Green certificates would gain value if flat rate feed-in tariffs were phased out

Implications: There is another flaw in the Arrhenius argument, not mentioned in peer reviews dealing with the distinction between wholesale power market spot and future prices. The Arrhenius authors appear to assume that green certificates would be issued or required on top of the German feed-in tariff regime, rather than as an eventual complete replacement for it. Instead, any reasonable assumptions, about reform of the German regime and EU harmonisation of means of support according to market based principles, would suggest that a quota scheme should eventually replace flat rate feed-in tariffs. Enhanced value for investors could then come not from overly generous guaranteed payments but from their meeting the marginal need for certificates, valid EU wide, in those countries or on the part of those suppliers who become most "short".   

Analysis: It is indeed a feature of the existing manner in which the German regime works that wind generators are insulated from both fluctuations in the EEX spot price and from any risk of being turned down by grid operators. Instead the volume risk is taken by the trading affiliates of the four main grid operators (and partly by other traders at the German borders, when interconnection capacityis constrained, owing to excessive loop flows occasioned by heavy wind production), while the price risk is absorbed by grid users i.e. German consumers of energy. It is clear that in the long run these risks should be shared more equitably and efficiently among those expected to help the EU achieve its ambitious 20% target, namely investors in renewable generation, lenders to them and retail power suppliers. Part of any efficiency gain needs to come from harmonised EU mechanisms, involving internationally tradable instruments, a result the European Commission's current draft directive would signally fail to deliver.