reduction of energy dependence, reduction of the energy bill and improvement in energy services. The fact that one measure (reduction of energy consumption) meets multiple goals in itself is regarded as a win-win situation. However, there is a negative side to this story as often financial incentives are provided to support meeting these goals. If there is insufficient coordination between these various goals and the financial support provided to meeting the goals, a risk of excess support exists. Such excess support should be avoided at all times. For one, as it is uneconomic to pay more than is needed to trigger the required investments in energy saving or renewable energy. Moreover, as one also risks creation of windfall profits. But most importantly, as the overlap and possibly related excess payments harm the trust in the market and the instrument itself.

Several other market-based instruments dealing with either trade in certification, obligations or allowances systems have been established on the European market in recent years. The most prominent being the EU emissions trading scheme and various national green certificate schemes. With such existing market-based instruments already in place any implementation of a white certificate scheme should address the additionality of that scheme to the existing schemes in order to avoid double counting. In other words, when a project results in the generation of green certificates or is credited under the EU ETS, it should not be eligible to creation of white certificates. Obviously avoiding such double counting with the EU ETS can be relatively easy when focusing at different sectors. The EU ETS concentrates on combustion installations and large-scale installations in the energy-intensive industry. Any white certificate scheme should address other sectors such as the tertiary sector, households and transport, and/or the smaller installations below the thresholds specified in the EU ETS. Yet, there is a risk to this as the European Commission is still considering expansion of the EU ETS with other sectors.

A logical choice would be to create consistency between the EU directive on EE&ES and the implementation of the white certificate scheme across Europe. However, given the various existing white and green certificate schemes there are already some practical issues to be settled. For one, as some sectors and technologies that are addressed by white certificate systems already implemented have not been included in the EE&ES Directive. One example is CHP which is not included in the Directive5 but is included in the Italian white certificate scheme. Extension of the options addressed in the Directive could be an option, but then again potential overlap exists with some of the other systems. For instance with the Wallonian green certificate scheme that does include CHP as one of the eligible technologies.

5 One of the reasons for not including CHP in the EE&ES Directive is that a dedicated Directive has been formulated on the promotion of higher-efficiency CHP on the European market. Discussions on the implementation and elaboration of this Directive among others concentrate on the formulation of mandatory targets for the share of high-efficiency CHP in each Member State and the establishment of a market for CHP certificates. It could be argued that such a system should be combined with a white certificate system.

39


5.2 The certificate system In most certificate systems currently in place the issuing of certificates is done by the regulatory authority or the transmission system operator. These are quite obvious choices as these are independent bodies that do have a formal status to monitor developments on the energy market. There is yet no formal co-operation between the issuing bodies and therefore certificates are incomparable. Should the EU want to establish an international market for white certificates, it should specify a standard format for the certificates or at least minimum rules to the format of each national certificate system. Moreover, it should establish an international transaction log where all deals in certificates would be registered. Requiring the regulatory bodies responsible for monitoring and control to use this international transaction log for the redemption of certificates when consumed would create a standardized system that avoids certificates being used or accounted for twice.

System costs The main cost components for green and white certificate schemes are operational market costs, transaction costs, and measurement and verification costs. The latter is relatively low on green certificate markets as these mainly concern costs of meter reading and auditing and thus are already paid for in the ‘normal’ operation of the general electricity market. In most white certificates systems costs are (or will be) additional to existing costs of operation and thus can be relatively high compared to other market systems. The height of transaction costs are strongly influenced by choices made in the design and operation of the scheme and by the existence of trading opportunities. Experiences in green certificate markets have shown that transaction costs can be relatively high during the first years of market operation but strongly decline in the years thereafter.

