GREEN CERTIFICATES AND MARKET POWER ON THE NORDIC POWER MARKET WORKING PAPERS IN ECONOMICS. Department of Economics U N I V E R S I T Y OF B E R G EN

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1 WORKING PAPERS IN ECONOMICS No.12/10 EIRIK S. AMUNDSEN AND LARS BERGMAN GREEN CERTIFICATES AND MARKET POWER ON THE NORDIC POWER MARKET Department of Economcs U N I V E R S I T Y OF B E R G EN

2 Green Certfcates and Market Power on the Nordc Power Market By Erk S. Amundsen 1 and Lars Bergman 2 Abstract: The purpose of ths study s to elucdate under whch crcumstances, how, and to what extent market power on the TGC market can be used to affect the entre electrcty market. There are bascally two reasons for beng concerned wth market power n TGC markets. One s that a small number of companes may have exclusve access to frst rate stes for wnd power generaton. The other s that wthdrawal of a small number of TGCs mples a multple reducton of electrcty consumpton, wth correspondng ncreases of end user prces. For the purpose of nvestgatng the prncples by whch market power may be exercsed n ths settng a smple analytcal model s desgned and analytcal results are derved. To nvestgate matters further a numercal model, based on the analytcal model, s constructed for the Nordc countres. Among the Nordc countres only Sweden has a TGC market but there s a common Nordc electrcty market wth free trade of electrcty. The analyss shows that Swedsh companes possessng capacty for green electrcty generaton, ndeed, have the ablty to exercse market power on the common Nordc power market by wthholdng TGCs. However, the analyss reveals that an openng of TGC trade between the the Nordc countres to a large extent acheves the obectve of elmnatng the use of market power that would otherwse be establshed. Also, ths may have a cushonng effect on the volatlty of TGC prces. JEL classfcatons: C7; Q28; Q42; Q48 Key words: Renewable energy, electrcty, green certfcates, market power, Nordc power market. 1 Correspondng author. Department of Economcs, Unversty of Bergen, Fosswnckelgate 6, N-5007, Bergen, Norway. E-mal: erk.amundsen@econ.ub.no, Phone: , Fax: Stockholm School of Economcs, Box 6501, SE Stockholm, Sweden. E-mal: Lars.Bergman@hhs.se

3 1. Introducton 3 In Sweden a market for Tradable Green Certfcates (TGCs) was ntroduced n The purpose was to stmulate nvestments n electrcty generaton based on renewable energy sources wthout usng drect governmental subsdes to renewable energy. More precsely the am s to create a market where dfferent types of renewable electrcty can compete on equal terms, thus relevng governments and publc agences from beng drectly nvolved n power ndustry nvestment decsons. Lke any other market a TGC market conssts of sellers and buyers. The sellers are the generators of green electrcty 4. The generators obtan an amount of TGCs correspondng to the amount of green electrcty they feed nto the network.e. one MWh of green electrcty generated gves rse to one TGC. The sellers thus get revenues both from sellng the electrcty on the electrcty wholesale market and from mmedately sellng the TGCs receved from the ssung body on the TGC market. However, they may also decde to sell the certfcates at a later date, or even not at all. The buyers of TGCs are the consumers and retalng companes that are requred to acqure certfcates correspondng to a certan percentage of the total consumpton of electrcty ( the percentage requrement ). In other words the demand for TGCs s drectly derved from the demand for electrcty. A market clearng prce of TGCs s determned by the nterplay of supply and demand. An mportant aspect of a TGC system s that the percentage requrement creates a drect lnk between the electrcty market and the TGC market. What happens n the electrcty market has a drect mpact on the TGC market and vce versa. Moreover, as the demand for electrcty tends to be nelastc, the derved demand for TGCs s even more nelastc. Several studes have focused on varous mplcatons of the drect lnk between the two markets 5. 3 The authors are grateful to Germund Nese for complng cost data and updatng the numercal model, and to Elforsk and the Nordc Energy Research Program for fnancal support. Constructve comments by Rchard Green (on an earler verson of the paper) are gratefully acknowledged. The ntal steps n ths proect were taken wthn the SESSA proect, fnanced by the EU Commsson. The usual dsclamer apples. 4 By green electrcty s meant electrcty produced by means of wnd-, sun-, wave- and geothermal energy as well as by bomass and peat and (new) small hydropower plants. 5 Amundsen and Mortensen (2001), as well as Amundsen and Nese (2004) show that an ncrease of the percentage requrement does not necessarly lead to an ncrease of the generaton of green electrcty 2

