Svezia : September 17, 2008
The Electricity Certificate System or ECS was initiated by the Government on 1 May 2003. This law was created in order to encourage production of electricity from renewable energy sources.
This incentive from the Government was designed to decrease greenhouse gas emissions in the country. The target for ESC by the year 2016 is set to increase the annual production of electricity from renewable energy sources by 17 TWh relative to its production in 2002.
The main challenge in increasing the amount of renewable energy production is largely based on financial considerations. For example, there is a lack of confidence by banks and investors that such renewable projects will provide a sufficient return on their investments. Other common barriers to such projects also include local opposition, insufficient grid transmission capacity and overly burdensome bureaucracy in their construction.
The ESC has developed into an open market based on an interaction between sellers and purchasers of certificates. Several factors affect the market price of electricity certificates with one of the most influential being the level of quota obligation set by the Government. Other market price factors include new investments in renewable energy production and actual consumption patterns.
The quota obligation set by the Government is part of the long-term goal of achieving the 17 TWh target by 2016. The quota set for 2008 is 17 percent meaning that 17 percent of the total energy consumed in Sweden must be derived from renewable energy sources. Market prices vary over time and consumers have to pay 17 percent of the total electricity certificate price for every unit of energy consumed.
The market price is available for consumers to track on a daily basis. Added to the fluctuating market price is the suppliers’ trading costs, risk handling and administration costs. In Sweden, when asking suppliers for new electricity contracts, the price of certificates is now questioned. Clearly, there is a negotiation opportunity in this area when asking for contract bids since the add-ons differ amongst the suppliers.
To confirm this point, an interview was conducted with an expert from a well-known Swedish energy supplier. She stated that in general consumers request a delivery price for the supplier’s total electricity certificate price, but there are differences from supplier to supplier.
While everyone applauds the ESC as a means of promoting a cleaner environment, this enthusiasm is tempered by the fact that consumers are paying higher prices.