With relatively few practical market experiences, little information is known on the costs of operation of the scheme, transaction costs and the costs of measurement and verification. This holds especially for the white certificate scheme as there yet has not been a system in place long enough to allow for a proper evaluation of the scheme. On the green certificate markets multi-year experiences have been gained and costs for specifically market transactions are regularly published. Obviously in white certificate schemes the costs for measurement and verification are a large part of the overall costs of the system. Most existing schemes use ex-ante calculations of deemed energy savings for each technology eligible in the system. Although being less accurate than ex-post calculations of resulting energy savings, for most technologies the level of exactness is sufficient to balance between ensuring investors a fair amount of certificates and that avoiding overestimations. Saving costs is also one of the benefits of harmonisation of measurement and verification across Europe. The International Performance Measurement and Verification Protocol (IPMVP) seems to be a suitable candidate to serve as a basis for an EU-wide M&V system. The European Energy Certificate System (EECS) could be used to go from just a harmonised M&V system to a harmonised white certificate registration system.

Another element in the system costs are the costs to operate the system. These costs can best be controlled by linking the white certificate scheme to other legally required market control mechanisms or obligations established in the European Union. The Directive on the energy performance of buildings for instance requires submission of a certificate on the energy performance of the building when it is constructed, sold or rented out. This requirement had to be implemented in each EU Member State as of January 2006. Combining this certification procedure with that of certification in a white certificate scheme could create important synergies and would reduce the total costs of operation of both schemes invidually. Another possibility would be the registration of compliance with energy saving requirements under the EE&ES Directive. Again, by combining the two important synergies and cost reductions could occur. In this case it woudl require national white certificate schemes to use a simular specification of eligible technologies and sectors as specified in the EE&ES Directive. The synergy could even go one step

40


further, by specifying that white certificates would be the only source of being able to comply with requirements specified in the EE&ES Directive.

5.3 Creation of demand Certificates clearly only get a price on the market when there is a demand. The price in theory is higher than zero when there is a shortage of certificates, so when supply is lower than demand. As illustrated in the previous chapter, demand in most certificate markets is created by an obligation set to a certain number of market players. In most markets, both green and white certificate markets, energy companies are the parties that are faced with an obligation. In green certificate markets this obligation is the need to supply part of their electricity from renewable energy sources. In a white certificate market this obligation is to achieve a certain reduction of energy consumption by either implementing energy saving projects themselves, or purchasing white certificates that represent such savings from other parties that have implemented accredited projects resulting in energy savings.

Parties that have the possibility to invest in energy savings or renewable electricity production would require some certainty on return on their investments. In other words they require some certainty on the size of demand for certificates on the market. This certainty can be created by defining long-term obligations, so parties know in advance that there will be a demand for certificates for a longer term. This timeframe obviously needs to be at least as long as the period required to recover the required investments. Further market security can be created by specifying intermediate targets, which will trigger some continuous development on the demand for certificates.

5.4 Market issues The first experiences with white certificate schemes show that the obligation to save energy can be very effective at least to unlock existing energy saving potentials that are not implemented on the basis of existing policies and measures. As the systems are still relatively new and in most cases still in an infant stage, trade has hardly occurred. Obviously this is also influenced by the fact that modest obligations have been set and supply of certificates has been sufficient. Obligated parties therefore did not have the need to trade either certificates or obligations.

5.5 The international dimension Both for white and green certificate schemes several national markets have been established. Starting from the subsidiarity principle, the European Commission preferred not to prescribe the way in which obligations for energy saving or renewable energy production have to be achieved in individual EU Member States. Member States are thus free to choose their own type of support scheme, as long as it provides some certainty on the achievement of (indicative) targets set to be achieved in their country. Consequently various systems exist and within specific choices of support schemes various variants are applied. This also holds for white and green certificate schemes. Although several EU Member States have chosen to implement certificate schemes, each scheme has its own specific design elements. This existence of various national schemes makes it more difficult to establish a European-wide certificate scheme. Each Member State would want to create stability on its national market, so would not be pleased to adapt its national scheme to a European system unless that European system would use similar definitions as used in its national system. But as said, definitions vary largely. The Italian white certificate uses primary energy for the measurement of energy savings and thus as the unit of a certificate,

41


while in France the unit of avoided final energy consumption is used. The EU directive on EE&ES specifies that Member States shall use the final inland energy consumption, which would force Italy to change its system.