4 It seems to us that many of the problems dscussed n these studes were not well understood when TGC markets were desgned and ntroduced. Another ssue that also seems to have been overlooked s the rsk for and mpact of market power n the TGC market. The purpose of ths study s to elucdate under whch crcumstances, how, and to what extent market power n the TGC market can be used to affect the entre electrcty market. There are bascally two reasons for beng concerned wth market power n TGC markets. The frst s the fact that the ndustry average cost curve for green electrcty tends to be upward slopng. Ths s because the cost of wnd power, one mportant source of green electrcty, depends on the wnd condtons at the ste of the plant, and that dfferent stes dffer sgnfcantly n ths respect. The stuaton s smlar for envronmentally frendly hydro power, and, to some extent, for other types of green electrcty. In the short and medum term the locaton of sutable stes n relaton to the exstng power grd mples that nvestments n green electrcty generaton, to a varyng extent, should nclude nvestments n transmsson capacty connectng the power plant to the exstng grd. In the case of bomass and peat other knds of transportaton nfrastructure nvestments may be needed. Thus, gven the state of technology and the upward slopng cost curve, there s a lmt on the amount of green electrcty that can be produced wthn a country. Ths means that some generators, by gettng access to the sutable stes, wll become domnatng producers of green electrcty and thus may be able to exercse market power n the TGC market. Currently the number of green electrcty producers n Sweden s very large, but 96 percent of them produce less than 50 GWh per annum (18 percent of the total producton of green electrcty). On the other hand the three maor power comand that harsher CO2 constrants (tax or permts) wll defntely lead to less green electrcty wth ths TGC system. (See also Bye (2003) and Fscher (2009) on the effects on electrcty prces wth a TGC system). Amundsen, Baldursson and Mortensen (2004) analysed the volatlty of TGC prce stemmng from the annual varatons of wnd power. Several specfc features of mult-country TGC markets have been studed by Fnon and Menanteau (2003), Bergman and Radetzk (2003), Nese (2003) and Unger and Ahlgren (2003), Butler and Neuhoff (2004), Amundsen and Nese (2009), 3

5 panes produce around 25 percent of all green electrcty, and on the bass of current nvestment plans ths share s lkely to ncrease sgnfcantly n the near future. The second reason for beng concerned wth market power n a TGC market s that, as a result of the percentage requrement, the wthdrawal of a gven number of TGCs from the market forces a much larger reducton of electrcty consumpton (e.g. f the percentage requrement s 10 the wthdrawal of one certfcate wll nduce a reducton of 10 MWh of consumpton). Thus, relatvely modest exercse of market power n the TGC market may have a sgnfcant mpact on the prce of electrcty and the allocaton of resources n the power ndustry. Moreover, by havng access to a large share of the best stes for generaton of green electrcty a small power producer may be able to exercse market power n the electrcty market by exercsng market power n the TGC market. In order to elucdate the nterplay between the electrcty and TGC markets a smple analytcal model s presented. Then a numercal verson of the model, depctng the Nordc electrcty market and the Norwegan-Swedsh market for TGCs s used to quantfy the mpact of TGC market power under varous assumptons about the dstrbuton of the essental resources for green electrcty producton. 2. An analytcal model The followng model s desgned to capture the nterplay between the electrcty and TGC markets. The followng varables wll be appled p : End-use prce of electrcty s : TGC prce q : Wholesale prce of electrcty x : Quantty of total electrcty y : Quantty of black electrcty z : Quantty of green electrcty w : Number of TGCs sold v : Number of TGCs used α : Percentage requrement 4

