Summary of preliminary findings presented in open meeting on Norwegian Guarantees of Origin 12th of June

Monday, 18 June 2018

The preliminary findings and assessment of Oslo Economics’ report as presented in yesterday’s meeting are summarized below. The aim of the report is to assess the Norwegian Guarantees of Origin (GO) and electricity disclosure scheme. For a more comprehensive description click here.

  • Oslo Economics estimates Norwegian GOs to provide up to 1 billion NOK in increased income to Norwegian power producers.
  • GOs are found to constitute approx. 2.5% of the electricity price (at a price of 40 EUR /MWh).
  • GOs provide incentives to new renewable production generally speaking, but has generated few new projects to date, GO incentive is counteracted by the El-cert market until 2020.

Norwegian businesses, households, and industry purchase few GOs. Around 84% of Norwegian GOs are exported. Several businesses do not currently procure GOs but claim renewable production by referencing the Norwegian production mix. The high degree (98%) of renewable electricity generation in Norway leads to the phenomenon of ‘double perception’ whereby electricity consumers believe that the electricity sold in Norway is more or less completely renewable. When, in fact, the Norwegian supplier mix consists of only 14% renewables.

Norwegian GOs have contributed to the establishment of data centers in Norway, hereunder Bitfury who has established a data center in Mo I Rana and will procure 350 GWh electricity with corresponding GOs. However, the export of Norwegian GOs has also enabled Facebook and Google to establish data centers in neighboring (and competing) countries. 

Oslo Economics reason that the overall impact of GOs has a positive effect for Norway as a whole:

  • Up to 1 bn. NOK of additional income to power producers in 2018.
  • A marginal but increasing effect on the entry of new market actors (electricity market).
  • The low utilization of GOs amongst energy-intensive industry leads to no substantial costs and thereby little effect for already established companies.
  •  A negative effect on competition for energy-intensive industry due to firms established abroad with clean Norwegian energy.
  • Households and other business buy GOs for less than 100 million NOK per year.
Risk analysis

This section presents risk factors and their possible effect on the price of GOs. Oslo Economics present different timelines as to when these potentially could come into effect.

Risk factors that may lower the price of Norwegian GOs:

  • Reduced demand due to “double marketing” – i.e. exporting GOs while claiming to be renewable without paying for GOs. – Effects could be seen from 2018 and onwards
  • Increased renewable deployment in Europe and an increase in trade of GOs. 2040 and onwards.

Factors that may contribute to a higher price:

  •  A “shall” contra “may” in the EU RED – increased demand from the European continent. The effect could be seen as early as 2018.
  • Increased connectivity to Europe leading to greater acceptance and demand for Norwegian GOs. ~ 2020-2021.
  • Customers demanding more renewables and documentation in products and services. May come into effect around 2020 and onwards.
  • More customers and sectors explicitly demanding GO documentation – leading to a greater need for industry to procure GOs. ~ 2025 – 2030.
Overview of possible changes to the Norwegian GO and the electricity disclosure scheme

Changes that could lead to a lower price of Norwegian GOs:

  • Using the national production mix for electricity disclosure – would result in a complete devaluation of Norwegian GOs.
  • Implementing a Norwegian GO standard or exiting the AIB with the aim of complicating export of Norwegian GOs.
  • Limit the export of GOs to the physically exported level of electricity.
  • Instruct power producers to hand out GOs to local consumers for free (partially tying GOs to physical consumption)

Changes that may lower or increase price depending on implementation:

  • Change the calculation and/or representation of electricity disclosure including residual mix, production mix and supplier mix.
  • Auction GOs for renewable power or hinder sale/export of GOs.
  • Increase efficiency of trade in GOs by removing barriers, harmonizing certificate registries and increasing access to market info such as pricing.
  • Implement ground rent tax for GOs.

Change that would lead to an increase in the price of Norwegian GOs

  • Implementing mandatory full disclosure for electricity delivered end consumers similarly to Austria and Switzerland.