Sweden is a lodestar when it comes to the renewable shift in Europe. It was among the first in Europe to introduce Guarantees of Origin (GOs) in 2001, and it also introduced a support scheme, El-certs, to enhance the development of renewable electricity in 2003. Meanwhile, Sweden was the first country to introduce carbon pricing, and it has the highest carbon price in the world.

, the total electricity production in Sweden in 2020 was 163TWh, while consumption was around 127TWh, making Sweden a net exporter of approximately 36TWh. Contrary to its western neighbour, Norway, Sweden has significant electricity production from non-renewable sources. In 2020, 32% of its gross production came from non-renewables, with 31% nuclear and 1% fossil.

Sweden Green Certificates - electricity

In the past decades, the main sources of electricity generation in Sweden come from Hydropower and Nuclear. Sweden is expected to be dependent on nuclear power as baseload in the future, but signals from the government indicate more subsidies to renewable development, with continuous grants to research and development on renewable energy 

. Except for El-Cert quota obligation system, Sweden also introduced an investment support for solar panels 

. As a global leader in decarbonisation, Sweden set the targets of cutting GHG emissions 59% by 2030 in comparison to 2005, being powered by renewables by 2040 and reaching a net-zero carbon economy by 2045 

Sweden Green Certificates - capacity

In conclusion, we should expect renewable electricity production to increase considerably in the years to come.

National Public Support Schemes: El-Certs and Solar Investment

Sweden introduced the El-Cert support scheme to enhance the development of renewable electricity in 2003. The El-Cert is a certificate-based quota obligation system for renewables, which set the quota to consumers except for electricity intensive industries. The consumers or electricity suppliers on their behalf are mandatory to buy and cancel a certain amount of El-Certs to meet their obligations, where the amount is an annual floating share of their total electricity consumption or sales 

. Basically, the electricity suppliers add the costs for El-Certs to the electricity costs, and the consumers finance the renewable supports by paying more for their electricity consumption. El-Certs are issued monthly, done on around 15th of every month, for the production for the previous month 

Norway entered the joint Swedish/Norwegian market for the El-certs scheme in 2012, awarding the power plants approved for El-Cert support for their production up to 15 years. El-Certs are awarded to power producers by the Swedish Energy Agency and the Norwegian Water Resources and Energy Directorate, and physical electricity certificates are delivered to designated accounts in Cesar registry (Swedish) or NECS (Norway) 

. As a freely tradable instrument in the joint market, El-Cert is used for support allocation and quota compliance. However, it cannot be used as a proof of origin for electricity disclosure 

. GOs can be issued for the same energy unit for which El-Cert has been issued. In the joint market of El-Certs, Sweden has dominated in both certification issuance (66% of total in 2021) and cancellation (62% of total in 2021) 

Sweden Green Certificates - El-Certs2

In 2012, Sweden and Norway put forward a common goal of new renewable production of 28.4TWh by 2020. In May 2019, the target set in 2012 was reached; of the 28.4TWh, 20TWh was commissioned in Sweden. In June 2017, Norway and Sweden made an agreement allowing Sweden to unilaterally extend the El-Cert market with ten years while Norway is scheduled to leave the scheme in 2030, with no new commissions after 2021 

. Meanwhile, the target was further raised to 46.4TWh by 2030. By 2021, the El-Cert scheme contributed 53TWh renewable output, exceeding 7TWh of 2030 target. Before 2013, Biofuels El-Certs has the highest production ratio of more than half. After that, Wind El-Certs started to prevail for issuance; in 2021, there were 68% of El-Certs sourced from the Wind production.

Sweden Green Certificates - El-Certs3

Norway is scheduled to leave the scheme in 2030, with no new commissions after 2021. However, Sweden Energy Agency has decided to extend the El-Cert scheme until 2045 and proposed that all investments made before 2030 will be eligible 

. The vast development of renewable installed capacity and surplus above the target has led to a significant oversupply of certificates and price pressures, as shown in the graph below. Meanwhile, due to the relatively low real price of El-Certs, there are big differences of price index between OTC market and Exchange, as the latter consists of high markup premium up to 50% of total prices. In 2022Q2, the spot contract in the El-cert OTC market was last traded between 0.6 to 0.9SEK/MWh (0.06 to 0.08EUR/MWh), and the corresponding forward prices was witnessed between 0.9 to 1.6SEK/MWh (0.08 to 0.15EUR/MWh) 

Sweden Green Certificates - El-Certs

Except for El-Certs, Sweden also set an investment support for solar panels, with a current support level of 20% of installation costs. The celling of support per PV system is 1.2 million SEK and the eligible costs may not exceed 37 000 SEK plus VAT per installed kilowatt electric peak power 

Before 2015, Swedish authorized GOs Issuing Body was TSO, Svenska Kraftnät. Since 2015, Swedish GOs are issued by Energimyndigheten (EM) and accounted for in Cesar. Implemented by the SFS 2010:601 (Lag om ursprungsgarantier för el - Act on guarantees of origin for electricity), GOs can be issued for all types of production, including nuclear and fossil (a so-called “full disclosure” framework). As in other AIB-countries, this is a voluntary scheme. Hence, to get GOs issued, the producer first needs to register their power plant and get it approved, and then report the production. EM does not issue any Non-Governmental Certificates (NGCs) or EECS-GOs with Independent Criteria Schemes (ICSs) 

Swedish GOs, Ursprungsgarantier, consists of National GOs (SE-GOs) and EECS-GOs. These two are mutually exclusive, and SE-GOs is restricted for use in Sweden while EECS-GOs can be freely traded among all AIB-countries in Europe, except Flanders. It is the EECS-GOs that are reported to AIB and is seen in the European statistics, and the exported EECS-GOs ending up in the AIB statistics started toinclude nuclear GOs from 2019. The detailed difference between two GOs are presented in table as below 

Sweden Green Certificates - Difference

The legal framework for GOs in Sweden, Lag (2010:601), was revised in June 2017, and Cesar was adopted to the EECS-standard. This simplified the handling of EECS-GOs. Before the change, the issuance of EECS-GOs (referring to electricity generation before 1st of June 2017) was facilitated by transferring SE-GOs to Swedish central registry for EECS-GOs managed by Grexel. For generation starting 1st of June 2017, EM replaces Grexel as issuing body and both SE-GOs and EECS-GOs are registered in Cesar registry 

. It implies that a growing amounts of Swedish GOs will become EECS-GOs, as shown below.

