A NEW ANALYTIC APPROACH FOR THE GREEN CERTIFICATE MARKET

The joint Swedish-Norwegian certificate market (elsertifikatmarkedet) entered into force on January 1 2012. This market is the major support mechanism used by both countries to achieve their respecitive renewable energy targets under the EU Renewables Dir ective. Under the scheme Norway and Sweden will jointly increase the amount of generation from qualifying renewable sources by 24.6 TWh per annum by 2020. Two key issues remain for all market stakeholders, including regulators, grid operators, developer s, producers, suppliers, consumers, and traders. What will drive price formation and investments going forward, and what impact, if any, could use of control stations, changes to market design and regulation, financing and actor behaviour have on the effe ctiveness and efficiency of the certificate market? Our research project will develop new computational models of the certificate market, to enable a better analysis of the market's future and assess the impact of changes to market design. Our approach i s built upon developments in the fields of behavioural economics and intelligent systems modeling (such as agent based simulation) to develop a model for the certifacte market that focuses on modelling the processes and decisions by the actors within a gi ven market, generating resultant market behavior in much the same way as seen in reality. Another aim is to show that historically observed prices, investments, and market outturns are largely explained by particular design components of the certificate market, and of particular market events (both in the certificate and the power market). Once identified, we could also answer the counterfactual, i.e. how would the market have behaved under different rules and circumstances. This will thus also help in a ddressing the question how future markets regulation may be refined or adjusted.

The joint Swedish-Norwegian certificate market (elsertifikatmarkedet) entered into force on January 1 2012. This market is the major support mechanism used by both countries to achieve their respecitive renewable energy targets under the EU Renewables Dir ective. Under the scheme Norway and Sweden will jointly increase the amount of generation from qualifying renewable sources by 24.6 TWh per annum by 2020. Two key issues remain for all market stakeholders, including regulators, grid operators, developer s, producers, suppliers, consumers, and traders. What will drive price formation and investments going forward, and what impact, if any, could use of control stations, changes to market design and regulation, financing and actor behaviour have on the perf ormance of the certificate market? We propose a research project to develop a new analytical and modeling approach to enable a better analysis of future certificate market outturns and impacts of changes to market design. Our innovation is to build upon advances in the fields of behavioural and intelligent systems modeling (such as agent based simulation) to develop a modeling methodology for the certifacte market that focuses on modelling the processes and decisions by the actors within a given market, generating resultant market behavior in much the same way as seen in reality. Another aim is to show that historically observed prices, investments, and market outturns are largely explained by particular design components of the certificate market, and of particular market events (both in the certificate and the power market). Once identified, we could also answer the counterfactual, i.e. how would the market have behaved under different rules and circumstances. This will thus also help in addressing th e question how future markets regulation may be refined or adjusted.