6 The nverse demand functon for electrcty s assumed gven by p p(x), wth = p' ( x) < 0 The cost functon for black electrcty for a gven producer, ( = 1,,n) s assumed gven by c = c ( y ), wth c '( y ) > 0 and c ''( y ) 0 The cost functon for green electrcty s assumed gven by h ( z ), wth h '( z ) > 0 and h ''( ) > 0 z Both black and green electrcty are delvered to a common wholesale market, from where proft maxmzng retalng companes purchase electrcty for end-use delveres. In addton to the wholesale market there s also a market for TGCs. We consder two cases wth respect to the functonng of the electrcty and TGC markets. In the frst we assume that the electrcty market s an olgopoly market where agents behave n accordance wth the Cournot model, whle there s perfect competton on the TGC market. In the second case both markets are olgopolstc, and Cournot behavor s assumed. In the frst case we assume that the producers take the TGC prce as gven and maxmze profts as a Cournot player on the electrcty market. Clearly, the mplcaton of ths s that the producers wll sell all TGCs generated. Hence, the obectve functon may be formulated as n the compettve case 5

7 Π ( y + z ) = qy + [q + s]z c (y ) h (z ) The frst order condtons read Π y Π z p( x) = x p( x) = x + q c '( y ) = 0 + q + s h '( z ) = 0 In dervng these condtons, observe that q q q ( p αs p = = = ) = y z, as s s consdered as gven by the agents Equlbrum condtons are p* = q * + αs * z * x* = y * + z* =, where x* = x *, y* = y *, z* = z * α p( x) x * + q* = c '( y*), p( x) x * + q * + s* = h '( z*), A more compact way of characterzng the compettve soluton may be obtaned by successve substtuton of the above condtons.e. p p(x*) + x * = (1 α)c '(y*) + αh '(z *), Ths condton states that the producer's margnal revenue s equal to a lnear combnaton of the ndvdual producer's margnal cost of provdng black and green electrcty, wth the percentage requrement as the combnaton weght. Moreover, by solvng ths equaton the prce of electrcty, p, can be expressed as a functon of y and z. In other words, by choosng the level of output of black and green electrcty a generator can nfluence the market prce of electrcty. 6

8 We then turn to the second case and consder an electrcty producer that behaves as a Cournot player n both markets. In the formulaton to follow, however, we assume that the electrcty producer does not game on the smultaneous functonng of the two markets 6. Rather we assume that the producer n determnng the generaton of green and black electrcty only consders the electrcty market and thus takes the TGC prce as gven. Lkewse, we assume that the producer n determnng the amount of TGCs to sell, w only takes the TGC market nto account and thus takes the wholesale prce as gven. Ths formulaton may be consdered as a standard Cournot formulaton wth multple markets. It s however, necessary to take nto account that the producer s constraned by the amount of TGCs generated,.e. we must have w z The electrcty producer, thus, faces the followng optmzaton problem Max Π s.t. (y,z, w ) = q[y w z + z ] + sw c(y ) h(z ), To solve ths problem, formulate the Lagrangan functon L (y, z, w ) = q[y + z ] + sw The frst order condtons are c(y ) h(z ) λ [w z ] L p(x) = x + q c' (y) = 0 y 6 For a dscusson of ths problem, see Amundsen and Nese (2004). For market power of nterconnected markets (e.g. emsson permt markets and energy markets) see Montero (2009). Furthermore, Traber and Kemfert (2009) analyze the mpacts of the German Feed-n tarffs on both electrcty prces, emssons and frms whle takng account of market power and olgopolstc behavour. 7

