After a period of uncertainty, Norway and Sweden have agreed on continuation of the common elcertificate scheme. Sweden will increase the obligation for elcertificates with 18 TWh to incorporate building additional renewable production until 2030, with elcertificate scheme lasting until 2045. The installations built until 2021 will be eligible for elcertificates in Norway, and the excess of production above 28.4 TWh will be handled by the increased Swedish demand. In addition to already proposed technical adjustment, the agreement resulted in the increased Swedish quota curve for the years 2018 and 2019. Also, the back-heavy quota curve from the original proposal of the Swedish Energy Authority was replaced by a linear quota curve for the years 2022-2030.
The proposal for the Parliament concerning the amendment of the Law on Elcertificates was published on the 19th of April. In June 2017, the Swedish Energy Authorities will provide the final parameters regarding the quota adjustment in the proposal for the second Progress Review. The changes, which are effective from the beginning of 2018, will have a significant impact on the fundamental elcertificate balance. In Sweden, there is a broad energy political consensus to replace carbon emitting electricity production by renewables by 2040, so, we assume that all the proposed changes are implemented.
According to our database of available projects under construction and with final investment decision, there is no doubt that the 28.4 TWh target will be reached and even exceeded. The main uncertainty about the coming years is the build-up rate of new capacity in Sweden after 2020. Future weather trends also cause uncertainty, that together with deviations in the expected demand and faster than proposed by the quota curve development of new production, could put the elcertificate price under pressure.
However, with relatively low levels of both power and elcertificate prices, investment decisions have been recently put on hold. Therefore, reliable price analysis is more important than previously as the investment decision basis.
This year’s edition of the Long-Term Elcertificate Outlook includes the analysis of how these and other changes will affect the elcertificate market regarding build-up, balance and price development until 2045. During the past years, we have been using a fundamental model, developed together with SINTEF, covering the elcertificate and power market based on the EMPS model. The model is the extension of the SKM Elcertificate model covering the supply side on power plant level. The detailed overview of the supply side of the market gives the basis for our forecast of new renewable production that is expected to be developed, divided both geographically and technologically.
The Long-Term Elcert Outlook 2017 provides a stochastic approach for analysing the future development of the common Swedish-Norwegian Elcertificate market. The main advantage of the EMPS model is the integration of the elcertificate market within the Nordic power market that enables us taking into consideration the stochastic nature of consumption, wind and hydropower. The historical weather data over a long period covering different weather types is used to analyse the variability of both the future renewable production and power demand. This provides us with 75 different weather scenarios, each with different developments for production of renewables and consumption. Among other things, the weather scenarios enable us to prepare duration curves together with average weekly prices for elcertificates with probability distribution.
- The latest adjustments in the elcertificate market
- Forecasts for expected new renewable generation and demand development
- Development of elcertificate balance and price until 2045 for different scenarios
- o Extended Swedish elcertificate target
- o Estimated Swedish quotas for the extended period
- o Quota adjustments at the Progress Review 2017 for the current period
- o Break-even for profitable investments
- Extensive report containing the summary of assumptions, discussion and analysis of the results
- Discussion of the elcertificate market framework and the future development of the elcertificate market, including Progress Reviews
- Stochastic approach to modelling with estimation of wind and hydro variability
- Fundamental scenarios analyzing the uncertainty of the market
- Detailed results for average weekly prices for elcertificates with probability distribution, demand and supply forecasts for elcertificates by country and technology provided in Excel-sheets