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Green power accounting
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Green Energy
Green power accounting Steps towards a European Market for Renewable Electricity If a member state wishes to comply with its indicative target for renewable electricity by importing it should be allowed to do so. The accounting of imports for the indicative targets is considered as a first step towards a European market for renewable electricity, which leads to a cost efficient compliance of targets set in Europe. In principle this is already possible, even without harmonizing national supporting systems. But in fact some elements of the European directive on renewable electricity (RES-E) need some clarification. Peter Niermeijer, Ecofys, and Rolf de Vos, GreenPrices argue which steps have to be taken in order to facilitate imports of green power.
M
ember states with little and expensive domestic potential for renewable power generation are likely to comply with their target in a more cost efficient manner by importing green power from abroad. Looking at the implementation of the renewable electricity directive (2001/77EC) one might conclude that the building blocks for a european market for renewable electricity are already there. From a member state's point of view there are three main elements concerning import of green power: 1. Cross border trade of electricity is possible and is executed between many countries. This is possible for all kinds of electricity including renewable electricity. 2. With the introduction of the Guarantees of Origin (GoO) the origin of
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the electricity can be proven as well. This is also the case for the electricity that is imported: according to the RES-E directive the GoO must be mutually recognised by member states. 3. Besides this member states have accepted a consumption target for renewable energy. The imported renewable electricity, proven with the GoO, contributes to the national targets set in the RES-E directive. However, in reality there's quite a bit more to importing and accounting it into the renewable energy balance of a member state. What are the details of this approach?
International trade Concerning the first aspect, there are no major obstacles. For example, the
Netherlands has been importing green power from Germany for years now. In practice an importing utility or trader has to obtain capacity from the interconnector in an auction. The second aspect needs some clarification. Each member state is supposed to have implemented a system for the GoO by October last year. This means that within a specific country the buyer of the electricity is able to obtain the proof of the origin. At the same time the GoO must be mutually recognised by member states. This means that the GoO can go with the electricity that is traded cross border. In practice two elements need attention. First, a technical problem exists: it must be possible to transfer the GoO from one database to another. This means that the information technology for the databases must be harmonised to do so. Second, the quality of the GoO must be regulated one way or another: what guarantee can be given that the GoO is true and not false? The verification and auditing processes must have a comparable quality level. For both reasons it is advisable that the systems for the GoO in both the importing and the exporting company are harmonised. This harmonization is exactly what is achieved via the Renewable Certificate System (RECS). Harmonisation and standardisation rules are available and tested and the systems for the GoO from the importing and exporting country can easily be harmonised and standardised by using RECS rules. The Netherlands and Finland have started talks about this and some countries will harmonise their systems very soon. The third aspect deals with targets and the definition of targets. The RES-E directive is on the one hand very clear about this and gives a clear definition of the consumption target: member states have to report on domestic production plus import, minus the export of renewable energy. But on the other hand the targets in the Annex of the RES-E directive are given as production targets. We believe that the Commission should clarify the definition of the target on this point.
1471 0846/04 ©2004 Elsevier Ltd. All rights reserved.
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Is harmonisation of support mechanisms needed? If the GoO systems could be harmonised and standardized, it would not be necessary to harmonise the support mechanisms. A member state does not have to compromise its own support system. Let us take an example of one wind turbine in Germany, in the case of a harmonized GoO system with the Netherlands. The owner of the wind turbine must be given the choice: • He sells his electricity (with the GoO) to the local grid company and receives the German feed-in tariff. Here the electricity is clearly consumed in Germany and the electricity is contributing to the German renewable electricity target. • The owner exports the electricity (with the GoO) to the Netherlands and collects the added value of green power on the Dutch green power market. The GoO is used to monitor this. Here the wind power is exported and contributes to the Dutch target.