Sweden Green Certificates - GOs

If we assume that all SE-GOs become EECS-GOs, it seems a substantial amount of Swedish GOs will be available in the European market. However, as we see from the statistics, we shouldn’t expect the overall supply in Europe to increase much, since most of the Swedish GOs usually get cancelled within Sweden.The prices of SE-GOs and EECS-SEGOs have been roughly identical the last couple of years.

Exported EECS-GOs are reported to AIB. The issuance of EECS-GOs shows an increasing trend with slightly diminishing growth rate the last two years, mainly caused by pandemic. On the other side, EECS-GOs’ cancellation experienced a rapid growth between 2017 to 2019 and a downward trend the last two years. The main sources for both issuance and cancellation are from Hydropower and Wind. Notably, EECS-GOs from Wind and Nuclear generation have represented noticeable rising portions of the total issuance. With more and more focus on renewables and the continuous development of renewable energy, we expect the same trend in years to come. 

Sweden Green Certificates - EECS-GOs

The energy source portions of SE-GOs issuance are in line with Swedish electricity generation, mainly from Hydro and Nuclear. In 2021, Nuclear and Hydro SE-GOs in total constituted around 80% of total issuance. By comparing the total issuance of Swedish GOs in Sweden with the issuance reported to the AIB, it looks like there is a huge amount of available non-exportable GOs in Sweden. However, by examining the numbers in more detail, and include domestic cancellations of non-exportable GOs, we only see a minor and rapidly decreasing amount that can potentially enter the free market each year. 

Sweden Green Certificates - SE-GOs

As elaborated in a separate Greenfact report 

, the Swedish Ecolabel Bra Miljöval (BMV in short, i.e., “Good Environmental Choice”) came into existence in 1996, five years before Guarantees of Origin (GO) was implemented in 2001. While GOs provide all relevant and technical information about the corresponding electricity’s production, Ecolabels set certain predefined criteria upon them - only those with qualified electricity generation can be labelled. As an Ecolabel, BMV for electricity comes with a set of criteria. For instance, BMV’s corresponding electricity must be generated from 100% renewable energy from hydro, wind, solar or bio. For BMV Hydro, the production plants must have a minimum water flow to avoid dry riverbeds; and for BMV Wind, electricity generation must come from parks that are not located in areas especially valuable for ecology 

Sweden Green Certificates - BMV

The BMV labelled GOs are usually traded at a premium over ordinary Nordic GOs. Theoretically, the difference should maintain a fixed level. In practice, we observe from Greenfact’s transaction record that the average difference for hydropower from 2011 to present time is 13.9 Eurocent/MWh (ca. 1.50 SEK/MWh), and large deviations are common 

. However, since 2018, the premium of BMV Hydro GOs had decreased compared to generic Nordic Hydro GO. According to our data partner, currently, BMV Hydro normally are traded at a premium of 8 to 25 Eurocents/MWh in comparison to Nordic Hydro, depending on vintage, volume, credit, delivery and settlement terms 

We expect that the total market of BMV-labelled GOs will continue to grow. Due to the strict criteria of the labelling, etc., however, a super-linear growth would be less likely. For the price, with the defining mechanism of BMV labelling, it is reasonable to expect the positive correlation between the prices of BMV hydro GO and generic Nordic hydro GO to continue.

Sweden is one of Europe’s largest producers of GOs, issuing around 73TWh EECS-GOs from renewable sources in 2020, the equivalent of more than 65% of Sweden’s renewable electricity production, increased from 60% in 2019. The demand for the national GOs is high, and as we saw in the previous section, most of them are cancelled.

Sweden has essentially four types of renewable technology, in descending order according to size Hydropower, Wind, Biomass and Solar PV 

. In the past decade, installed capacity for Hydropower and Biomass have been almost stable, with compound annual growth rates (CAGR) of 0.62% and 0.29%, respectively; while Solar PV has the highest CAGR of 59%, due to the introduction of solar panel investment supports, followed by Wind, which has a CAGR of 14%.

Assuming that development for renewables can be well represented by historic numbers, in the figure below, we have plotted historical values together with the expected development of installed renewable capacity in Sweden.

Sweden Green Certificates - capacity forecast

As one of the leading players in the green transition, Sweden sets the target to reaching a net-zero carbon economy by 2045. After 2017, Cesar was adopted to the EECS-standard, which simplified the handling of EECS-GOs. However, due to the high national demand in Sweden, it is unclear how much more exportable GOs we will see. By looking at the 2021 statistics from Cesar and AIB, we see that the percentage of Hydro EECS-GOs in total GOs has increased from 70% in 2020 to 72% in 2021 and Wind EECS-GOs has increased from 80% in 2020 to around 82% in 2021.

Sweden and Norway agree end to electricity certificate scheme - Wind Power Monthly

How Should a Stop Mechanisam for Electricity Certificate Market be Designed? - THEMA , Energimyndigheten

The Ecolabel Bra Miljöval - market review 

Decrease in the premium for Bra Miljöval GOs

Market Report

Sweden and Green Certificates

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