9 L p(x) = x + q + λ h' (z) = 0 z L 1 p(x) = w + s λ = 0 w α In dervng these condtons observe that p q ( ) s p x = α 1 ( = ), w w α as q, by assumpton, s consdered as gven by the agents as they sell TGCs. Elmnatng λ * the equlbrum condtons may be expressed as 7 p* = q * + αs * x * z * = y * + z* = α p( x*) x * + q* = c '( y*), p(x*) w * [x * + ]* + q * + s* = h'(z*), α Upon successve substtuton of the above condtons, the followng compact relatonshp appears p(x*) p(x*) + [x * + w *] = (1 α)c ' (y *) + αh ' (z *), Ths condton states that the producer's margnal revenue from the electrcty and the TGC markets s equal to a lnear combnaton of the ndvdual producer's margnal 7 Observe that condton 15) assumes an nteror soluton for the TGC prce. The reason for ths s that the change of the TGC prce followng from a change n the sale of TGCs s equal to zero f the TGC prce s at any prce bounds. In such a case there would be no dfference between optmalty condtons of the present market settng and the market settng consdered above (.e. market power n the electrcty market only). 8

10 cost of provdng black and green electrcty, wth the percentage requrement as the combnaton weght. By solvng the equaton above the prce of electrcty can be expressed as a functon of y, z and w. In other words, a generator affects the prce of electrcty not only by hs output decsons, but also by sellng or not sellng the TGCs he has receved. 3. A two- country model Next we consder two countres, A and B, (such as Norway and Sweden) that trade both electrcty and green certfcates wth each other. In ths settng polcy measures taken n one country may effect the decsons made n the other country. Under autarky each country wll have to satsfy the same general set of equlbrum condtons as dscussed above. Prces and quanttes wll, however, be specfc to each country as determned by the demand functon, the cost functons and the polcy measure appled (percentage requrement). Openng for trade n electrcty whle stll keepng separate TGC markets, the electrcty wholesale prce wll become the same n both countres. Thus t holds that A B = q * = q * q *. Consderng the most general case of Cournot behavor n both markets the followng condtons apply: p * = q * + s *, α = A, B x A * + xb* = y A * + z A * + y B * + z B * x * = y * z *, + = A, B p(x*) x * + q* = c '(y *),,, = A, B p(x*) [x w * + α * ] + q * + s * = h ' (z *),, = A, B Observe that the common wholesale market mples that the dervatves of end-user prces wll be the same for both countres even though end user prces may be dfferent. Ths follows from the fact that 9

11 q* = p A ( x A*) α As A* = pb ( xb*) α BsB * and the assumpton that the TGC prce s consdered as gven when operatng n the electrcty market. Openng for trade n certfcates, the TGC prces wll be equated and become the same for both countres. Thus, t holds that s * = s * s * at a level ntermedate to the ntal TGC prces of the two countres. A B = In ths settng there s a need for an addtonal varable and an addtonal equaton (statng that total certfcates appled must be equal to total certfcates sold) to descrbe the equlbrum soluton. Hence, we descrbe the number of certfcates used n country by v. Net mport of certfcates for country s then equal to v w. The set of equlbrum condtons now reads p * = q * +α s*, = A, B x A * + xb* = y A * + z A * + yb * + z B * x * = y * + v *, = A, B v A * + vb* = wa * + wb * p( x*) x p(x*) [x * + q* = c '( y *),, w * + α * ] + q * + s* = h, = A, B ' (z *),,, = A, B A specal case apples f only one of the two countres has a TGC system and generators n the other country are allowed to partcpate n that system. For nstance, Norwegan generators of green electrcty could receve Swedsh TGCs and be allowed to partcpate n the Swedsh market for TGCs. 4. A numercal model In order to shed some lght on the real world stuaton a numercal model wth the same basc structure as the analytcal model has been used. The model s an updated 10

