Long-Term Elcert Outlook

During 2019 the tough reality has hit the Elcertificate market with full speed. Per mid-March spot price is trading at around 1.6 - 1.7 EUR, compared to the 12-13 EUR level seen one year ago. This very well illustrates the recent market collapse.

The pace of investments within the scheme is proceeding with express speed. Although it is almost two years left of the common Swedish-Norwegian scheme period, the common 28.4 TWh target of new renewables was reached already in May last year. According to latest quarterly report issued by NVE and Energimyndigheten 34.4 TWh was accepted into the scheme by the end of 2019, and additionally 23.3 TWh was under construction, mainly wind power. Although investments have slowed down, some new projects have also come into the pipeline during the last twelve months. The accumulated balance has been negative for many months in 2019 and some months into 2020. However, the massive build out of capacity will erase the deficit and create a large future oversupply of elcertificate in near future.

The backdrop for the beginning of 2019 was the rather surprising news announced by the regulators right before Christmas in 2018 and the turmoil this created. The regulators suggested a Swedish date stop rule in 2030, which caught the market at surprise and caused objections among many market participants. In mid-March 2020 the Swedish government released their long-awaited proposal, suggesting a stop rule similar to Norway. This implies closing the Swedish part of the system in the end of 2021 and moving the demand intended for 2036-2045 forward, i.e. shortening the scheme by 10 years. Although the final decision for a stop mechanism for the Swedish part of the scheme is still unsettled, this has contributed to the very bearish development this year.

This year’s edition of the Long-Term Elcertificate Outlook gives an updated analysis on how the current market situation will affect the elcertificate market regarding build-up, balance and price development until 2044 assuming either of the two stop mechanisms. During the past years we have been using a fundamental model, developed together with SINTEF, covering the elcertificate and power market based on the EMPS model. The model is an extension of the SKM Elcertificate model covering the supply side on power plant level. The detailed overview of the supply side of the market gives the basis for our forecast of new renewable production that is expected to be developed, divided both geographically and technologically.

The Long Term Elcert Outlook 2020 is providing you a stochastic approach for analysing the future development of the common Swedish-Norwegian Elcertificate market. The main advantages of the EMPS model are the integration of the elcertificate market within the Nordic power market and that it enables us to take into consideration the stochastic nature of consumption, wind and hydro power. Historical weather data for a long period covering different weather types is used to analyse the variability of both the future renewable production and power demand. This provides us with 75 different weather scenarios each with different developments for production of renewables and consumption. Among other things, the weather scenarios enable us to prepare duration curves together with average weekly prices for elcertificates with probability distribution.

Long-Term Elcert Outlook 2020 covers:
    • Updated statistics per fourth quarter of 2019.
    • Updated elcertificate and power price development by the end of week 13 2020.
    • Recent forecasts for expected new renewable generation and demand development.
    • Development of elcertificate balance and price until 2044 for two scenarios:
      • Proposal from the regulators as of December 2018: Assuming an implementation of Swedish date stop in 2030 and no changes to the demand side
      • Proposal from the Swedish government as of March 2020: Assuming an implementation of Swedish date stop in 2021 and moving of 2036-2045 demand to shorten the scheme period. Assessment of scenarios for future electricity demand development
Long-Term Elcert Outlook 2020 includes:
  • Extensive report containing assumptions, discussion and analysis of the results.
  • Discussion of the elcertificate market framework and the future development of the elcertificate market including Progress Reviews.
  • Stochastic approach to modelling with estimation of variability of wind and hydro.
  • Fundamental scenarios analysing the uncertainty in the market.
  • Detailed results with average weekly prices for elcertificates with probability distribution, demand and supply forecasts for elcertificates by country and technology in Excel-sheets.

For order or questions please contact

Viktor Balyberdin
Tel: +47 99 59 59 09

Sigrun Morland
Head of analysis
Tel: +47 45 42 35 00

If you have any questions about this product please contact us using contact information in the right column.