Cost effects of international trade in meeting EU renewable electricity targets

The European market for renewable electricity received a major stimulus from the adoption of the Directive on the Promotion of Renewable Electricity. The Directive specifies the indicative targets for electricity supply from renewable energy sources (RES-E) to be reached in European Union (EU) Member States in the year 2010. It also requires Member States to certify the origin of their renewable electricity production. This article presents a first EU-wide quantitative evaluation of the effects of meeting the targets, using an EU-wide system for tradable green certificates (TGC). We calculate the equilibrium price of green certificates and identify which countries are likely to export or import certificates. Cost advantages of participating in such an EU-wide trading scheme are determined for each of the Member States. Moreover, we identify which choice of technologies results in meeting targets at least costs. Results are obtained from a model that quantifies the effects of achieving the RES-E targets in the EU with and without trade. The article provides a brief insight in this model as well as the methodology that was used to specify cost potential curves for renewable electricity in each of the 15 EU Member States. Model calculations show that within the EU-wide TGC system, the total production costs of the last option needed to satisfy the overall EU RES-E target equals 9.2 eurocent/kWh. Assuming that the production price of electricity on the European power market would equal 3 eurocent/kWh in the year 2010, the indicative green certificate price equals 6.2 eurocent/kWh. We conclude that implementation of an EU-wide TGC system is a cost-efficient way of stimulating renewable electricity supply.