Abstract
At the time of its introduction in 2002, the Flemish system to support renewables was a pure market-based green electricity certificate system. Starting in 2004 a string of changes to the system, up till the current year 2013, culminated in the addition of a minimum allowance for green electricity certificates. This minimum allowance presents a minimum market price for green electricity certificates. The gradual transformation of the system took place as a consequence of a series of policy responses to imperfections of the system as perceived by policy makers. In our analysis, we investigate whether the system has been effective and efficient in reaching its goals. We focus on four consequences of the system’s structure: three related to the aspect of minimum allowances (the time-lagged nature, the technological orientation and the differentiated rights for technologies) and one related to the market-based green certificate aspect (the short-term target setting by limited annual quota increases). At present Flemish renewable targets have been reached, thus the system seems to have been effective but there are doubts about its efficiency. Whether the current form of the system will still be effective in the future, so that Flemish renewable energy targets can be met, and whether the system will turn out to be efficient, is as yet undetermined.
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Notes
- 1.
Legend: COMB = combustion; HH = households; COMP = companies; CD = co-digestion; AGM = agrarian and/or manure; VGF = vegetable, fruit and garden; SESI = subsidy for ecologically sound investments.
- 2.
In finance, the net present value (NPV) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values of the individual cash flows of the same entity.
- 3.
The discount rate is the rate used in discounting future cash flows.
- 4.
The Internal Rate of Return (IRR) is used in capital budgeting to measure and compare the profitability of investments.
- 5.
The term ‘Investor’ refers to all organisations or individuals who contribute capital and/or resources to the development of renewable electricity projects, small or large scale, and who anticipate a financial benefit.
- 6.
The incremental demand path has already been changed a few times in the past. E.g. from 01/01/2011 to 29/07/2012 the 2013 target was 8 % and the 2020 target was 12.5 %.
- 7.
In addition to final demand for green electricity certificates as set by the Flemish government, the possibility to bank green electricity certificates for 10 years allows for a temporal increase or decrease in demand. (banking of certificates = storing obtained certificates for later usage) The decision to bank green electricity certificates can be based on an expected future certificate price increase.
- 8.
A price-inelastic demand translates to a demand level which remains constant regardless of an increase or decrease in price.
- 9.
PJ = Petajoule = 1015 Joule: a derived metric for energy where one joule is equivalent to the work required to produce one watt of power for one second.
- 10.
Final electricity consumption in Flanders was 181.7 PJ in 2011. Flemish Energy Balance 2011, http://www.emis.vito.be/sites/default/files/pages/1332/2012/balans_2011_versie_nov_2012_correctie_0.xlsx.
- 11.
With the expression “fixed demand path level” we refer to the mechanism where the Flemish government defines a fixed number of green electricity certificates to be handed in each year and hence defines the demand for green electricity certificates. The quantity to be handed in each year is known years in advance. So the demand for certificates is known as well as the yearly evolution of this demand. We call this a “fixed” (by law) “demand path” (yearly evolution) “level” (known quantity).
- 12.
A technology lock-in is a situation where past investment decisions limit the number of present technology investment options. If an investor has committed a large amount of capital to a new installation it is unlikely that he will end its exploitation before the end of its technical life. Hence he will not make new investment decisions during this time.
- 13.
Efficacy measures in how far goals are met.
- 14.
Effectiveness measures the causal relation between an action and goal satisfaction. Has the action resulted in the goal satisfaction or would the goal also be obtained without the action?
- 15.
Efficiency measures the balance between effort and result. Is the amount of effort proportional to the obtained result?
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Moorkens, I., Dams, Y., Van Wortswinkel, L., Schaeffer, G.J. (2013). Green Electricity Certificates in Flanders: The Gradual Extension of a Market-Based Mechanism and Doubts Over its Cost-Efficiency. In: Michalena, E., Hills, J. (eds) Renewable Energy Governance. Lecture Notes in Energy, vol 23. Springer, London. https://doi.org/10.1007/978-1-4471-5595-9_19
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