Long-Term Elcert Outlook

2018 has been a rather turbulent year in the Elcertificate market. The installed capacity within the scheme increased significantly in both countries during 2018, and a great number of projects are currently under construction. The volume targets set by the regulators will most likely be reached in near future. Also, last year was an unusual year in terms of weather, with low wind production for several months and extremely dry conditions in the Nordic area. This caused lower than normal production within the scheme. Currently the market is in a tight situation with possibility of a negative accumulated balance by the time of yearly cancellation (1st April) of elcertificates this year.

The most important event of the year took place in late December when the regulators of the scheme, NVE and The Swedish Energy Agency, announced their proposal for a stop mechanism for the Swedish part of the scheme. To market participant’s surprise they recommended that the Swedish part of the scheme should be closed by a pure date based stop mechanism on 31st December 2030. The proposal caused strong reactions among market players. Most investors and producers expected a volume based stop mechanism to keep the supply and demand side balanced by the end of scheme period. If the proposed date stop mechanism goes through the parliament, the market will most likely be flooded by elcertificates, and the accumulated balance will end with a large surplus by the end of the balance phase of the scheme in 2045.

Longer term prices have decreased significantly due to the current large capacity increase and the news regarding the proposed Swedish stop rule. However, the unusual weather and fear of the steadily declining accumulated balance have supported the price on shorter term this year. Although the elcertificate price most likely will drop to quite low levels in the future due to the increasing surplus, there is uncertainty regarding how rapid the decrease will be.

This year’s edition of the Long-Term Elcertificate Outlook analyses how the current proposed Swedish date stop and other possible changes to market framework will affect the elcertificate market regarding build-up, balance and price development until 2043.

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 an 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 2019 is providing you a stochastic approach for analysing the future development of the common Swedish-Norwegian Elcertificate market. The main advantages of the EMPS model are the integration of the elcertificate market within the Nordic power market and that it enables us to take into consideration the stochastic nature of consumption, wind and hydro power. Historical weather data for 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.

Long-Term Elcert Outlook 2019 covers:
    • Updated statistics per fourth quarter of 2018.
    • Updated elcertificate and power price development by the end of week 13 2019.
    • Recent forecasts for expected new renewable generation and demand development.
    • Development of elcertificate balance and price until 2043 for different scenarios:
      • Implementation of Swedish date stop in 2030 allowing the supply side to exceed the demand side.
      • Implementation of an earlier date stop or investors fleeing the market causing zero capacity increase in Sweden after 2021.
      • Alteration of quotas to reduce accumulated balance, front-heavy curve.
Long-Term Elcert Outlook 2019 includes:
  • Extensive report containing 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 variability of wind and hydro.
  • Fundamental scenarios analysing the uncertainty in the market.
  • Detailed results with average weekly prices for elcertificates with probability distribution, demand and supply forecasts for elcertificates by country and technology in Excel-sheets.

For order or questions please contact

Viktor Balyberdin
CEO
Tel: +47 99 59 59 09

Sigrun Morland
Head of analysis
Tel: +47 45 42 35 00

If you have any questions about this product please contact us using contact information in the right column.