New elcertificate agreement lifts prices, but does not solve market design challenges

24. April 2017 | News

After months of uncertainty, Sweden and Norway have agreed to extend the Elcertificate market. The market is prolonged for 10 years and Sweden unilaterally increases the target by 18 TWh. The extension lead to a significant increase in prices. 

Overall the market participants should be pleased with the agreement. By extending the system the fear of overinvestment and a price collapse is pushed forward and prices will likely increase, easing the situation for current investors. There are however remaining design issues that are not addressed in the proposal. The profitability of new investments will inter alia depend on the still pending design of a stop mechanism in Sweden. Ovreall, the agreement transfers more of the risk (and downside) in the system to new investors in Sweden.

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T-CG Insight 2017-02 >> Agreement on extension of the elcertificate market in Sweden lifts prices, but does not address market design challenges