Nordic Green Power Boom Seen Exceeding Target on Wind Boost

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Sweden and Norway will probably exceed a joint target for renewable energy production by the end of the decade, industry consultant Nena AS said.

A goal of 28.4 terawatt-hours of annual renewable output by 2020 may be exceeded by 1 terawatt-hour, Joachim Jernaes, an Oslo-based analyst at Nena, said Monday by phone. More than 60 percent of the capacity needed has already been built, according to Nena, whose clients include banks and utilities. A terawatt-hour supplies 200,000 Swedish households for a year.

Plans by developers to earn additional certificates include 200 onshore wind parks, which will be competing with new hydro, bio and solar plants. Production in the Nordic region will exceed demand by as much as 7 percent by 2020, according to Nena. Year-ahead power last month traded at its lowest level since 2005 on Nasdaq OMX Group Inc.’s commodities exchange.

“There is a massive amount of projects that do not need to be built already in the pipeline,” said Jernaes. “It can quickly become a situation where investment decisions are made for more production than intended.”

Each megawatt-hour produced from approved sources receives a tradable certificate. Utilities are obliged to buy permits every year to match sales of electricity. Demand is decided by a fixed quota of power sales, which has remained stable since 2012. A surge in renewable generation has boosted the supply of certificates and cut their market value.

Slumping Certificates

Certificates fell to a record 136 kronor ($16) per megawatt-hour in March, according to Svensk Kraftmaekling AB, a broker in Stockholm. They traded at 144 kronor on Tuesday. Without an increase in the quota setting demand, or tighter Swedish supply rules, prices may fall to zero after 2020, Jernaes said.

Power for 2016 fell to a record 26.30 euros ($29.36) per megawatt-hour on May 22 and closed Tuesday at 26.88 euros on Nasdaq’s commodities market.

Sweden and Norway may revise the 2020 target, or add a new 2030 goal to the market, Jernaes said.

There may be further interventions because 76 percent of investments are in Sweden, he said. A combination of well-developed grid connections, tax exemptions and authorities permitting windmills as tall as 240 meters (787 feet), has made it more profitable to invest in Sweden rather than its more windy neighbor, Jernaes said.

Solar power output in the joint system will rise to 1 terawatt-hour by 2020, from 0.1 terawatt-hour in 2016, according to Nena.

Most of Sweden’s hydro plants are located in the north and with most industrial demand in the south, the grid is better developed to transfer power than in Norway, where hydro plants are more evenly distributed.

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