GoO systems have to be harmonised and standardised and the imported electricity is not allowed to appear in the accounting of the targets by the exporting country. Such an experiment could be preferably executed on a bilateral basis: two countries come to an agreement accepting each other's GoOs as proof for consumption of electricity and contribution to their targets. Note that this can be done without harmonising support mechanisms all over Europe. Countries can freely choose to stick to their national support system for the national consumption or production as long as they accept that the GoO is the sole proof of export and import. The experiments with common markets can for example carry on up to 2010. The support mechanisms must be evaluated and the decision to harmonise the support mechanisms - if needed at all - can be postponed until 2010. Norway and Sweden have already announced that they are starting talks on this issue.
Step number three is a further debate on the targets. Parallel to the experiments the debate about the targets themselves can begin. Different aspects must be put on the agenda. For instance, an important incentive for new investments in renewable energy production now will be a target set after 2010, because investors need long-term certainty. The debate about the targets for 2020 and the sharing of the burden by member states must therefore begin as soon as possible. We conclude that all ingredients for a successful and cost-effective internal renewable energy market are already available. They only have to be mixed and "cooked" in the right way by a common effort of the European Commission, the member states and the main players on the green power market. Contact: Rolf de Vos, Greenprices; e-mail: [email protected]; www.greenprices.com
In both ways the system for the GoO is only the facilitator of these market forces. Moreover, a sound harmonised GoO system will prevent the wind turbine owner from collecting the green value of his power production twice. The GoO is taken out of the market when the corresponding green power is used, so it can only be used once. It does not endanger the German feed-in law and double counting is avoided.
RE road map The road map towards a European renewable energy market exists out of some elementary steps that have to be taken. Step number one will be a well functioning system of GoO all over Europe. The systems of the GoO must be harmonised: the databases must be able to communicate with each other and the verification and auditing processes must be of the same quality level. The RECS standardisation rules have been tested and are available. Step number two could be an experiment with one country that accepts imported renewable electricity as eligible for its support systems. Of course the
www.re-focus.net
March/April 2004
reFOCUS 59
07/04/2004
11:35
Page 58
Green Energy
Green power accounting Steps towards a European Market for Renewable Electricity If a member state wishes to comply with its indicative target for renewable electricity by importing it should be allowed to do so. The accounting of imports for the indicative targets is considered as a first step towards a European market for renewable electricity, which leads to a cost efficient compliance of targets set in Europe. In principle this is already possible, even without harmonizing national supporting systems. But in fact some elements of the European directive on renewable electricity (RES-E) need some clarification. Peter Niermeijer, Ecofys, and Rolf de Vos, GreenPrices argue which steps have to be taken in order to facilitate imports of green power.
M
ember states with little and expensive domestic potential for renewable power generation are likely to comply with their target in a more cost efficient manner by importing green power from abroad. Looking at the implementation of the renewable electricity directive (2001/77EC) one might conclude that the building blocks for a european market for renewable electricity are already there. From a member state's point of view there are three main elements concerning import of green power: 1. Cross border trade of electricity is possible and is executed between many countries. This is possible for all kinds of electricity including renewable electricity. 2. With the introduction of the Guarantees of Origin (GoO) the origin of
58 reFOCUS
March/April 2004
the electricity can be proven as well. This is also the case for the electricity that is imported: according to the RES-E directive the GoO must be mutually recognised by member states. 3. Besides this member states have accepted a consumption target for renewable energy. The imported renewable electricity, proven with the GoO, contributes to the national targets set in the RES-E directive. However, in reality there's quite a bit more to importing and accounting it into the renewable energy balance of a member state. What are the details of this approach?