42


6. CONCLUSIONS AND RECOMMENDATIONS Before drawing conclusions we repeat that white and green certificates are no policy instruments as such but are means to support the policy instruments used in the market to achieve the goals set in an effective and efficient way. Green and white certificates actually are a ‘device’ that represents the environmental value of respectively a unit of renewable energy production and energy saving. The green certificate in fact separates the physical electricity from its environmental value and allows trading the two values on separate markets. The white certificate allows registration of energy savings and allows appointing an economic value to avoided energy consumption. As there are yet relatively few experiences with white and green certificate systems it is too early to draw clear conclusions on its performance. Theoretical studies have clearly illustrated the ability of being very cost-effective, and with the correct design also very effective. The first experiences with white certificate schemes show that the obligation to save energy can be very effective at least to unlock existing energy saving potentials that are not implemented on the basis of existing policies and measures.

Policy objectives Target setting for renewable energy and energy saving serve multiple goals, which often are expressed in the specific objectives formulated for the white and green certificate schemes. The key drivers evidently are an increased share of renewable energy (green certificates) and an uptake of energy saving (white certificates). Other important policy drivers targeted are increased security of supply (both schemes), greenhouse gas reductions (both schemes), reduction of energy costs (white certificates), increase of employment (green certificates).

Creation of demand One of the key elements in certificates system is the creation of demand for certificates. Clearly, when all is left to voluntary demand, the amount of trade in the market, the overall size of the market as well as the prices of certificates will all be much lower than in a market where parties are obliged to purchase certain amounts of certificates. Analysis of systems implemented so far shows that most certificate markets are driven by a mandatory target setting. An optimal target is set for a long-term horizon, specifies intermediary targets, and is clearly beyond business-as-usual.

Electricity and gas suppliers are the parties faced with an energy saving obligation in most of the existing and planned white and green certificate schemes. Italy is the exception to the rule where energy and gas distribution companies are the obliged party on the white certificate market and producers and importers of electricity are the obliged party on the green certificate market.

Coverage of the schemes All schemes implemented so far are national schemes operating within national boundaries. Some schemes are open to imports of certificates from other schemes, but require full reciprocity. On the green energy market an interesting discussion has been taking place on the possible inclusion of Norway in the Elcert scheme; the scheme currently in operation on the Swedish market. However, these plans have been abandoned early 2006. There are yet no plans whatsoever to link existing white certificate schemes.

Large variations exist between different national green and white certificate schemes in terms of coverage of technologies and measures. This is mainly due to the fact that national governments wish to express national policy objectives in the target setting.

43


Measurement and verification The costs for measurement and verification are in most green certificate markets relatively low, as these mainly concern costs of meter reading and auditing and thus are already paid for in the ‘normal’ operation of general electricity market. For white certificates this is not the case. In most systems costs are (or will be) additional to existing costs of operation and thus can be relatively high compared to other market systems.

It is recommended for white certificate schemes to link the schemes to other legally required market control mechanisms or obligations. One example is the certification required under the Directive on the energy performance of buildings. Other examples are the registration of compliance with energy saving requirements under the Directive on Energy Efficiency and Energy Services, and requirements on environmental performance of products (here among others appliances for heating and cooling) under the so-called Eco-design Directive.

Monitoring and control In most existing green and white certificate markets the market operator responsible for issuing and redemption of certificates is also charged with monitoring and control of the system. This seems to be an obvious choice as the combination of these tasks keeps the costs of administration and control of the system relatively low.

System costs With relatively few practical market experiences, little information is known on the costs of operation of the scheme, transaction costs and the costs of measurement and verification. In white certificate schemes the costs for measurement and verification are a large part of the overall costs of the system. Using ex-ante calculations of deemed energy savings balances accuracy and keeping operational costs acceptable. Further harmonisation of M&V across Europe would further reduce costs and so would a harmonised operational scheme. Suitable candidates for a harmonised European scheme are the International Performance Measurement and Verification Protocol and the European Energy Certificate System (EECS). Cost reductions can furthermore be achieved by linking to other legally required mechanisms such as with the EE&ES and/or EPBD requirements as described above.