12 verson of the statc model of the Nordc electrcty market,.e. the ntegrated electrcty market of Denmark, Fnland, Norway and Sweden, ntally used n Bergman and Radetzk (2003). The basc features and assumptons of the numercal model are as follow: In each country there are 3-5 maor electrcty generaton frms, actng as Cournot players, and a number of small generaton frms formng a compettve frnge. There s no entry of new frms, but the ncumbent frms may nvest n new capacty. Margnal cost curves are step-wse ncreasng and lnear, reflectng unt costs and capacty lmts for varous technologes. 8 Green electrcty encompasses electrcty generated by wnd, water and bomass. However, only electrcty generaton n new small hydropower plants are consdered green, whereas electrcty generaton n exstng hydropower plants are consdered black 9 ust as electrcty generated n nuclear-, gas-, coal-, and ol power plants. Free-trade n electrcty between the four Nordc countres, but nter-connector capacty lmts may lead to dfferent wholesale prces n the varous countres Two alternatve trade regmes for the TGC market: Autarky or free trade between the four Nordc countres Two alternatve assumptons about the behavor of the maor frms n the TGC market: Prce takng (perfect competton) or Cournot behavor. The frnge frms always behave as prce takers both n the electrcty and the TGC market. Constant elastc demand curves n each country (prce elastcty: -0,3) Usng 2001 as ts base year the model proects annual equlbrum prces and quanttes n, and cross border tarffs between, the electrcty markets n Denmark, Fnland, 8 The cost of producton n an electrcty generaton unt s equal to the varable cost n exstng unts and the sum of the varable cost and the annualzed captal cost n a new unt. 9 For Norway black electrcty generaton s almost exclusvely takng place n water power plants whereas black electrcty generaton n Sweden also ncludes electrcty from nuclear-, gas- and coal power plants. 11

13 Norway and Sweden. It also proects equlbrum prces and trade n the markets for TGCs n Norway and Sweden. In the model t s assumed that the rghts to explot the most favorable stes for wnd power producton has been acqured by the maor power generators. Thus a frnge power producer who wants to enter the market for green electrcty only has access to more costly wnd power stes,.e. stes where wnd condtons and/or the cost of connectng to the grd s hgher than for the stes avalable for the maor generators. In the followng we wll use the numercal model to analyze to what extent a requrement to have a certan percentage of green electrcty n Sweden affects the Nordc electrcty market. We consder both autarky and free trade of TGCs. Moreover we analyze to what extent that market power n the TGC market affects the electrcty market. The case of no TGC market s consdered as a benchmark. The focus s on the year As the effects of the Swedsh TGC system are smlar n the three other Nordc countres we only present the results for Norway (beng a sgnfcantly larger natonal electrcty market than Denmark and Fnland together). 5. Smulaton results Usng the numercal model we have consdered three alternatve cases, or proectons, for 2010, and compared the outcome for prces and quanttes wth the correspondng data for the benchmark case (denoted Base 2010). Note that the Base case s also a proecton, and that electrcty consumpton ncludes transmsson and dstrbuton losses. In the tables prces are expressed n per MWh. The dfferent cases are defned n the followng way: Base 2010 In ths case there s free trade n electrcty between the Nordc countres,.e. Denmark, Fnland, Norway and Sweden. There s no TGC system n Sweden or n any other Nordc country. 12

14 Case 1 Agan free trade n electrcty between the Nordc countres s assumed, but now a TGC system wth the percentage requrement equal to s ntroduced n Sweden. Perfect competton n the Swedsh TGC market s assumed, but there s no crossborder trade n TGCs. Case 2 Ths case s lke Case 1, except that the maor generators act as Cournot players n the market for TGCs Case 3 Ths case s lke Case 2, except that generators n Denmark, Fnland and Norway are allowed to partcpate n the Swedsh TGC system, and to trade TGCs across the Nordc borders. We present the smulaton results by par-wse comparsons of the four alternatves. In order to analyze the mpact of a TGC system on the electrcty market we compare Base 2010 and Case 1. Note that n Case 1 the Swedsh TGC market s assumed to be perfectly compettve,.e. no generator can, or decdes to, exercse market power on the TGC market. Also note that producer prces are equal to producer prces n Norway. The key results are summarzed n Table 1 below. Table 1. Base 2010 vs. Case 1 Base 2010 Case 1 Electrcty consumpton n Norway, TWh Electrcty consumpton n Sweden, TWh Producer prce of electrcty n Sweden, /MWh The offcal percentage requrement for 2010 s 17.9 percent. However, as electrcty ntensve ndustres are exempt from the requrement to use a certan fracton of green electrcty the average percentage requrement on all electrcty consumpton s

