The role of green and white certificates in sustainable energy promotion Presentation at MILEN-seminar 19 th May 2010 U

1. The role of green and white certificates in sustainable energy promotionPresentation at MILEN-seminar 19th May 2010University of Oslo Dag R Christensen, senior adviser, Energy Norway

2. 20% reduction –greenhouse gas emissions EU – greenpackage Increasedenergyefficiency by 20 % 20% growth – renewableenergy EU targets – greenpackage – more targets thanonlyGHG-emissions

3. 20% reduction –greenhouse gas emissions EU – greenpackage Power sectoremissionsregulated by emissionstrading • EU ETS – securesagreedGHG-reduction (volume) in thepowersector • Increasedpowerprice due to costof CO2-emissions – costof CO2-quotas – increasedincome for power producers • Currentquotaprice not sufficient to stimulateinvestments in renewablepowergeneration – nor in carboncapture and storage • Necessaryquotalevel to lift onshore windpower: • Ifcoalpower: appr. 800 NOK/tonn CO2 • If gas power: appr. 500 NOK/tonn CO2 • Currentquotaprice: 150 NOK/tonn CO2

4. EU – greenpackage 20% growth – renewableenergy Securtiyofsupply EU - renewableenergy target – contributes to increasesecurityofsupply – priority 1 in Barroso II • Having ETS in place – the RES target will not contribute to lowerGHG-emissionswithin ES, onlyinfluencethequotaprice • RES willreduceGHG-emissionsif it substitutes fossil fuelsoutside ETS • RES target reducespowerprice – reducesincome for power producers • No guidance from EU onchoiceof support systems though market based instruments arepreferred from the Commission

5. Is securityofsupply relevant for Norway?Why more renewablepower in Norway is needed The climatechallenge: By 2050 industrialisedcountries have to reduceemission by 80 % - down to 2 tonnes CO2/capita – therefore – need to substitute fossil fuelwithrenewableenergy = increasedneed for electricity Electricity Hot water End consumers have to use CO2-free energy carriers Bioenergy Hydrogen Solar, geothermal

6. Energy suppliers to deliver CO2-free energy carriers basedon a varietyofenergysources Productionofenergy carriers Hydro, wind Electricity Fossil Hot water Bio Bioenergy Nuclear Hydrogen Other RES Solar, geothermal CO2

7. An instrument to meettherenewable target: A greencertificate market is generated by an obligation from thegovernmentonpowersuppliers Interestinginformationonthe Web-siteofSwedish Energy Authorities

8. Why do we support a greencertificate system for renewablepower? • Costefficiency driven by competition • Certificatepriceadapts to actualpowerprice (certificatepricewill be reducedwhenquotaprice lifts powerprice) • Deliverrequiredvolume – howeverdifficult to adjustwhen target is set? • Support cheapestsolutions • Technologyneutral • Environmentalissueswill be dealtwith in theconcessionprocess • No dependanceofannual grants from thestatebudget • No conflictwith EU stateaidregulation

9. Other support systems • Feed-in tariffs • costefficiency? Relyon a administrative estimateof support level – set for differenttechologies • Have deliveredvolume – (Germany, Denmark, Spain) at whichcost? • toolittlecompetitiveincentives • Investment grants • dependent ongovernmentfinancing • burdensomeprocess for investors

10. Norwegianexperiencewith support systems for renewablepower • 2000 – 2006 – discussionsgreencertificates – did not reachagreementwithSweden for a common market • Feed-in tariffs – 2006-2007 – did not deliver – never in operation • Investments support from 2008 – throughEnova – deliver, buttooslow • Did not reachthe 3 TWh windenergy target by 2010 • The industry is looking forward towards 1.1.2012

11. Norwegian-Swedish system for greencertificates from 1.1.2012 – buildonSwedishexperience • Targets in Swedenreached – theyare in line with target for 2020 • Acceptablecosts – paid by customers – included in powerprice • Currentcertificatecost Averagepricecertificates – 2009 - 2010 SEK/MWh 2009 2010

12. EU – greenpackage Increasedenergyefficiency by 20 % Security ofsupply EU energyefficiency target – contributes to increasesecurityofsupply • Having ETS in place – theefficiency target will not contribute to lowerGHG-emissionswithin ETS, onlyinfluencethequotaprice, butreduces GHG ifsubstitute fossil fuelsoutside ETS • Efficiency target reducespowerprice – reducesincome for power producers • No final EU agreementyetonhow to implementtheefficiency target • Efficiencyincentives • Relyoncurrentpowerprice • Stimulate by governmentincentives • Economic • Direct support • White certificates • Regulation

13. An instrument to meettheenergyefficiency target:A whitecertificate market – generated by thegovernment Obligationputonf.extheenergysupplierthat has to buyefficiency from different market players in addition to ownactivities. Thus a market is created Building sector Energy supplier Kr/MWh Industry Energy supplier Residential Energy supplier GWh Other

14. White certificates – under discussion in thepowerindustry in Norway • Characteristics: • Volumecontrol – as for ETS and greencertificates • Stimulatecheapestsolutions • Engage multiple skills and sectors • Harvesting onlylowhangingfruits? • Administrative costs? • Follow up and control? • Organisation: • Need an organisationthatcanloadthecoston all consumers • Weareevaluatingourpotentialinterest in thispossible market

15. Conclusions • More renewablepower is needed to phaseout fossil fuels – also in Norway • EU-ETS will not financerenewableenergy or sufficientefficiency • Green and whitecertificate markets candelivernecessaryresults and contribute to securityofsupply – for EU and for Norway • Certificate markets involves risks, butthepowerindustryshould be able to handle that risk