The implementation of the Guarantees of Origin (GO) in Ukraine has been a hot topic for the RES sector for a couple of years already and became a pressing need on the eve of transitioning to the new market model and in the current situation of the shortage of funds to cover green tariff obligations. Both the RES industry companies and the state stakeholders raise similar questions regarding the obligations that Ukraine has to fulfill and the options of the implementation mechanism of the GOs to be considered. EUEA team sat down with Naida Taso, an expert of the Energy Community Secretariat, to discuss the Secretariat’s work on the Guarantees of Origin and address the questions on the options for the implementation of the mechanism of GOs for Ukraine.
What drives the need to implement Guarantees of Origin and what is the timeline for that? What is the framework and the requirements for the Guarantees of Origin? How the implementation of GO is to support Ukraine in fulfilling its obligations for the EU accession?
The Clean Energy Package which is adopted in the Energy Community in 2021 includes the Renewable Energy Directive (RED II) and its transposition and implementation deadline has expired at the end of 2022. However, a number of the Contracting Parties are still struggling with the implementation of requirements from the REDII related to GOs. Although implementation of a reliable system for GOs was an obligation arising from the previous directive which was in force in the Energy Community since 2012, RED II calls for a wider approach to GOs (i.e. obligation to issue GOs for all energy carriers, including renewable electricity, gases and heating and cooling).
Being a candidate country to the EU, Ukraine has to fully align with the EU acquits requirements, including REDII, and accordingly ensure transposition and implementation.
What is exactly a Guarantee of Origin and what is its purpose?
It is an electronic certificate disclosing the source of energy sold to final consumers. The GO contains factual information known as attribute about that specific unit of energy. It contains information on the technology used to generate it, the location of production and the producer’s name. A Guarantee of Origin has a standard size of 1 MWh.
How come the Energy Community Secretariat became involved with Guarantees of Origin development in its Contracting Parties?
On one hand, Contracting Parties of the Energy Community have to comply with the EU acquits. On the other hand, the need for independence from fossil fuels has increased energy security concerns calling for urgent increase in renewable energy generation. At the end of 2020, a number of parties were behind schedule in both goals, and the Energy Community Secretariat decided to support them by implementing the regional project for guarantees of origin.
How will becoming a member of the ECS regional system facilitate Ukraine’s joining of the AIB Hub, and what role does the AIB Hub play in the exchange and transfer of traded certificates (GOs) under the European Energy Certification System (EECS)?
ECS regional platform is fully aligned with Energy Community requirements and EU standards (including EECS and CEN). It enables trade of guarantees of origin among Contracting Parties, before joining the AIB. It is fully compatible with AIB hub requirements, therefore, once all other preconditions are met and Ukraine becomes a member of the AIB, it can easily connect to the hub.
What is the framework of the project of the Energy Community? What does it cover in addition to the development of the regional system?
The main goal of the project was to create a national electronic registry for each Contracting Party (CP) as well as a regional system to enable the trade of GOs among CPs. Hence, the registry for Ukraine in the framework of a regional system has been created last year and is ready to be used once the issuing body signs a direct agreement with the service provider (Grexel).
What is the current state of the development of the regional system?
The regional system together with national registries for all Contracting Parties are prepared. Georgia was the first country to sign the agreement with Grexel and go live with its registry in early 2023, and it took less than 6 months for them to prepare the needed legislation. Grexel has the registers ready for other countries, waiting for the issuing bodies to sign the agreement. Contracting Parties will be able to trade GOs among each other using the regional system.
There are two further stages of the project previewed: if/ when an issuing body of the Contracting Party becomes a member of the AIB and its register is being added to the AIB hub, it will be able to trade GOs both with the Energy Community Contracting Parties and with the EU Member States. Ultimately, it is expected that all Contracting Parties will join AIB. The Energy Community Secretariat has signed MoU with the AIB to support Contracting Parties in that regard.
Is it possible to connect an independently developed register to the platform of Energy Community?
Only the Grexel-developed registry can become a part of the regional system. In other words, if Ukraine’s officials decide to develop their own register, Ukraine will not be able to become part of the EC regional hub. It still will be able to join AIB later on, once all conditions are met.
What about other carriers of the energy: gas, heating etc.?
The currently developed registries by Grexel are meant for electricity only and do not include any other sources of energy. However, from the technical perspective, the current registry can be easily extended to the other energy sources, once the relevant issuing bodies are determined.
What kind of certification system exists in the EU?
The European Energy Certificate System (EECS) is the universal certificate system for EU countries. The EECS is administered by the Association of Issuing Bodies (AIB). In line with the requirements from REDII, CEN-EN 16325 standard is being finalized.
What is the function of the Guarantees of Origin in the EU or any other developed market?
The European market observes constant growth of GOs since 2012 with an annual growth rate of 12%. While EECS-GOs are transferred via AIB hub, they are traded bilaterally or through dedicated platforms. Price depends on technology, production month, country, GO quantity or even installed capacity. Currently, prices of GOs in Europe are between 4-7 EUR. The demand is mostly driven by corporate consumers, using GO to represent their carbon footprint and meet decarbonization goals. Also, the introduction of GOs empowers consumers to drive energy transition by enabling them to choose green electricity.
More statistics on GOs in AIB countries can be found here:
https://www.aib-net.org/facts/market-information/statistics/activity-statistics-all-aib-members
Would the projects under FiT/ other state support receive GOs?
Contracting Parties have to ensure that when a producer receives financial support from a support scheme, the market value of the guarantee of origin for the same production is taken into account appropriately in the relevant support scheme. Issuing GOs for supported electricity and selling them on the market through auctioning could help avoid double subsidies, as the revenue gained by the auctions would be used by the state to fund the support system and thereby offset the cost of renewable support.
How can a guarantee of origin be sold? Would it be bundled with the electricity or sold separately from the electricity it accompanies?
It can be sold both as bundled and unbundled from the electricity. In case of an unbundled sale, it is the simplest way for corporates to satisfy the requirements of green energy consumption. Additionally, it is an important option for consumers to be able to choose which power they consume.
In the case of bundled sales of GOs, the certificates are sold together with the electricity under corporate power purchasing agreements, cPPA.
Are there restrictions for trade of GOs with EU Member States?
Article 19(11) of the REDII imposes restrictions on the recognition of GOs between EU MSs and third countries.
The Ministerial Council of the Energy Community in its conclusions from the meeting held in December 2022, invites the European Commission to present a proposal to overcome this barrier to the next meeting of the Ministerial Council (which will be held at the end of 2023). However, in the same conclusions, the Ministerial Council reiterates its invitation for the Contracting Parties issuing bodies for guarantees of origin to participate in the regional initiative set up by the Secretariat and to sign the contracts with Grexel to start using national registries. This remains a key precondition to continue the discussion on removing the restriction from REDII.
What are the costs related to the operation of the register developed for the Energy Community system?
There is an offer for Ukraine for one-year free-of-charge usage provided by Grexel. From the 2nd year, the costs for operating and maintenance will comprise EUR 2.500,00 per month. The service provider will keep the system and registries fully alighted with the EU requirements. Fixed costs are guaranteed for the first three years, as part of the Energy Community project.
Will there be an option for auction in the registry itself? How the sale of the GOs is previewed?
The Energy Community regional system does not provide a platform for trading of GOs. It is defined separately by the legislation of each country. According to the proposals of the Ministry of Energy of Ukraine, there are to be a couple of trading platforms for the GOs, including the Market Operator.
