Main principles
Affected market participants
Outlook
The Ministry of Petroleum and Energy closed its consultation on a green certificates bill on February 1 2011. The bill was brought before the Norwegian Parliament on April 15 (Prop 101 L (2010-2011)) and was passed on June 24 2011.
The purpose of the proposed certificate system is to support new renewable energy production. The goal is to establish 26.4 terrawatt hours (TWh) of new renewable energy production in Norway and Sweden by the end of 2020. Norway will undertake to finance 13.2TWh.
The bill allows for the establishment of a market mechanism that will give relevant power producers green certificates based on actual power production. Power purchasers will have a statutory duty to buy the certificates, which must be redeemed every year, based on yearly power consumption.
According to the bill, the system shall be technology neutral. All renewable energy produced by plants built after September 7 2009 will qualify for green certificates. However, an exception applies for mini and micro-hydropower plants (ie, plants producing less than 1 megawatt), which will be entitled to green certificates if the building process started after January 1 2004. Green certificates are issued for 15 years to each power plant and are to be issued by no later than December 31 2035. Any annulment of the certificates must be made by no later than April 1 2036.
Power plants that opt for green certificates must be authorised. The bill proposes that the Norwegian Resources and Energy Administration shall issue such authorisations. Statnett (responsible for all high-voltage electricity transmission and distribution in Norway) will be responsible for the registration, issuing and trading of green certificates.
Pricing of the green certificates will be affected primarily by energy prices and development costs. In Sweden, the average price of green certificates has been approximately Nkr 0.25 per kilowatt-hour (kWh).
The direct costs of green certificates will increase in accordance with the quotas of green certificates and are expected to peak in 2020. Assuming that the average price will be Nkr 0.25 per kWh, the expected costs in 2020 will be Nkr 0.572 per kWh, including value added tax.
Producers of renewable energy, power suppliers and end users will all be affected by this bill.
Power producers can obtain one green certificate for each megawatt-hour of renewable energy produced, provided that they meet the remaining criteria of the bill.
Power suppliers and certain end users will need to meet a requirement for holding green certificates. This implies a duty to hold a certain amount of green certificates each year in order to fulfil a specified quota.
Power suppliers can then invoice their clients for the extra costs incurred due to the green certificates, meaning that consumers are left to pay these extra expenses.
There is still work to be done - further detailed regulations are yet to be added that will complement the bill. These regulations will elaborate on the practical issues of this new arrangement and will be coordinated with the Swedish rules. Furthermore, the regulations will set out limitations for energy-intensive businesses which are not subject to this bill.
The agreement with Sweden was signed June 29 2011. Sweden has made some adjustments to its current legislation and has now sent the agreement and the legislation proposed by the government to be read this autumn. Implementation is expected to be January 1 2012 for both Norway and Sweden.
For further information on this topic please contact Hege Smith Heiberg or Aksel S Tannum at Advokatfirmaet Haavind AS by telephone (+47 22 43 30 00), fax (+47 22 43 30 01) or email ([email protected] or [email protected]).