Certificates attesting to the green energy credentials of power production have failed to spark significant investments in renewable energy, but efforts are underway to change that
VOLATILE PRICING
Accurately timed certificates may lead to higher prices when renewable power dips or see prices approach zero when green power is plentiful OPEN ACCESS
The EU’s Fit-for-55 package wants guarantees of origin certificates to be mandatory for all renewable energy generation, including those projects that already receive support KEY QUOTE
More granular Guarantees of Origin will make the surpluses and shortages of renewable electricity over time visible and create value for those that invest in the solutions that can cope with the variable nature of renewables
In August 2021, the UK government opened an investigation into green electricity tariffs offered to consumers, citing concerns energy companies may be overstating their environmental benefits. Under the current system, companies can offer tariffs for 100% renewable power even if they directly source no energy from renewables, as long as the fossil fuel-generated electricity supplied to these customers is offset by the purchase of an equivalent amount of Renewable Energy Guarantees of Origin (REGO). A REGO, like other energy attribute certificates (EACs), provides proof that one megawatt-hour of power production injected into the grid comes from a wind, solar, hydroelectric, biomass or another renewable plant. In the European Union (EU), EACs are known as Guarantees of Origin (GOs), while in the United States and Canada, Renewable Energy Certificates (RECs) are available and international RECs (I-RECs) can be found elsewhere. EACs may be bundled together with electricity sales or detached from the physical power and sold separately. Since all electrons get mixed together in the grid, they provide a mechanism for the consumer to back up claims they are using renewable energy. 
As part of efforts to combat greenwashing, the UK government is looking into making its REGO system smarter. “As net-zero requires smarter and more flexible energy solutions it is vital we have a transparent accounting system which better reflects the physical realities of the electricity grid and creates stronger customer incentives to make the most of low carbon generation when it is needed,” the UK government’s Department for Business, Energy & Industrial Strategy said in a call for evidence on designing a framework for transparency in carbon content for energy products. Industry participants are also investigating how EACs could be improved to help further the energy transition. EnergyTag, a non-profit industry-led initiative, has brought together companies and organisations with the aim of establishing guidelines and building up a market for time-stamped, hourly and sub-hourly certificates. Major corporations such as Google, Microsoft, Statkraft, Energinet, Vattenfall, Centrica and Eneco are among the 300-odd backers of the initiative, which features half a dozen demonstration projects in the US, Denmark, the Netherlands, Sweden, Norway and Australia using Blockchain and other technology platforms. 
Clocking in
Major corporations such as Google support the EnergyTag initiative to establish a market for time-stamped certificates
SUB-HOUR DELIVERY Before reaching such granular detail, the industry is working on an initial move to monthly reporting in some markets. Currently, EACs are typically used to match consumption with renewable energy generation on an annual basis. This could mean solar power produced in the summer could cover green electricity requirements on a winter night. “Certificate schemes are very important in allowing consumers to choose one form of energy over another, but they have one fundamental flaw,” explains EnergyTag founder Toby Ferenczi. “They tell you where your power is coming from but not when it is produced.” Annual matching might have been fine two decades ago when renewables were practically always displacing fossil fuels, but is no longer seen as fit for purpose as the penetration of renewable energy increases. Google and Microsoft are aiming to demonstrate their energy comes from renewable energy around the clock also need a certification system to back up these claims, Ferenczi adds, while advances in ledger technology, data processing and data availability have now made hourly certification possible. Some companies are already looking into certifying renewable energy production on a sub-hourly basis. While projects are now in the pilot stage, Ferenczi expects the first markets for the time-stamped certificates could be up and running as early as 2022. Hourly or sub-hourly certification is also expected to lead to higher prices for certificates when renewable power is lacking and prices approaching zero when green power is ample, providing opportunities for arbitrage. Excess supply of EACs has thus far helped to keep their prices almost universally low making their contribution to financing additional renewable energy investments marginal. In electricity markets today, any shortages in renewable electricity are mainly compensated by the use of flexible fossil fuel power sources, but this is not made clear to the end-consumer, notes Joris den Blanken of Eneco, a Dutch utility. “More granular GOs will make the surpluses and shortages of renewable electricity over time visible and will create value for those that invest in the solutions that can cope with the variable nature of renewables such as energy management systems or batteries,” he says. More detailed data could also help to bolster consumer trust in GOs and green electricity tariffs. “REGO schemes may continue to foster confusion and distrust from consumers who are aware that renewable generation is not always available when their electricity consumption occurs,” said the UK government’s energy department. “Consumer trust is vital and increasing the granularity of information is a way of increasing transparency and addressing consumer confidence.” GREEN HYDROGEN Guarantees of Origin look set to be a key policy pillar for the development of the green hydrogen industry believes Emanuele Bianco of the International Renewable Energy Agency (Irena). He says a GO scheme is needed to avoid