International trade Concerning the first aspect, there are no major obstacles. For example, the
Netherlands has been importing green power from Germany for years now. In practice an importing utility or trader has to obtain capacity from the interconnector in an auction. The second aspect needs some clarification. Each member state is supposed to have implemented a system for the GoO by October last year. This means that within a specific country the buyer of the electricity is able to obtain the proof of the origin. At the same time the GoO must be mutually recognised by member states. This means that the GoO can go with the electricity that is traded cross border. In practice two elements need attention. First, a technical problem exists: it must be possible to transfer the GoO from one database to another. This means that the information technology for the databases must be harmonised to do so. Second, the quality of the GoO must be regulated one way or another: what guarantee can be given that the GoO is true and not false? The verification and auditing processes must have a comparable quality level. For both reasons it is advisable that the systems for the GoO in both the importing and the exporting company are harmonised. This harmonization is exactly what is achieved via the Renewable Certificate System (RECS). Harmonisation and standardisation rules are available and tested and the systems for the GoO from the importing and exporting country can easily be harmonised and standardised by using RECS rules. The Netherlands and Finland have started talks about this and some countries will harmonise their systems very soon. The third aspect deals with targets and the definition of targets. The RES-E directive is on the one hand very clear about this and gives a clear definition of the consumption target: member states have to report on domestic production plus import, minus the export of renewable energy. But on the other hand the targets in the Annex of the RES-E directive are given as production targets. We believe that the Commission should clarify the definition of the target on this point.
1471 0846/04 ©2004 Elsevier Ltd. All rights reserved.
pp58-59.qxd
07/04/2004
15:40
Page 59
Is harmonisation of support mechanisms needed? If the GoO systems could be harmonised and standardized, it would not be necessary to harmonise the support mechanisms. A member state does not have to compromise its own support system. Let us take an example of one wind turbine in Germany, in the case of a harmonized GoO system with the Netherlands. The owner of the wind turbine must be given the choice: • He sells his electricity (with the GoO) to the local grid company and receives the German feed-in tariff. Here the electricity is clearly consumed in Germany and the electricity is contributing to the German renewable electricity target. • The owner exports the electricity (with the GoO) to the Netherlands and collects the added value of green power on the Dutch green power market. The GoO is used to monitor this. Here the wind power is exported and contributes to the Dutch target.
GoO systems have to be harmonised and standardised and the imported electricity is not allowed to appear in the accounting of the targets by the exporting country. Such an experiment could be preferably executed on a bilateral basis: two countries come to an agreement accepting each other's GoOs as proof for consumption of electricity and contribution to their targets. Note that this can be done without harmonising support mechanisms all over Europe. Countries can freely choose to stick to their national support system for the national consumption or production as long as they accept that the GoO is the sole proof of export and import. The experiments with common markets can for example carry on up to 2010. The support mechanisms must be evaluated and the decision to harmonise the support mechanisms - if needed at all - can be postponed until 2010. Norway and Sweden have already announced that they are starting talks on this issue.
Step number three is a further debate on the targets. Parallel to the experiments the debate about the targets themselves can begin. Different aspects must be put on the agenda. For instance, an important incentive for new investments in renewable energy production now will be a target set after 2010, because investors need long-term certainty. The debate about the targets for 2020 and the sharing of the burden by member states must therefore begin as soon as possible. We conclude that all ingredients for a successful and cost-effective internal renewable energy market are already available. They only have to be mixed and "cooked" in the right way by a common effort of the European Commission, the member states and the main players on the green power market. Contact: Rolf de Vos, Greenprices; e-mail: [email protected]; www.greenprices.com
In both ways the system for the GoO is only the facilitator of these market forces. Moreover, a sound harmonised GoO system will prevent the wind turbine owner from collecting the green value of his power production twice. The GoO is taken out of the market when the corresponding green power is used, so it can only be used once. It does not endanger the German feed-in law and double counting is avoided.
RE road map The road map towards a European renewable energy market exists out of some elementary steps that have to be taken. Step number one will be a well functioning system of GoO all over Europe. The systems of the GoO must be harmonised: the databases must be able to communicate with each other and the verification and auditing processes must be of the same quality level. The RECS standardisation rules have been tested and are available. Step number two could be an experiment with one country that accepts imported renewable electricity as eligible for its support systems. Of course the
www.re-focus.net
March/April 2004
reFOCUS 59