Guarantees of origin: Innovations for consumers, companies and plant operators

1. Current developments in the field of GoOs and their drivers

The expansion of renewable energies has recently increased due to political support and falling production costs in Germany and Europe. However, the electrification of applications in industry and among private customers has lagged behind political targets, for example in areas such as heat generation and e-mobility. In Germany, only very small quantities of guarantees of origin for green electricity are still available due to the double marketing ban in the EEG and the low capacity of non-subsidized wind and solar plants. Even if the number of plants built without subsidies increases, there will not be significantly more freely available GoOs, as these new plants are normally economically secured through long-term PPAs.

The majority of the GoOs used in Germany therefore still comes from hydropower plants in Scandinavia. Norway remains one of the largest exporters. The discussion that the country could withdraw from the European association of registers, the Association of Issuing Bodies (AIB), and use the guarantees of origin domestically has recently been discontinued.  

This international trade in “green electricity properties” at comparatively low prices has long been criticized and is not understood by large sections of private end consumers. It is therefore understandable that the EU Commission is aiming for more transparency and a stronger consumer position with the Renewable Energies Directive (RED), among other things.

One instrument for this could be an EU-wide green electricity label, the introduction of which is to be examined in the EU by the end of 2025. This would ensure uniform criteria and guarantee comparability - however, the differences in the European electricity markets are so great that some fear the requirement will be reduced to the lowest common denominator.

In addition, Germany has implemented the extension of the guarantee of origin system to gas as well as heating and cooling in the form of the Guarantees of Origin Register Act, which was passed in 2023. There are already certificates for proof - for example, for biogas that has been upgraded to natural gas quality and fed into the gas grid. This allows suppliers to declare gas deliveries from the grid as being of biogenic origin in whole or in part. A separate register of guarantees of origin for biogenic gases and hydrogen will now follow. This is primarily necessary in order to prove the origin from low-carbon or completely renewable energy sources.

The introduction of the register of guarantees of origin for gas is therefore a central component of the federal government's hydrogen strategy, as guarantees of origin for hydrogen are linked to the condition of the two aforementioned sources, meaning that hydrogen produced using energy sources of fossil origin is excluded. The introduction of the register of guarantees of origin for gas is expected in 2026.

2. Innovations in guarantees of origin for green electricity

Guarantees of origin for green electricity are to be revised with regard to the unit and time reference: The unit of a GoOis to be reduced from one megawatt hour to a size yet to be defined of several hundred kilowatt hours. A change is also to be made from a production month to almost real-time time stamps.

As an explanation: Currently, it is sufficient to validate a certain amount of guarantees of origin for green electricity in order to declare the corresponding electricity supply as green electricity for an entire year - regardless of when they were produced in the calendar year. Some players (e.g. a project by 50Hz, Lichtblick, Granular Energy) have developed a certificate with hourly granularity so that the electricity requirements of a company or a household customer product can at least theoretically be covered by a green electricity purchase. This involves creating an hourly time series that compares the production load profile of a hydropower plant, for example, with the electricity consumption. The aim is to prove that the power plant would at least theoretically have been able to cover demand. Theoretically, because there is often no physical delivery, but only the quality of the electricity is transmitted.

This approach is therefore also criticized, as it implies a physical delivery that does not contribute to greater transparency. To date, it has not been possible to prove that green electricity is supplied and generated at the same time using the Federal Environment Agency's guarantees of origin, which are the only official source for voluntarily sourced green electricity in Germany.

However, this is desired by many customers, for example in order to identify the (physical) electricity purchase by means of Power Purchase Agreements (PPAs). The EU's new Renewable Energy Directive therefore opens up the possibility of issuing HKNs with hourly granularity. The switch to at least hourly granularity for guarantees of origin is therefore likely in the future.

Another instrument for reconciling the physical supply of electricity and its characteristics is the so-called optional coupling of guarantees of origin. This is not new in itself, but has been revised in order to be able to map industry-standard contracts and now also serves to compensate electricity prices for large consumers. This means that industrial companies can be reimbursed for the costs of emission certificates by providing proof that they have purchased electricity from a renewable energy plant. The basic prerequisite is proof of electricity supply from a green electricity balancing group without offsetting transactions.

Even before the guidelines on optional coupling were officially adopted by the Federal Environment Agency, there was a great deal of interest from industrial consumers. They want to use this instrument to provide proof of electricity procurement from wind or solar parks by means of PPAs and at the same time be able to use the savings via electricity price compensation.
 

3. Advantages for consumers, industry and plant operators

The implementation of the EU Directive will increase the prevalence and importance of guarantees of origin. For consumers, this fundamentally means more transparency and confidence that the volumes of green electricity or biogas etc. that are reported are actually produced and not marketed several times, as this is the primary goal of guarantees of origin.

At the same time, there are new ways for companies to demonstrate their commitment to decarbonization and make it verifiable. Whereas previously it was only possible to purchase green electricity via guarantees of origin or PPAs and then advertise it, in future it will be possible to provide concrete proof of the physical supply of electricity from certain power plants, the use of renewable hydrogen or waste heat, for example.

At the same time, new sales opportunities will open up for plant operators, as guarantees of origin will become an interesting commodity for industrial consumers, depending on the energy source, feed-in characteristics and age of the plant. This is a sensible development in order to increase the quality of green electricity generated in this country - but also of heating and cooling energy.

but also of heat and cooling supplies - instead of continuing to map the characteristics of the energy sources predominantly via favorable guarantees of origin from abroad, as has been the case with green electricity to date. The operators of wind and solar parks have so far largely treated the issuing of guarantees of origin for plants that have fallen out of subsidy or are operated without subsidy as a secondary issue.

 Do you have questions about guarantees of origin? Please feel free to contact us!

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