Additionality and Eco-labels

This article illuminates additionality criteria, one essential way companies should evaluate renewable energy procurement. We hear some insight from Steven Vanholme of EKOenergy, who will help us better understand the link between additionality and ecolabels.

What does additionality mean in the realm of renewable energy?

Additionality refers to organizations adding new capacity for green energy to the grid, meaning companies can support the building of new assets directly and/or indirectly. The idea is that capital from business investment and commitment guarantees a project to take off, thanks to a company's purchase.

Strong additionality has only been linked to Power Purchase Agreements. However, additionality is difficult to assess since the current market structures must provide a universal comparison metric.

A Corporate Power Purchase Agreement (PPA) is an energy contract between a company and a generator. By purchasing green electricity directly from the producer, the off-taker can hedge against prices, fix price ex-ante, and be protected from market volatility for up to 25 years. The off-taker also demonstrates a strong commitment toward a net-zero path.

On the other hand, corporate commitment guarantees the project's bankability for the generator. While signing a greenfield PPA contributes to adding new capacity to the grid, it is not the only way companies can prove additionality.

Other ways to enhance additionality exist, such as purchasing Energy Attribute Certificates (EACs), a viable way to add (additional) capacity.

How can this be ensured?

Looking at the EAC procurement, there is a notable distinction between purchasing EACs from old or recently built power plants. The latter still needs to pay back the investments made to build the plant, and EACs issued from those new plants support the financing of the projects.

Energy ecolabels for EACs aim to add additional sustainability criteria to the sector, help organizations contribute to new clean energy projects, and clearly distinguish various qualities of EACs, supporting consumers in their choice.

Labels encourage companies to do more than buy EACs. Among those, EKOenergy stands out. It is an international non-profit (NPO) ecolabel for energy that fulfills additional sustainability criteria and finances projects to combat energy poverty.

GO2 Markets is an authorized seller of EKOenergy-labelled EACs. We interviewed Steven Vanholme, the spokesperson for the EKOenergy label, to better understand the link between additionality and ecolabels in promoting more sustainable renewable energy.

What is additionality, and why/how can an EKO-energy label ensure additionality?

Additionality means something changes, i.e., something extra happens that would otherwise not have happened. For example, thanks to the consumer's choice, there will be more renewable energy production.

For the EKOenergy ecolabel, this is an important concept, but we focus on something other than the installation where the energy has been produced. In most cases, it is difficult to prove that the wind turbine or the solar farm you are buying from would only be there with you, and that is one of the reasons why there are so many unproductive discussions about additionality in the renewable energy sector. Instead, at EKOenergy, we focus on what happens after the purchase. Every EKOenergy consumer contributes financially to renewable energy projects in developing countries. This way, we help fight energy poverty. As an environmental NGO, consumers of EKOenergy also help us promote renewable energy in over 60 countries. And finally, we support and encourage consumers to communicate about their renewable energy consumption. Proud and clear communication about using renewable energy is one of the ways to convince others to switch to renewable energy. It's a compelling but often forgotten aspect of additionality.

What is needed for a supplementary label?

More needs to be done to speed up the energy transition. Some companies dedicate specialized staff to finding ways to do more and go faster. Think of Google and its focus on 24/7 renewable energy consumption. However, most consumers need more time to develop their solutions. This is where EKOenergy comes in. We are an experienced environmental organization that follows market developments in many countries. This helps us select the best available methods and has enabled us to choose criteria that are both impactful and work for all kinds of consumers across all continents.

Think of the "additionality" that we just mentioned. If consumers are told, "What they do is not additional enough," the result is often not that consumers look for something more, whatever that may be, but rather that they end up confused and frustrated.

Labels are one way to make things easier for consumers. We help more consumers take action and increase the impact of their choices.

Also, note that our label can be combined with all types of renewable energy sourcing. For example, people with on-site solar panels or companies with a PPA for wind energy can decide to add the label to the MWhs they consume.

What would you like to see looking forward to in the EACs market?

I prefer to discuss renewable energy markets. EACs are, in most cases, an essential tool to prove the origin of the energy, but the EAC markets, as such, cover only a very small part of what is happening in the renewable energy sector. Instead, let's discuss the fast-growing, vibrant market of green tariffs, PPAs, unbundled RECs, and many more.

We are seeing more and more market players enter and bring more diversity and new solutions to the market, which is very hopeful. Everyone must have easy access to renewable energy, and no solution fits all, so we need diversity.

I hope that different approaches and solutions focus on their strengths and that they improve constantly. But there is no need to grade and judge each other. 24/7 solutions are attractive, but that doesn't make solutions not based on 24/7 a bad option. PPAs have fantastic potential, but they must be scalable for most consumers. The focus should be on 90% of the people and companies not using renewable energy. Let's attract them to whatever solution they find best, as long as it is 100% renewable.

How did the market for eco-labels evolve in the past years?

We see growing interest. We started in the Nordic market in 2013, became active elsewhere in Europe in 2014 and 2015, and beyond Europe in 2016. As of 2021, our label has been used in 65 countries.

The basics of our environmental label have remained the same. Still, it is gradually becoming more accessible to explain to people what we are and want, as we can now show a growing number of concrete results. For example, we have financed 79 renewable energy projects in developing countries in the past years.

Furthermore, as everyone can see the impact of global warming all around us, more companies are looking for tools to demonstrate their climate ambition. The EKOenergy ecolabel is a pragmatic tool available worldwide and with a proven track record.

We have seen that there can be another layer of granularity while purchasing EACs. Supporting additional capacity in the global south while fighting energy poverty and helping underserved communities without companies' investment would not have been granted access to affordable and clean energy.

GO2 Markets' mission is to unlock renewables' full potential by bridging capital from the private sector to where it is needed most. Our green energy services start with a global renewable energy procurement strategy aligned with the RE100 initiative. We navigate companies through the technical criteria recommended by recognized environmental standards, conducting due diligence in sourcing, executing effectively, and ensuring that renewable claims have documented proof.

We are implementation partners through market-based solutions such as Power Purchase Agreements, Renewable Energy Certificates, and biomethane certificates. With an ever-expansive network in renewable energy markets and decade-long experience, our team is equipped to meet your immediate and long-term sourcing needs.