Sweden and Norway extend joint electricity certificate system for renewables to 2030

Norway’s Ministry of Petroleum and Energy announced that the joint market-based subsidy scheme of Sweden and Norway will be extended to 2030. The program, which was previously set to expire in 2020, is open to power generation projects from biofuels, wind, solar, hydro and wave sources.

The two countries have  had a common electricity certificate market for renewable energies since January 2012. The target set at the time was the addition of 28.4 TWh of power generation by 2020. The governments of the two countries, however, started to disagree on the future of the program last year, with Sweden asking for an extension and Norway seeking to leave the scheme. Sweden aimed at supporting the growth of renewable generation beyond 2020, while Norway was not available to introduce any new targets under the certificate system.

As a result of several months of negotiation, the two governments have now reached a compromise that will allow Sweden to add a further 18 TWh of capacity and Norway to add new projects to the scheme only by 2021. Furthermore, Norway will maintain unchanged to 2030 its original 13.2 TWh target set for 2020, while Sweden will add the 18 TWh to its original 2020 target of 15.2 TWh. The joint market will permit trading in both Swedish and Norwegian certificates until April 2046.

Electricity Certificates, both Swedish and Norwegian, are traded on the Nord Pool exchange with the price agreed between purchasers and sellers. The two countries release tradable certificates to renewable energy producers for every MWh they generate for the first 15 yearsof a power generator’s lifetime. The scheme is managed by the Norwegian Water Resources and Energy Directorate (NVE) and the Swedish Energy Agency. In 2015, Norway issued 2.8 million certificates, while Sweden issued 21.8 million.

Swedish wind power is the prevailing energy source accounting for about 74% (2.3 TWh) of new production in Sweden for 2015. In Norway, instead, hydropower had the largest share accounting for 97% of the new production 2015.

Solar has a very minimal share in this market to date. In 2015, only 100 solar installations located in Sweden contributed to the target with 0.04 TWh. It is not excluded, however, that solar will increase its shares in this market over the next years, as Norway’s PV market saw its largest growth in 2016 and the Swedish government is implementing a series of measures to revive the solar sector and, in particular, the commercial segment.