Support schemes for renewable energy in the Nordic countries

1. Support schemes for renewable energy in the Nordic countries Jouni Tolonen JT

2. Backround • Why renewable energy? • Mitigation of CO2 and other emissions • Security of supply (self-sufficiency, diversification) • Development of new energy technology • Employment and local economic development • Sustainable development • Support schemes are needed because in general renewable energy sources (RES) are not competitive in the market • How the goals can be reached cost-efficiently and with mimimum market distortion? JT

3. Power supply in the Nordic countries in 2004 Source: Nordel JT

4. Indicative targets in the RES-E Directive JT

5. Support schemes for RES • Feed-in-tariffs (fixed price or premium) • Quotas + tradable green certificates • Investment aid • Tax incentives • Taxation of fossil fuels in heat production • R&D support • CO2 emission trading JT

6. Basic features of support schemes Government pays Customers pay Investment aid Support/price level set by authorities Amount of RES set in the market Tax support Feed-in-tariffs (fixed or premium) Tendering Support level set in the market Amount of RES set by authorities Quotas + green certificates JT

7. Main RES support schemes in EU countries Many countries use different schemes simultaneously investment aid, tax incentive feed-in-tariffs quota + green certificates tendering JT

8. Support schemes in the Nordic countries • Denmark • Feed-in-tariff for wind (premium ≈13 €/MWh+market price) • Feed-in-tariff for biogas (fixed ≈80 €/MWh) • Tendering for off-shore wind farms • Support was higher before 2003 • Norway • Investment aid for wind (10-20 %) • Tax support for wind (5.7 €/MWh) was terminated in 2004 • Possibly a joint green certificate market together with Sweden in the future • Iceland • No support for RES JT

9. Support schemes in the Nordic countries • Finland • Investment aid (0-40 %), 25 million € in 2004 • Tax support (4.2 or 6.9 €/MWh), 32 million € in 2004 • Possibly reduction of RES support in emission trading sectors • Sweden • Green certificate + quota • 7.4 % in 2003  16.9 % in 2010 • ≈24 €/MWh, ≈250 million € in 2004 • Production support (Miljöbonus) for wind until 2009 • ≈11 million € in 2005 • On-shore ≈10 €/MWh • Off-shore ≈17 €/MWh • Changes to green certificate system under consideration JT

10. Support for new renewable electricity generation Source: Nordenergi JT

11. Nordenergi concludes that well constructed support schemes for renewable energy should: • Not interfere in a negative way with the electricity or the CO2-markets • Level the playing field – international coordination of effects of different support schemes might be needed in order to achieve equal subsidy levels • Be predictable and transparent – credibility and political stability are important for investments • Be cost efficient - minimize costs to the energy consumer, energy companies and public expenses • Not be directed towards specific technologies – renewable technologies should compete with each other and a support scheme should therefore be technology neutral. This could be complemented by specific support to R&D for emerging technologies. • Not create bureaucracy JT