Guarantees of Origin in Corporate PPAs and their Value in Southeast Europe
In order to clearly understand the function and value of Guarantees of Origin (GO) in Power Purchase Agreements (PPAs), as well as the position of GO in a globally recognized certification system, we will have to start from the roots of the green agenda and its Prometheus. At heart is the need on the consumers' side to enable them to track and claim ownership of renewable energy, while reducing their greenhouse gas (GHG) emissions and achieving renewable energy goals expressed in ESG (Environmental Social and Governance) ratings. From this came the initiative of the corporate sector (consumers) to rely on an accurate tracking system that can prove the origin of renewable energy on a global scale. This is a crucial moment for the green agenda of corporate Prometheans united under RE100 (https://vvv.there100.org/ ) and CDP initiatives (https://vvv.cdp.net/en ) to recognize reliable renewable energy monitoring systems and recommend them to their corporate members.
About RE100 Climate Group and CDP
The journey of renewable certificates starts with the association of corporate consumers RE100 climate group. RE100 is the global corporate renewable energy initiative bringing together hundreds of large and ambitious businesses committed to 100% renewable power. An impressive online list of proud corporate members moving towards 100% renewable energy consumption can be found here: (https://www.there100.org/re100-members). RE100 works in cooperation with the CDP. The CDPs is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.
RE100 and CDP recognize different systems established on national levels for tracking renewable energy and one name for all of them is Energy Attribute Certificates (EAC).
Introduction to EAC and GOs
European Guarantees of Origin (GOs) are part of the group of global-wide tracking certification systems, commonly referred to as Energy Attribute Certificates (EAC). EAC proves the origin of renewable power from the source (generator) to the sink (consumer). Here is a quick overview of most of them:
1.?????European, Guarantees of Origin (GOs) ( https://www.aib-net.org/certification/certificates-supported/renewable-energy-guarantees-origin )
2.?????North American, Renewable Energy Certificates (RECs) ( https://www.epa.gov/green-power-markets/renewable-energy-certificates-recs )
3.?????The International, Renewable Energy Certificates (I-RECs, https://www.irecstandard.org/ )
4.?????Tradable Instruments for Global Renewables (TIGRs APX) of APX ( https://apx.com/about-tigr/ )
5.?????Another recognized by RE100 national level certifications (Australia, Japan, New Zealand, China) may be found on the map ( https://www.there100.org/about-us ).
About GOs
Guarantees of Origin (GOs) are official certificates issued in Europe and overseen by the standardized system provided by the Association of Issuing Bodies (AIB: https://www.aib-net.org/aib ), through the European Energy Certificate System - "EECS". In order to further facilitate this, the AIB operates an inter-registry communications Hub. Its members are in figure 1.
Value of GOs that corporate PPA brings to the consumer
GO carry 2 values:
1.?????Tangible commercial value (they can be traded and have a market price determined on the basis of demand from the consumer side and supply from the renewable production side). Several electronic platforms and corporate brokers create a market for GO in Europe and around the world, and
2.?????Intangible business value (cannot be directly sold for cash like tangible, but can offer higher ESG ratings from ESG rating agencies and consequently receive cheaper financing, find reputable investors, get local community support, get government recognition, earn employee satisfaction and as well as the ultimate goal of contributing to society in reducing and eliminating GHG emissions).
Potential added value for consumers outside the EU zone
The question to be answered is whether the official GO stored in the AIB register and produced in the Western Balkans (SE Europe and outside the EU zone) can be counted at national levels to offset the carbon tax imposed by the EU. Based on the available information, the answer currently appears to be no. However, it appears to be the only established technical and legitimate system that can guarantee that the power consumed is carbon-free. Therefore, GOs have the potential to be used as official evidence for the carbon footprint calculations of corporations in Europe.
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The current market price of European GOs
According to market sources as of 27. December 2022, the market value of European GOs ranges by generation type:
Solar????????????????????0.95 – 21.10 EUR/MWh
Wind????????????????????0.32 – ??7.55 EUR/MWh
Hydro??????????????????0.23 – ??1.89 EUR/MWh
Biomass?????????? ????0.25 – ??0.95 EUR/WMh
Geothermal?????? ?0.36 – ??0.36 EUR/MWh
How to purchase AIB-recognized GOs from Western Balkans and Southeast Europe?
1.?????The most direct way is from the generator (developer) at an early stage of the project, or
2.?????on the secondary market from the power offtaker (renewable PPA buyer), or
3.?????on the bilateral markets such as electronic trading platforms and organized exchanges, or
4.?????from a wholesale trading company (trader), or
5.?????from the power supply company (retailer), or
6.?????Alternatively, approach a consultant to check all options and propose the most cost-effective alternative that meets the consumer's requirements.
Consumer benefits with renewable corporate PPA
A corporate consumer of power can request a GO together with the purchased energy from the PPA signed with the supplier or producer. In that case, GO will be a stamp of added value in addition to the price paid for power. Corporate renewable power contracts signed directly with the generator or through the supplier can offer direct, significant, and clearly visible savings from the first years (1-3 years) of the PPA contract in exchange for a long-term contract commitment of 7-10 years.
The future of the GO market may be brighter than expected today. If some tax savings are applied to green energy consumption in the future, the demand for GO could increase significantly.
More on GOs and Corporate PPAs: