Wind power deployment in the Swedish-Norwegian tradable electricity certificate market

2015

This thesis examines the market-based common Swedish-Norwegian tradable electricity

certificate support scheme for investments in new electricity generating capacity from renewable

energy sources, with a particular focus on deployment of wind power in Norway. We evaluate

the costs of onshore wind power projects in the pipeline and their potential to contribute to the

quantitative target of adding new renewable electricity generation corresponding to 26.4 TWh

per year by 2020. We present relevant theory on electricity certificate markets and available data

on the Swedish-Norwegian electricity certificate market. We show how several features of the

policy design are likely to result in high risk and uncertainty to potential investors. In particular,

there is a risk of overshooting the quantitative target, resulting in certificate price spoilage, due to

a lack of information regarding the supply and demand for electricity certificates over the

duration of the scheme. The large electricity generation potential of the projects in the pipeline

reinforces the risk of overinvestment. Risk and uncertainty is likely to contribute to high riskpremiums

and increase the capital costs of new investment. These costs, which ultimately are

covered by the electricity consumers in Norway and Sweden, have the potential to weaken the

cost-effectiveness of the policy. Improved systems for information in the market, increased

transparency in electricity certificate trade and more frequent corrections of demand deviation

are suggested as viable measures that the regulators can take in order to reduce risk and

uncertainty faced by the market participants.