What are Renewable Energy Certificates?

The renewable energy quota system policy is a compulsory regulation made by the government of a country or a region on the market share of renewable energy power generation.

In China, the "renewable energy quota system" is an important policy proposal in China's "10th Five-Year Plan" for renewable energy. The basic meaning is that in the regional power construction, renewable energy power generation needs to maintain or occupy a certain proportion. Renewable energy equivalent to the quota ratio can be traded between regions (grids) to resolve regional differences in renewable energy resources.

The main approach is to provide in the form of laws that a certain percentage of the total electricity supply must come from renewable sources.

First, through the form of laws and regulations, it is guaranteed to achieve the quantitative development goal of renewable energy in a long period of time, that is, to ensure that renewable energy power generation

In order to promote the development of renewable energy, the government has designed different methods that require electricity suppliers to purchase renewable energy power. Among them, the Renewables Portfolio Standards (RPS), also known as Tradable Green Certificates, TGC) is a more common one. Under this type of system, renewable electricity is sold at market prices just like conventional electricity, while the cost of producing renewable energy is higher than the cost of traditional fossil energy electricity. Certificate sales offset. The core of the system is that the government or regulatory authorities can enforce regulations to require power supply companies to have a certain minimum quota or a fixed percentage of the electricity sold before a certain time must come from renewable energy. In order to meet the statutory requirements for renewable energy, power supply companies can use renewable energy to generate electricity and hold relevant quotas or certificates, or buy renewable energy power with quotas or certificates from other companies, or purchase renewable Renewable energy quota or certificate.

The main principle of the renewable energy quota system policy is to separate the environmental and social benefits involved in generating electricity from renewable energy from the electricity itself and sell it separately, and to introduce competition among buyers and sellers of renewable energy electricity and certificates. The total price realized by renewable energy power generation enterprises is composed of both the market price of electricity and the price of renewable energy certificates.

The Netherlands introduced a groundbreaking "green label" system in 1996 (revised in 1998) and has attracted much attention. The system is based on the trading market, and Dutch power companies voluntarily commit themselves to renewable energy targets to be achieved. Until the end of 1999, the system produced mixed results, partly due to the lack of mandatory targets. The experience of the Netherlands shows that the government needs to set clear medium-term and long-term goals, that is, to provide policy predictability; the validity period of the green certificate should be a certain duration in order to "storage" and "borrow" the certificate; it is necessary to market the certificate Internationalization to improve stability and market liquidity.
Other countries that introduced tradable renewable energy generation certificates include Italy (since 2002), the United Kingdom (since 2002), Belgium (since 2002), Australia (since 2001) and Sweden (since 2003) Starting), although the United States has not established a renewable energy quota system at the federal level, about 20 states have adopted their own quota systems. Other countries have postponed or abandoned the plan, such as Austria and Denmark. ^[1]

The main benefit of a renewable energy quota policy is that it improves static and dynamic efficiency. Low-cost manufacturing companies have a better chance of selling their certificates in the green certificate market. This has a positive effect on regionally distributed power generation companies that are no longer limited by their local resource availability and technological possibilities.

The quota policy sets long-term and more aggressive renewable energy development goals. In addition to providing a more stable external policy environment for power generation enterprises, it will also bring better grid planning to adapt to renewable energy development and other promotion of renewable energy. Necessary conditions for energy development. If the renewable energy quota policy is not only understood as a means to reflect external costs and benefits, but also as a mechanism to support the commercialization of emerging technologies and the diversity of energy supply, it can be adjusted to promote a wider range of The development of renewable energy, then different renewable energy technologies need to be divided into different levels. This will at least avoid extruding some of the more expensive or less developed technologies. When the minimum cost mechanism inherent in the system is to be maintained, the problem of weakened liquidity in the certificate market will arise. The certificate trading market that trades a single certificate will be divided into smaller independent certificate trading markets for wind power, bioenergy, and photovoltaic power generation. Competing technology choices at various technological levels are ultimately political decisions. In principle, it can be said that if relatively expensive technologies with lower socio-ecological and economic impact are included in the system without ranking, these technologies will not be able to compete successfully. This division of technical grades can not only increase the diversity of energy supply, but also reduce the overall negative impact of the energy system on the economy, society and the natural environment.

First, it has flaws in policy design. One aspect is the coverage of the policy. For example, the quota system in the United States only stays at the level of various states, and different states have different standards for qualified renewable resources, different rules for their production, and regulations on whether renewable energy certificates can be independently traded. Nor are they consistent, all of which will lead to some degree of fragmentation in the renewable energy market.

By establishing a broader quota policy (such as extending to the federal level in the United States), although the market segmentation problem can be solved, it will also cause new problems. For example, the states in the southeastern United States are considered to be regions lacking renewable energy. If a federal-level quota system is adopted, power generation companies in these regions may face a long-term net purchase of green certificates, which will seriously affect the generation of these power generation companies. Profitability. On the other hand, the setting of quota targets and the design of green certificate trading systems are very complicated processes, and management agencies tend to set a more aggressive target. If these targets are not reachable or unrealistic, they may cause most Even if the power generation enterprises work very hard and spend a lot of investment, they will not be able to achieve the renewable energy proportion required by the quota system policy, which will discourage power generation enterprises from investing in renewable energy. At the same time, such a more aggressive policy will lead to rising electricity costs and thereby harm the entire economy, and will lead to social resistance to renewable energy electricity.

Secondly, the non-differential quota system does not encourage the development of immature technologies. Its disadvantage is that low-cost renewable energy power generation technologies may force high-cost technologies to exit the market. For example, in the US state of Texas, wind power capacity has increased significantly, while solar power still has no price competitive advantage over traditional power generation. In the UK, most renewable energy development activities under the Renewable Obligation (RO) system are limited to onshore wind power and landfill gas power generation. This means that the learning curve benefits of market development and other technologies will be limited. ^[2]

In addition, the complexity of implementing quota management will result in higher regulatory costs. The operation of the quota system policy is more complicated, and requires effective supervision and strong penalties, which have increased the cost of control. ^[3]