Trading statistics There is yet no single green or white certificate market in Europe. Instead, there are a variety of fragmented markets, in which prices vary considerably. Prices are mainly determined by the penalties or maximum prices specified on the national markets. Prices on the green certificate market in the past year ranged from approx 24 Euro per MWh on the Swedish market to 109 Euro per MWh in Flanders and occasionally 115 Euro per MWh on the Italian market. Prices on the pure voluntary green energy market have been very low at 0.20 Euro per MWh. There is yet too little market information to draw conclusions on white certificate prices. To realize cost-efficient operation of the TGC and TWC markets, the markets should be sufficiently transparent and liquid. That is, a large amount of buyers and sellers, good information on products and prices, good trading volumes, a low bid/offer spread and enough means for price arbitrage. The following means have been identified to enhance market transparency and liquidity: • Exchange platforms which publish volume and price of transactions • Broadening the geographic scope of the market (e.g. linking to other systems, allowing for imports and

exports of certificates) • Allowing (limited) banking and borrowing of certificates

44


• Providing certainty on demand (e.g. by formulating both long-term and intermediary targets) • Development of a forward market • Introduction of financial products

45


LITERATURE AIB, 2005: Basic Commitment being The Principles and Rules of Operation of Members of the Association of Issuing Bodies for The European Energy Certification System, Association of Issuing Bodies, 2 March 2005. CEN/CENELEC, 2005: Energy Management, European Committee for Standardization; European Committee for Electrotechnical Standardization; CEN/CENELEC BT/JWG, March 2005. Ecofys, 2005: Green Energy Markets in Europe, Ecofys/Greenprices, Utrecht. Ecofys, EcoSecurities, 2005: Market Assessment for JI/CDM credits in the context of the Implementation of the Linking Directive, Ecofys UK Ltd, London, draft. Enzo Di Giulio: Energy saving targets without white certificates. Issues for analysing costs and benefits of En.Eff. certificate trading, Eni Corporate University – Scuola Mattei, powerpoint presentation. EPBD Concerted Action, 2005: Website on the European Building Performance Directive Concerted Action, http://www.epbd-ca.org/. Accessed 14 October 2005 EC, 2004: Mandate to CEN/CENELEC/ETSI for programming of standardization work in the field of eco-design of energy using products, M341-EN, Brussels, 7 January 2004

46

http://www.epbd-ca.org/

47


www.eurowhitecert.org

eERG - Politecnico di Milano

It is conducted under the auspices of the Intelligent Energy for Europe (IEE) Programme of the European community and fifteen national agencies: Austria – AEA, the Austrian Energy Agency; Bulgaria – EnEffect, Centre for Energy Efficiency; ESD Bulgaria Ltd, Energy for Sustainable Development; Finland – VATT, the Government Institute for Economic Research; France – ARMINES, Contract research organisation of the Ecole des Mines de Paris; ADEME, French Agency for Environment and Energy Management; Germany – ZSW, Centre for Solar Energy and Hydrogen Research; Greece – CRES, Centre for Renewable Energy Sources; Hungary – CEU, Department of Environmental Sciences and Policy of the Central European University; Italy – eERG, end-use Efficiency Research Group of Politecnico di Milano with the support of la220; APAT, the Italian Agency for Environmental Protection and Technical Services; The Netherlands - Ecofys, international consultancy company specialised in sustainable energy and climate change issues; Portugal – ISR-UC, research and technology transfer institute associated with the University of Coimbra; Sweden – IIIEE, the International Institute for Industrial Environmental Economics with the support of ELFORSK (Swedish Electrical Utilities R&D Company) and STEM (Swedish Energy Agency); United Kingdom – ESD, Energy for Sustainable Development Ltd with the support of DEFRA (Department for Environment, Food and Rural Affairs)

EuroWhiteCert is supported by the European Commission and several national governments.

European Commission Intelligent Energy Programme...European Commission Intelligent Energy Programme...

Documents

Transcript of European Commission Intelligent Energy Programme...European Commission Intelligent Energy Programme...