15 Producer prce of electrcty n Norway, /MWh Prce of TGCs, /MWh 29.0 Consumer prce n Sweden, /MWh As can be seen n the table the ntroducton of a TGC system leads to a reducton of the producer prces of electrcty,.e. the system and area prces determned at the common Nordc power exchange Nord Pool. The reason for ths s that the TGC system nduces addtonal nvestments n generaton capacty. As a result the supply of electrcty ncreases, and the equlbrum producer prce falls. The consumer prce of electrcty n Sweden, however, ncreases as a result of the percentage requrement and the postve prce of TGCs. Thus electrcty consumpton ncreases n Norway (where producer and consumer prces are the same n the model) and decreases n Sweden. The prce of TGCs n Case 1 s somewhat lower than the actual TGC prces observed , whch vared wthn the range /MWh. For the perod , when the percentage requrement was lower, the prces proected by the model were very close to the observed prces. The somewhat hgher prces n 2008 and 2009 could be a result of market power beng exercsed, but t could also reflect relevant costs not fully taken nto account by the model. Next we analyze the potental mpact of market power on the Swedsh market for TGCs,.e. we compare Case 1 and Case 2. The results are summarzed n Table 2. As can be seen n the table there s consderable potental market power on the TGC market. If ths market power s fully exercsed the equlbrum prces of TGCs would be several tmes hgher than the prces htherto observed. Moreover, the mpact on the electrcty market would be sgnfcant, reducng electrcty consumpton n Sweden by around 15 percent. The numbers may seem unrealstc, but they clearly ndcate that the percentage requrement, whch s the core feature of 14

16 a TGC system, opens up a new possblty to exercse market power n the electrcty market. Table 2. Case 1 vs. Case 2 Case 1 Case 2 Electrcty consumpton n Norway, TWh Electrcty consumpton n Sweden, TWh Producer prce of electrcty n Sweden, /MWh Producer prce of electrcty n Norway, /MWh Prce of TGCs, /MWh Consumer prce n Sweden, /MWh One reason for the sgnfcant potental market power created by the TGC system s that the TGC market s a qute small natonal market wth a small number of relatvely large players. Consequently t s an olgopolstc market n whch each player has sgnfcant market power. One way of dealng wth that problem s to enlarge the market and open up for nternatonal trade n TGCs. Case 3, where generators n the other Nordc countres are allowed to partcpate n the Swedsh TGC market, represents one possblty along these lnes. Case 3 mples that, from a Swedsh polcy perspectve, green electrcty generated n Denmark, Fnland and Norway s seen as a perfect substtute for green electrcty generated n Sweden. Consequently TGCs are allocated to generators n the other Nordc countres on the bass of the same prncples as TGCs are allocated to Swedsh generators. Moreover, all generators n the Nordc countres can sell ther TGCs n the Swedsh market for TGCs. Needless to say the Case 3 model has not been serously consdered by polcy makers n the Nordc countres. However, t llustrates a serous 15

17 drawback of the current Swedsh TGC market. The smulaton results are summarzed n Table 3, where the results for Case 1 also are ncluded. Table 3. Case 2 vs. Case 3 Case 2 Case 3 Case 1 Electrcty consumpton n Norway, TWh Electrcty consumpton n Sweden, TWh Producer prce of electrcty n Sweden, /MWh Producer prce of electrcty n Norway, /MWh Prce of TGCs, /MWh Consumer prce n Sweden, /MWh As can be seen n the table the addton of new partcpants on the Swedsh TGC market ncreases competton and sgnfcantly reduces the possbltes to exercse market power. In fact, openng up for cross-border trade wth TGCs (Case 3) essentally has the same effect on the electrcty market as perfect competton n a natonal Swedsh market for TGCs (Case 1). 6. Concludng remarks In connecton wth the restructurng of the electrcty markets n the Nordc countres market power was seen as a maor potental problem. The reason was that each one of the natonal (n Denmark two dsconnected regonal markets) was domnated by one maor power company. However, by ntegratng the natonal markets ths problem was sgnfcantly mtgated. Our results ndcate that market power s a potental problem n the Swedsh market for TGCs, but agan the soluton seems to be market ntegraton. That s, to open up the Swedsh market for green power producers n the other 16