unfair competition between green hydrogen and hydrogen produced using other technologies, such as “blue hydrogen” where the gas is created using fossil fuel sources, but with carbon capture and storage to trap the emissions. “The big issue is what the criteria should be for getting a GO for green hydrogen,” says Eneco’s den Blanken. “You need a robust way to demonstrate that green hydrogen is truly green, which means that the electrolyser works 100% on renewable electricity and that its power demand doesn’t lead to others using less renewable electricity,” he says. “In other words, you need to make sure that the electrons from a new, additional, renewable asset have a fair chance of reaching the electrolyser and that the electrolyser has helped the investment in sustainable energy production.” GOs as they currently exist are incapable of providing these sorts of guarantees, but could play a role should they become more granular and provide proof of renewable energy production on a 15-minute basis, den Blanken says. BUY LOCAL Alongside timing, the location of plants from which GOs are sourced is expected to be increasingly important for some consumers looking to improve their sustainability credentials. Nordic hydroelectric plants currently represent the majority of European GOs and can be purchased by buyers in distant European countries. The same is true from GOs from Iceland, although the country has no grid connection with mainland Europe. However, EnergyTag’s Ferenczi says there is a growing number of energy suppliers are seeking certificates from local generation projects in order to more closely replicate physical flows of energy. Stefano Cavriani of EGO Group, an Italian energy trader, points to the emergence of a niche group of buyers keen on purchasing GOs from wind and solar plants within the country of use, what he terms “kilometre zero” energy. On the other hand, a company located in a country like France, where the grid is already low carbon, could argue that it would be more effective in driving decarbonisation to buy GOs in a place like Poland, where coal is still the dominant power source, Ferenczi adds. Some countries also have illiquid certificate markets, limiting buying opportunities. While some buyers may be willing to pay a premium to purchase certificates of nearby projects, the majority is simply interested in getting the cheapest price for GOs, whether they come from distant Nordic hydroelectric plants or biomass, Cavriani adds. 
GUARANTEES FOR ALL One issue that has been subject to debate is just who should receive GOs to most effectively support the rollout of new renewable capacity. Some countries in Europe have withheld GOs from renewable energy producers that benefit from state support while others issue them both for production from plants that benefit from support and those that do not. In its Fit-for-55 package of policy proposals unveiled in July 2021, the European Commission said that GOs should become mandatory for all renewable energy generation, including that which already receives state support and behind-the-meter plants. The European position is in line with what has been requested by a number of stakeholders, including trade associations SolarPower Europe and WindEurope as well as their RE-Source Platform, an alliance of renewable energy buyers and sellers. GOs need to be extended to all renewable generators in order to maintain transparency and the link between renewable energy producers and consumers while supporting the uptake of corporate renewable energy sourcing, argues Mercè Labordena of SolarPower Europe. The EU’s recast Renewable Energy Directive (RED II) already obliges EU member states to take into account the market value of GOs when issuing state support so double compensation is not a cause for concern, she says. Labordena points out that GOs have been a major part of Europe’s growing success of corporate renewable energy sourcing. A total of 15 gigawatts (GW) in power purchase agreements (PPAs) have been agreed in Europe since the first deal in 2014, with a record 4 GW last year. Labordena says the extension of GOs to renewable generation also enjoying state support will open up new opportunities for PPAs in major markets like France and Germany, two countries that currently do not issue GOs for this production. One factor that will be key in ensuring a robust framework for GOs is a common approach across EU member states, she says. A TOOL FOR CHANGE On the other hand, the European Consumer Association (BEUC), a group of consumer organisations, is among those who believe that renewable energy generators should not receive both GOs and state support. “It’s the whole question of the purpose of GOs,” states Anna Martin of BEUC. “We would like the GO system to be a tool for consumers to really make a change and create demand for additional renewable capacity.” Despite the system’s shortfalls, Martin says it is possible to enable GOs to be more than just a statistical tracking tool. By implementing minimum requirements for green electricity labelling would ensure that consumers are helping to drive investments in new renewable projects. One country where green electricity tariffs work well is Denmark, where binding requirements have been set for green electricity tariffs, she says. Energy suppliers may satisfy the requirement by earmarking funds received from green power tariffs for new renewable energy investments. In the UK, some companies are backing up their renewable energy claims with actions. Energy suppliers Good Energy, Green Energy UK and Ecotricity have been granted exemptions from electricity price caps by showing how their green electricity standard tariffs support increased investment in green infrastructure materially exceeding those driven by existing government mechanisms. Tightening up the rules for all companies marketing green electricity tariffs and finetuning the system to support certification of renewable energy generation every hour, or even more frequently, could help to drive more investments in renewables and technology needed for the energy transition in the UK and elsewhere. •
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Heather O’Brian
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Alex Dudar