Design of markets for green certificates and the interaction to other electricity markets

Klaus Skytte
Systems Analysis Department
Risų National Laboratory

The liberalisation process of the electricity sector has involved a radical change in the marked structure from a central controlled system to a decentralised system with new markets, power pools, and financial markets.
At the same time, renewable energy is playing an increasingly important role in energy planning, especially in consideration of the need to stabilise and eventually reduce the emission of greenhouse gases. The interest in new market designs has recently been extended to markets for green certificates, where renewable energy producers receive an additional payment for their clean power on competitive conditions.
This paper discusses the design of markets for green certificates and sets up a mathematical model for these markets and their interaction with the physical power market.
The market mechanism is illustrated via two case studies.