18 Nordc countres. The argument for dong ths becomes even stronger f a TGC system s ntroduced n the other Nordc countres. In concludng ths paper t should be noted that the success of ntroducng TGC markets not only depends on the ablty to mtgate market power but also on other factors. One potental problem s the volatlty, both short term and on an annual bass, of TGC prces resultng from natural varatons n wnd condtons (see Amundsen, Baldursson and Mortensen (2006)). In Denmark, for nstance, the supply of wnd power may vary by 25 percent (compared wth the annual average) between wndy and calm years. As the margnal cost of wnd power generaton s close to zero for exstng capactes compettve wnd power generators wll at all tmes produce what s feasble and thus generate erratc and prce nelastc supply. Hence, the number of TGCs ssued and avalable for sale wll also be hghly volatle and ths wll lead to a consderable uncertanty wth respect to the remuneraton (.e. the sum of the TGC prce and the wholesale prce) of nvestment n green technologes. Ths n ts turn may also nfluence the requred rate of return for nvestors n renewable electrcty.e. the requred rate of return would be hgher as compared wth what would be necessary f subsdes were stable and certan. However, an ntegraton of the Swedsh TGC market wth other Nordc TGC markets would be a soluton, or at least a remedy, to ths problem. Ths s because wnd varatons n varous parts of the Nordc area probably are not closely correlated. Hence, an extenson of the TGC market would stablze TGC prces. Lterature Amundsen, E.S. and J.B. Mortensen (2001) The Dansh green certfcate system: Some smple analytcal results, Energy Economcs, 23, Amundsen, E.S. and G. Nese (2004) Market Power n Interactcve Envronmental and Energy Markets: The Case of Green Certfcates, Workng paper, Department of Economcs, The Unversty of Bergen. 17

19 Amundsen, E.S., M. Baldursson and J.B. Mortensen (2006) Prce volatlty and Bankng n Green Certfcate Markets. Envronmental and Resource Economcs, 35: Amundsen, E.S and G. Nese (2009) Integraton of tradable green certfcate markets: What can be expected?, Journal of Polcy Modelng, 31, Bergman, L. and M. Radetzk (2003) Global klmatpoltk, SNS Förlag, Stockholm. Butler, L. and K. Neuhoff (2004) Comparson of Feed n Tarff, Quota and Aucton Mechansms to support Wnd Power Development, Workng Paper Department of Appled Economcs, Unversty of Cambrdge. Fnon, D. and P. Menanteau (2003) "The Statc and Dynamc Effcency of Instruments of Promoton of Renewables", Energy Studes Revew, 12(1): Fscher, C (2009) Renewable Portfolo Standards: When Do They Lower Energy Prces? The Energy Journal, 31, No. 1, Hndsberger, M. et al. (2003) Co-exstence of electrcty, TEP, and TGC markets n the Baltc Sea Regon, Energy Polcy, 31, Montero, P. (2009) Market Power n Polluton Permt Market, The Energy Journal, 30 (Specal Issue 2), , Nese, G. (2003) Essays n Lberalzed Energy Markets Doctoral dssertaton, Department of Economcs, The Unversty of Bergen. Unger, T. and E.O. Ahlgren (2005) Impacts of a common green certfcate market on electrcty and CO 2 emsson markets n the Nordc countres Energy Polcy, 33, Traber, T. and C. Kemfert (2009) Impacts of the German Support for Renewable Energy on Electrcty Prces, Emssons, and Frms The Energy Journal, 30, No. 3,

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