On March 31, 2023, at the initiative of the Verkhovna Rada Committee on Energy and Housing, a round table on the implementation of the mechanism of guarantees of the origin of electricity from RES was held. Representatives of the Ministry of Energy, the Energy Community Secretariat, NEURC, the Guaranteed Buyer, RES Associations, the European Business Association, as well as People’s Deputy of Ukraine, were involved in the discussion.
The purpose of the discussion was to discuss the issue of the introduction of guarantees of origin (GOs) of electricity from RES. The use of GOs allow European businesses and Ukrainian exporters to EU countries to confirm the use of clean energy, and thus to follow EU regulations regarding the climate goals of decarbonization and to confirm the implementation of corporate regulations regarding the reduction of carbon emissions.
Oleksandr Martyniuk, a representative of the Ministry of Energy, noted that the jointly developed Draft Law №9012 meets the requirements of the government decisions, decrees of the President and EU Directive 2018/2021. Mr. Martyniuk noted that the draft law provides for the designation of the NEURC as the body issuing guarantees, and the NPC “Ukrenergo” as the administrator of commercial accounting. The draft law provides several trading platforms for the circulation of guarantees of origin, one of which may be the Market Operator. Guarantees of origin will be available to everyone who generates energy from RES, both producers and consumers with generating facilities. In addition, the guarantees of origin will become a source of additional income for the state, as the draft law provides that GOs for e/e produced from RES with state support will belong to the Guaranteed buyer/providers of universal services. Accordingly, this will reduce the burden on the transmission tariff. The draft law calls for Ukraine’s joining the register of guarantees launched by the Energy Community Secretariat for EC member states. At the moment, the roadmap for the implementation of the guarantee mechanism has been previously worked out.
In his comments, Oleksandr Farmahey, a member of the NEURC, fully supported the legislative regulation of the mechanism, and noted the advantages of the NEURC, as a body for issuing guarantees. Among them, he emphasized the independence of the Regulator, compliance with the EU Directive 2018/2021, the ability to exercise control over all licensees, as well as verification and inspection for the purpose of the origin of e/e from RES. In case of violation of the requirements, the Regulator has the authority to apply sanctions. Mr. Farmahey also noted that the Regulator is already cooperating with the USAID Energy Security project to develop secondary legislation for the development of high-quality regulation.
Artem Nekrasov, the acting head of the SE “Guaranteed Buyer”, noted that exports are expected to resume in the near future, and excess electricity that is part of imbalances now will be able to be transferred to the European market. He believes that export revenues will be strengthened due to the introduction of guarantees of origin. In the opinion of Mr. Nekrasov, the introduction of GOs will stimulate the development of RES in Ukraine both by increasing export revenues and by increasing domestic demand, stimulated by the introduction of CBAM.
The presentation of Naida Taso, an expert of the Energy Community Secretariat, described in detail the basis for the implementation of guarantees of origin, as well as the current status of the EC registry implementation. Naida Taso noted that the Clean Energy Package was adopted on November 30, 2021, which includes three main Directives: RED II, Revised Directive 2012/27 and Regulation 2018/1999. The new provisions include a market-based support scheme, own consumers, sustainability and regulation of greenhouse gas emissions, as well as a broader approach to implementation. Naida Taso also mentioned the AIB Hub, which allows registering participants and transferring certificates of guarantees of origin in 28 European countries. Production and emission of the certificates in the AIB countries show an annual growth of 12% since 2012, and neighboring countries of Ukraine, such as Latvia, are actively developing the export of guarantees.
The main advantages of implementing guarantees of origin, according to the expert, include additional income for financing RES support programs, additional income for producers, branding for suppliers, green differentiation for industry and the ability for end consumers to choose the desired electricity. Naida also noted the critical importance of guarantees of origin for the introduction of the corporate PPA market and the transition of the RES market to a new market model. For example, in 2014-2020, cPPA contracts for the total volume of 12 GW output were concluded in Europe (of which 4 GW in 2020).
The Energy Community noted the importance of this issue and last year the EC Secretariat created a national register of guarantees of origin for each participating country. Accordingly, a ready-made register that meets all the requirements of the AIB and the Energy Community has been created for Ukraine. Grexel, the company, which won the tender for the development of the register, offered free annual use of the register for Ukraine. As soon as Ukraine decides which body will issue guarantees, Ukraine will be able to quickly join the existing register. Moreover, the existing registry can be easily extended to other types of energy.
It is important to note that Article 19(11) of RED II states that “Member States shall not recognize guarantees of origins issued by a third country except where the Union has concluded an agreement with that third country on mutual recognition of guarantees of origin issued in the Union and compatible guarantees of origin systems established in that third country, and only where there is direct import or export of energy”.
This provision causes certain problems, and at the last Council of Ministers meeting in Vienna, it was decided to appeal to the European Commission with a proposal to improve the situation. The Community is currently working with the EC to repeal this provision. However, after the repeal, the provision will require the implementation of several conditions, namely the provision of an internal system that will meet the requirements of the European Union, an electronic system, and a certification system. Ms. Taso also noted the three stages of development of the EU regional system of GOs, which implies the joining of the system of the AIB at the last stage and opening its participants the opportunity to trade with the AIB countries.
Oleksiy Ryabchyn, the Advisor to the Vice-Prime Minister for European and Euro-Atlantic Integration, also noted the importance of guarantees of the origin of e/e from RES in the context of the issue of CBAM – a carbon tax for third countries. In this context, guarantees of origin will help reduce the tax burden and increase competitiveness for the exporters to EU.
The European-Ukrainian Energy Agency supports the fastest possible introduction of the guarantees of the origin of electricity in compliance with the requirements of the regional system of the Energy Community. Considering the presence of an already existing registry that meets the requirements of the AIB and was developed for Ukraine, it is possible to implement this in a few months. The introduction of the circulation of certificates confirming the origin of “green” electricity produced in Ukraine will allow both the “Guaranteed Buyer” and producers to receive additional income, and in the long term will allow synchronization with the European registers of guarantees of the origin of electricity.
