1 Systems Analysis Division, Risø National Laboratory for Sustainable Energy, Technical University of Denmark2 Risø National Laboratory for Sustainable Energy, Technical University of Denmark3 unknown4 Department of Management Engineering, Technical University of Denmark
This report is Deliverable 4.1 of the EU project “Wind Power Integration in Liberalised Electricity Markets” (WILMAR) and describes the application of two policy instruments, Tradable Emissions Permits (TEP’s) and Tradable Green Certificates (TGC’s) forelectricity produced from renewable energy sources in the European Union and the implications for implementation in the Wilmar model. The introduction of a common emission-trading system in the EU is expected to have an upward effect on the spot pricesat the electricity market. The variations of the spot price imply that some types of power generation may change the situation from earning money to losing money despite the increasing spot price. Heavy restrictions on emissions penalise thefossil-fuelled technologies significantly, and the associated increase in the spot price need not compensate for this. Therefore, a market of TEP’s is expected to have a significant influence on the electricity spot price. However, the expected pricelevel of TEP’s are met with great uncertainty and a study of a number of economical studies shows a price span between zero and 270 USD per ton of CO2 depending on the participation or non-participation of countries in the scheme. The price-determinationat the TGC market is expected to be closely related to the price at the power spot market as the RE-producers of electricity will have expectations to the total price paid for the energy produced, i.e., for the price of electricity at the spot market plusthe price per kWh obtained at the green certificate market. In the Wilmar model, the TGC market can either be handled exogenously, i.e., the increase in renewable capacity and an average annual TGC price are determined outside the model, or a simple TGCmodule is developed, including the long-term supply functions for the most relevant renewable technologies and an overall TGC quota. Both solutions are rather simple, but to develop a more advanced model for the TGC market seems to be out of scope forhandling the interplay with the Wilmar model. The obligation for the TGC market is normally given on an annual basis, i.e., the certificate quota has to be fulfilled within a given year. This implies that to establish a TGC price on an hourly basisthroughout the year is not only difficult, but irrelevant as well. The incorporation of model elements representing an annual quota for emission and deriving a TEP price seems more relevant for the Wilmar model.