Since January 1st in 2012, Norway and Sweden have established a joint market for electricity certificates. The common goal is to increase renewable electricity production by 28.4 TWh by 2020. In this way, Norway and Sweden both contribute to the targets in the EU Renewable Energy Directive.
Electricity producers that invest in renewable power generation can receive certificates for the electricity generated for the next 15 years. One certificate is allocated for every new megawatt hour (MWh) produced renewable electricity. The electricity certificates are sold in a market where prices are determined by supply and demand. In this way, the electricity producers receive an extra income in addition to the electricity price.
Demand for certificates is created in the market because electricity suppliers and end-users of electricity are obliged to buy them. Norwegian and Swedish electricity consumers therefore finance the system, as the cost of electricity certificates is added to the final cost of electricity. Sometimes electricity suppliers also buy electricity certificates.
When electricity suppliers distribute the cost of electricity certificates to their customers, the cost of certificates should be included in the different price contracts for electricity.
The EU's Renewable Energy Directive sets binding national targets for the proportion of renewable energy in final energy consumption. According to the Directive, Norway is obliged to increase the national share of renewable energy to 67.5% by 2020. The main tool to achieve this target is the electricity certificate system. As the system increases renewable electricity production, Norway obtains a higher security of supply.