Legislation on Electricity Favourable to Renewables (Electricity Reform Agreement)

The Electricity Reform Agreement, which entered into force in 2000, established the framework for safeguarding consumer protection, environmental considerations and security of supply in the liberalised electricity market. It transformed the subsidy scheme for renewables from fixed payments to a type of renewables portfolio standard. The legislation introduced CO2 quotas, tradable emissions allowances and renewable energy certificates for a green electricity market. To meet their quotas, it was intended that electricity distributors could develop renewable supply options or purchase renewable generation credits as proxies. The law envisaged that these market mechanisms would be developed in stages, with a view to full functionality in 2003. The framework for the bourse was to be regulated by the government; but with system regulators and net operators being responsible for measuring renewable electricity production and for issuing certificates representing the number of kilowatt hours on offer. Demand for green certificates was to be ensured by means of quotas for the purchase of renewable energy electricity, which all electricity consumers were to fulfil and which were to be laid down by the Minister for Environment and Energy. Under the terms of the Electricity Reform Agreement, the price of a green certificate was presupposed to be a minimum of DKK 0.10. A penalty price for not satisfying the renewable quota was initially introduced at a price of DKK 0.27 per kWh (akin to the maximum price for a green certificate), thereby establishing a certain degree of stability of market prices. It was anticipated that the share of electricity generated from renewable sources (principally wind turbines) was expected to rise to 20% by the end of 2003. In 2001, a parliamentary hearing concluded that the renewable certificate scheme was impracticable and it has not been implemented. Until a final decision is taken, transitional regulations on power purchase rates and premium payments for renewables are set out in Executive Orders.