Green Labels

by W van Zanten, Novem, the Netherlands

A new system of trading in 'green labels'-certificates for renewable energy supplied to the grid-is aimed at stimulating the market for renewables in the Netherlands.

 

Introduction
The Dutch government is striving towards meeting 10% of the country's energy needs from renewable energy in the year 2020. This is an ambitious goal as the renewable energy share is currently only 1.5%. The government is using several instruments to achieve its goal; one of these is a voluntary agreement with parties in the Dutch energy market. The government and the association of energy distribution companies in the Netherlands have agreed to generate 1.7 thousand million kWh of electricity from renewable sources by the year 2000. In other words 3.2% of the electricity turnover will be 'green' by that time. The association expect to realise this agreement by issuing green labels.

Background
Through liberalisation of the energy market in Europe, competition between energy companies is increasing. Liberalisation tends to reduce electricity prices, but lower prices do not favour the promotion of renewable energy which is usually more costly than conventional energy sources. Renewable energy therefore needs a boost in the changing energy market if it is to increase its current small share.

There are two ways to increase the use of green energy: by stimulating supply, or by stimulating demand. The energy distributors in the Netherlands have set up a system based upon stimulating demand. This approach requires renewable energy to be distinguished from fossil energy, and the use of green labels makes this possible.

The government has agreed with the distributors a system of labels or certificates to promote the use of renewable energy in the Netherlands. This centralised arrangement enables individual utilities to contribute to the government's commitment on green electricity. Each utility is responsible for generating an amount of renewable electricity in proportion to its electricity sales in 1995. Every company thus has its own quota. Companies not fulfilling their quota must purchase the shortfall at a penalty price NLG 0.50 per kWh above the going market rate. This penalty benefits the supplying company.

The regulating energy tax or 'ecotax', also helps in promoting the use of renewable energy. Local utilities collect this ecotax and remit it to the government. However, the utilities do not have to hand over ecotax on energy they bought from renewable sources, and this gives renewable energy producers an advantage.

Early in 1997, the utilities agreed with the Ministry of Economic Affairs to generate 1.7 thousand million kWh of green electricity by the year 2000. This represents a substantial increase from the present generation of about 0.9 thousand million kWh.

The green label system
In the green label system each kWh of electricity from renewable sources obtains a label. This label is discrete from the electrical energy, so that a renewable energy plant actually produces two products: electricity and green labels. The producer sells the electricity to the local utility which is forced, by law, to accept all electricity against a standard remittance fee.

For convenience, each 10,000 kWh obtains one green label ­ a certificate stating that 10,000 kWh of electricity from a renewable source was supplied to the national grid in a particular month. The label is advertised on an openmarket. Private persons, enterprises and utilities can sell and buy green labels. In particular, utilities which have failed to meet their quota for renewable energy may buy labels to make up their shortfall.

A registration system, maintained by the utilities, keeps a record of all green labels issued and traded and the records are published on an Internet site (www.GroenLabelNed.nl). You trade on the market by putting a note on the bulletin board requesting or offering green electricity. Each note also comprises details on the type of energy, the cost, the availability and the contract period. The Internet site keeps all information over the last two months. This Internet site also gives an overview of the Dutch market in green electricity.


Breda van Melle PV plant in the Netherlands.

The application
Trading in green labels started at the end of 1997. A genuine market does not exist at present; not enough labels have been generated as yet to keep a steady supply available to trade. This has been compounded by utilities tending to keep their labels as they want to secure their own quota before entering into trading.

An example of a deal in green labels is the experience of the PNEM utility. PNEM bought labels from the "Kneeshoek" wind farm. The wind farm sold electricity to the ENW utility but sold labels to PNEM. Each month, ENW verifies the amount of renewable energy supplied by the wind farm and 'converts' this to green labels. The wind farm director then sells the labels to PNEM.

The standard market value of electricity is NLG 0.08 per kWh at present. The ecotax for 1999 is NLG 0.05 per kWh, so all renewable sources with an electricity price less than NLG 0.13/kWh (NLG 0.08 + 0.05) are economical now. If the likely generation cost of 1.7 thousand million 'green' kWh is NLG 0.18 /kWh, a label should generate NLG 0.05/kWh. The current value of a label is about NLG 500.

Conclusion
Green labels are a way of stimulating the use of renewable energy. The green label system facilitates the generation of green electricity by rewarding generating companies with a premium on top of the standard remittance fee of electricity. It also helps distribution companies with insufficient capacity to generate green electricity themselves to accomplish their obligation to the government in the voluntary central agreement. The Internet site: http:www.GroenLabelNed.nl gives a permanent overview of the present market in green electricity labels.

For more information contact the CADDET Dutch National Team in Sittard.

The CADDET Renewable Energy Newsletter is a quarterly magazine published by the CADDET Centre for Renewable Energy at ETSU, UK.

The articles published in the Newsletter reflect the opinions of the authors. They do not necessarily reflect the official view of CADDET.

Enquiries concerning the Newsletter should be addressed to Pauline Toole, Editor, CADDET Centre for Renewable Energy, ETSU, Harwell, Oxfordshire OX11 0RA, United Kingdom. Tel: +44 1235 432968, Fax: +44 1235 433595.